South Dakota Legislative Proposal to Reform Total Loss Vehicle Classification
A legislative proposal in South Dakota aims to restrict the conditions under which insurance companies can classify a vehicle as a total loss. Senate Bill 227, initiated by Senator Steve Kolbeck, proposes that insurers cannot declare a vehicle a total loss unless repair costs reach or exceed 75% of the vehicle’s actual cash value. Exceptions would be allowed if the vehicle owner submits a written request.
The measure advanced through the Senate, obtaining a 4-2 approval from the Senate Transportation Committee and passing the Senate floor with a 27-6 vote. It now awaits consideration by the House, potentially reshaping regulatory compliance requirements for insurers and offering more control to vehicle owners.
During a Senate Transportation Committee session, Senator Kolbeck shared personal challenges faced by his family with an auto insurance carrier, highlighting AI-driven prior authorization delays after a collision. He emphasized the insurer's power in determining the vehicle's total loss status and the need for regulatory adjustments to better support consumers.
The current protocol usually requires a repair estimate, with the insurer evaluating if repair or total loss declaration is more cost-effective. However, Kolbeck noted that this decision, once made, becomes final, leaving the owner without the vehicle or an immediate payout, raising industry compliance concerns.
Legislative and Industry Perspectives
Co-sponsor Representative Tim Walburg echoed similar experiences, advocating for legislation that allows vehicle owners some decisions regarding repairs versus total losses. Justin Smith of the South Dakota Auto Body Association (SDABA) also supported the bill, citing consumer protection and regulatory compliance requirements amidst varying practices among insurance carriers.
Smith clarified that the proposed legislation targets insurance operators declaring total losses at lower damage thresholds, a practice differing from industry standards in states like Alabama and Kansas, which have specific damage percentage laws for salvageable vehicles.
As the automotive insurance market evolves with high-tech vehicle components, insurers face complex risk management decisions. Previous legislation combating repair insurance fraud underlines South Dakota’s focus on a balanced regulatory framework, prioritizing both insurer and consumer interests. The bill highlights ongoing discussions about the role of insurers in total loss determinations and presents a pivotal moment for legislative measures enhancing consumer protection within the auto insurance sector.