Insurers Deny Daewoo Coverage

Daewoo •Owners' Complaints •GM Buys Daewoo •GM Will Sell Rebadged Daewoos in U.S. •Insurers Refusing to Cover Daewoos

November 4, 2002
The news just keeps getting worse for Daewoo owners. A growing number of insurance companies are refusing to write collision policies for the Korean orphans. That means Daewoo owners will have fewer choices and most will wind up paying higher rates for collision coverage.

The shortage of Daewoo parts is to blame for the insurers' decision. With Daewoo in bankruptcy and its assets taken over by General Motors, the shortage of parts has reportedly become critical in many sections of the country. That means damaged cars are nearly impossible to repair and are thus an unacceptable risk for insurance companies.

Insurers will still write personal injury and liability insurance because, in most states, they're required to do so. But consumers who financed their car purchase may be in violation of the terms of their loan if they drive without collision coverage. They're also taking a risk that they will wind up owing thousands of dollars on a car that is no longer driveable.

Allstate and State Farm, which together write about a quarter of all auto insurance in the U.S., say they are still issuing policies for Daewoos but are raising their rates. Companies declining to provide coverage include Liberty Mutual, the nation's eighth largest.

Meanwhile, the parts situation may improve shortly. Daewoo Motor America's parent company and General Motors are forming a new company to take over Daewoo's manufacturing assets and to manage parts distribution in the U.S.

Warranty problems may also be improving. Dealers have been refusing to do repairs because they say they are not being reimbursed for warranty work. But now, warranty funds will be coming from a trust fund established by Daewoo Motor Co. and monitored by the U.S. Bankruptcy Court for the Central Disstrict of California in Los Angeles.

Some dealers have sued GM, claiming it is responsible for covering warranty repairs. But GM denies any such responsibility and insists the trust fund will be adequate.

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