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Sophisticated Cars, Sophisticated Risks

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Few machines have become as high tech as automobiles. In just the last decade, fully electric cars have become a viable alternative to gasoline-powered vehicles, as the range of semi-autonomous crash-avoidance features in luxury autos widens. While these developments are good news from a safety and environmental standpoint, they bode new financial risks for owners.

Crash-mitigation technologies tend to show up first in high-end luxury and performance cars made by Mercedes, BMW, Ferrari, Lamborghini and Tesla, among other top brands. Such pricey vehicles involve pricey repairs when damaged, however. That’s because of the expensive computers, sensors and data analytics software that are weaved into the automobile to operate the semi-autonomous functions.

These run the gamut from adaptive cruise control and frontal collision avoidance systems to lane departure and blind spot warning features. In a nutshell, these systems are making some of the decisions drivers have made on their own in the past. All this is leading to a time in the future when cars will be fully autonomous.

That’s the goal of Google, which recently announced the development of a fleet of experimental electric-powered vehicles without traditional controls, such as the steering wheel, brakes and acceleration pedal. One would simply direct the vehicle to a location, as if directing an Uber driver or a chauffeur.

Not Your Grandpa’s Oldsmobile

These mind-boggling technological achievements were the subject of a discussion I enjoyed recently with Adam Wolfson, owner and president of Wolfson Insurance Brokerage, Inc., a New York-based insurance advisor to a high-net-worth clientele.

Adam, the proud owner of a Tesla, kindly pointed out the financial expense of repairing such novel automobiles. “The bodywork alone is at least three times the cost of repairing a Mercedes or BMW,” he said. “That’s because, among other reasons, it’s made largely of aluminum.”

Unlike a traditional car with a steel body that dents when it is hit, an aluminum body “kind of crumbles” Adam explained. “If you have a fender bender, you can’t pop out the dent; you have to replace the entire piece. And the repair shops that do this specialized work charge a lot more than regular shops. Even a long scratch could cost upwards of $8,000 to $10,000 to repair.”

He cited an automobile accident claim filed earlier this year by one of his clients. “She called me and said she had backed her Mercedes into a Tesla and left a really small mark which she said was the `size of a baseball,’” Adam said. “She was astonished to learn that the repair costs topped $8,000. She assumed this simply had to be a mistake. When I told her it was accurate, she let loose a litany of profanities.”

Such experiences are not confined to Tesla, a fine car that has extended the driving range of electric automobiles to the betterment of the environment. For example, a 2016 Mercedes S Class sedan, which costs around $125,000, contains more than 100 sensors diagnosing engine conditions and ambient safety considerations. One reason such exotic vehicles cost more than a Ford Focus is the breadth of such expensive equipment inside them.

Mercedes’ website describes the S Class as if it had emerged from the mind of science fiction writer Ray Bradbury. “While you drive, a set of multitasking cameras continuously captures a rapid series of images of the environment in front of the car,” the website states. “High-speed algorithms help the system’s ‘eyes’ to recognize other vehicles, cycles and pedestrians, and then predict their movement in six dimensions of space and time.”

By analyzing more than 70 driving behaviors, the car can even tell if the driver is becoming drowsy on a long trip. It also is affixed with infrared beams providing virtual vision for driving after dark. When I popped into a local Mercedes dealership to ask about this space age vehicle, all the salesperson could talk about were these connected systems. It’s tomorrow’s car today.

Not to be outdone, BMW’s 2016 7-series sedan boasts similar features, in addition to other firsts. Among them is the unique materials used to make the vehicle—a combination of carbon fiber, aluminum and steel. By using lightweight carbon-reinforced plastic to make the structures above the vehicle’s center of gravity and using heavier components closer to the ground, there is less mass up top, which helps maximize safer handling.

Needless to say, the computer screens in these and other ultra-luxury automobiles look like NASA mission control had a say in their creation. The screen in Adam’s Tesla, for instance, operates every function in the car other than the steering, braking and gear shifting. “It opens the sunroof, the windows and the trunk,” he said. “You can make phone calls, get directions, and see what’s behind the car. My kids can literally stream a movie on it while I drive. I can surf the Internet to find the best sushi restaurant nearby.”

He added, “It’s like a desktop computer with wheels.”

Even more sophisticated, from a performance standpoint, are the $1 million cars (give or take) such as the McLaren P1 and the Porsche 918, which pack up to 900 horsepower in their hybrid gas and electric engines. When such vehicles are damaged, the repair costs can stagger.

In the last seven months, we’ve received two accident-related claims on such ultra-supercars. Even though they were involved in relatively minor collisions, the autos were so new and complicated they couldn’t be repaired by a traditional auto body shop. Each high-performance vehicle had to be sent back to the factory to be rebuilt virtually from scratch. 

Small wonder why owners of such vehicles need to secure advice from knowledgeable insurance brokers like Adam, who is a self-admitted car nut (his college roommate and close friend is David Gooding, president of the high-end automobile auction house Gooding & Co.). It also explains the mistake of insuring these vehicles with an insurance company that markets commodity automobile insurance for the masses.

Specialized automobile insurers have direct connections to factory repair facilities at Mercedes, BMW, Bugatti, Ferrari, Lamborghini and Tesla. They regularly contact global salvage shops to find hard-to-replace pieces on older exotics. They’ve nurtured relationships with high-end repair shops that are certified to fix such exclusive vehicles.

Best of all, they require automobile repair shops to only use original equipment parts when fixing the vehicle. And they also replace a high-end automobile at an agreed-upon value, not a depreciated amount, if the vehicle is in a total loss event.

Drive safe. And assured.