The total loss process is often complicated, inconsistent and arbitrary. It's also technologically behind the times and subject to the vagaries of human decision making.

That's the assessment Eric Burr made at his presentation "Importance of Total Loss Determination and Evaluation" on Wednesday, when he explained how the total process often worked, and issued a call to change some of the laws that govern the process. "What is needed is a more simplistic and consistent process that all can understand, agree with and execute. We have made it much more difficult and confusing than it needs to be, leaving consumers and shops often perplexed why a company decided to repair or total a particular unit," he said.

The total process should be an economic decision, says Burr, vice president of industry relations for Mitchell International. For example, a car worth $10,000 that needs $12,000 worth of repairs is not worth fixing. But what if that same car has $7,500 worth of damage? It would make sense to fix it, right? In many states you can't fix that car because it's above a state mandated 70 percent threshold, and by law it must be retitled as a salvaged or rebuilt salvage. "Some state laws say that when the repair cost or an estimate exceeds 70 to 75 percent of the pre-accident actual cash value (ACV) of the vehicle, you are required to get a branded title," says Burr.

Threshold laws alter the economic decision insurers make by forcing them to total cars that they might otherwise repair (or vice versa) and potentially complicate the total process because of state to state variances, sometimes with unique and ambiguous provisions that make administration even more difficult and confusing.

Thresholds are the reason vehicles with original estimated repair costs of 50 percent to 60 percent of their ACV are often totaled according to Burr. "An initial estimate is usually incomplete and more damage is discovered when the vehicle is torn down leading to supplements. Those supplements can push a car well past the threshold, which means that an insurance company may have to total-get a branded title-a repaired vehicle because the repair cost went beyond the total loss threshold," says Burr.

Another vagary in the total process is the determination of the ACV of the vehicle. "At best it's a hypothetical, best guess estimate about the value of that vehicle. All of the information providers, Mitchell, ADP, CCC have indicators that show the estimate value against unadjusted book value, but it's not perfect-there can often be more than a 10 percent swing between what the estimating systems is showing as an ACV and the actual ACV, because they don't take into account deductions for old damage or increases due to added equipment," says Burr. The result, he says, is that a vehicle may be totaled because of incorrect or incomplete assumptions about its pre-accident value.

While insurers have rules and methods they use to determine totals, not every estimator is following them or using them in the same way, says Burr. That adds even more confusion to the process.

Total loss designations can also affect the accuracy of tools used to evaluate the performance of staff and shop estimators via key performance indicators (KPIs) "Not every appraiser is good about marking their estimates as total losses once it has been deemed a total. It's still listed as a repairable vehicle within the database and those show an inflated cost of repair, potentially because they are the largest estimates. They also may involve artificial and elevated alternative parts utilization rates because the process uses large, raw parts groups-front clip, rear clip, left door, right door. It throws off the benchmarks and performance measurements," says Burr.

While there is not much shops can do beyond understanding the laws and insurer rules about totals; using alternative parts and offering discounts to decrease repair costs on "close" jobs; Burr does think that shops need to take action. "It's a very complex and ambiguous process and I'm saying that we need to recognize the subjective aspects, and minimize them. We also need to start looking at legislative means of changing the totals process to gain some consistency about how the rules are deployed," says Burr.

Mark Johnson is senior editor for ABRN.