Damage Claims: An Accident Waiting to Happen

It’s a story we have all seen before. A customer returns a vehicle with new damage. And when it is pointed out to him, instead of accepting the facts, he openly questions the ethical integrity of the company he rented from. There is nothing remarkable about this.

Sooner or later, most consumers come across a news story about alleged damage fraud. And every time they do, it reinforces a perception that the industry as a whole treats damage as a profit center. Left unchecked, that perception will inevitably lead to hasty and ill-conceived legislation. We do not have to let that happen.

The car rental industry has a long and storied history of letting negative public perception turn into unfavorable legislation. In my home state of California, we have seen restrictions on damage recovery from renters and authorized drivers, such as a prohibition on loss of use and caps on administrative fees, the imposition of caps on collision damage waiver (CDW) prices, limitations on GPS tracking and so on.

Many of these laws resulted from a few, high-profile cases of operators who crossed the line, either out of a lack of understanding the fundamentals of consumer protection or even out of greed or desperation.

Eventually, legislators reacted to these cases by promulgating new regulations that not only corrected the alleged problems, but also outlawed even reasonable and fair approaches to the various issues. Without public support, the car rental industry has become a popular whipping post for politicians and a source of tax revenue for unrelated industries.  

I worry that we are just a bad case or two away from additional legislation being enacted over damage claims. Indeed, a bill just introduced in Colorado seeks to take away some important rights granted in the PurCo v. Koenig loss-of-use cases.

The solution to a perception problem is simple: You get in front of it and you do something proactive to change that perception. Other industries have solved this problem through self-regulation.

The MPAA created the well-known movie rating system in response to concerns about content. Manufacturers rely on independent organizations such as Underwriter Laboratories and IEEE to help keep their products safe and reliable.

Self-regulation does a far better job of balancing the needs of industries and consumers than legislation will. Numerous studies have repeatedly shown that enforcement of self-regulation increases profits, makes companies empirically better, provides a measurable benefit to consumers and keeps legislators away.

CONTINUED:  Damage Claims: An Accident Waiting to Happen
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