Will your Toyota’s insurance go up?

February 5, 2010 – 9:52 am

When a major car manufacturer like Toyota announces a recall on your vehicle, you’re likely to be concerned about your car’s safety. But you may also wonder what the recall will mean for your car insurance rate.

Toyota recently announced recalls of roughly 5.2 million vehicles for a pedal entrapment and floor mat problem and an additional 2.3 million vehicles for a gas pedal problem. Product liability lawsuits and wrongful death lawsuits against Toyota are beginning to mount.

How good is your car insurance rate?

But car insurance companies do not base rates on recalls or lawsuits — they use a car’s claims history. Currently, there’s no evidence that claims due to Toyota’s gas pedals have affected insurance premiums for Toyota owners. And with so many Toyotas on the road, it would take a significant number of claims to affect premiums.

“Traditionally, Toyotas have been safe cars,” says Peter Moraga, a spokesman for the Insurance Information Network of California. “They’ve had a good safety reputation, and their crash test results have been decent.” Your insurance premium is partly calculated based on the type of car you drive (the make and model’s claims record). Other factors include your driving record, claims and credit history, age, gender, type of car insurance you purchase and where you live. If your car model is associated with a higher-than-average number of claims every year — for any reason — it’s likely to jack up your insurance premium.

It may take years to see if Toyota’s recall has any an impact on premiums.

For that to happen, insurers would have to see a huge influx in claims for the recalled makes and models. If Toyota fixes the problem quickly, then there may not be an increase in claims, Moraga says. Toyota already announced that parts to reinforce the pedals are being shipped for use by dealers and that dealer training is under way.

“Has this raised a red flag? Yes. Will this mean higher insurance rates? Maybe. But at this point we don’t know,” Moraga says. “I think the biggest impact is going to be on the (Toyota) brand itself and its reputation.”

If you’re in an accident caused by a gas pedal malfunction, your insurance company will pay the claim.

“But then insurers may go after Toyota if it was a defect that caused the accident (to recoup their expense),” says Moraga.

Rumblings began 3 years ago

What’s a Toyota owner to do?

Toyota’s gas pedal problem didn’t happen overnight. State Farm, the nation’s largest home and auto insurance company, can sometimes use its data from insurance claims to help identify car defects years ahead of a recall.

“State Farm has received inquiries about alleged unwanted acceleration problems in Toyota and Lexus vehicles in recent years,” says spokesman Dick Luedke.

“We track claim data and voluntarily share that data with the National Highway Traffic Safety Administration. In this case, State Farm notified NHTSA on a number of occasions, starting in late 2007, about an increase in situations involving alleged unwanted acceleration in Toyotas.”

Luedke continues, “We do encourage our auto claims representatives to — when they have a claim involving an alleged failure — notify our claims research group, which in turn contacts the NHTSA when appropriate.”

A hearing by a House Energy and Commerce subcommittee on Feb. 25 will address how quickly Toyota and the NHTSA responded to consumer complaints about the gas pedals.

This article was written by Kat Zeman and Amy Danise for Insure.com.

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