Lower car prices distort insurance payments

The drop in the cost of the US dollar produced a reduction in the prices of automobiles, and this has caused a distortion in full coverage insurance premiums for car owners. According to Hector Linares of the Listin Diario, it is possible that a full coverage policy will pay just 50% or 60% of the assured value of the vehicle. Cars that were insured over four months ago are over-insured, since the insurance companies pay for damages at the market rates at the time of the accident. The greatest drop off has been among those vehicles that are two or more years old and whose market value has fallen by 50%, according to Linares. As an example, a 2002 SUV that cost RD$750,000 to RD$800,000 that year, saw its value double during the next 12 months. The original full coverage policy cost around RD$35,000 to RD$40,000. During the later part of 2003 and the early part of 2004, the same vehicle, used, had increased in value by 150%-200% due to the devaluation of the currency. Insurance policies doubled in cost to perhaps RD$90,000 for the same vehicle, and with the bolstering of the national currency, the same vehicle is now over-insured. As a result, insurance brokers are recommending that their clients reassess their cars, and if there is a high proportion of the last policy still in force, they should request either a credit towards the next policy or a return of funds.