The widespread theft of vulnerable older Hyundai and Kia models not equipped with a crucial anti-theft device could end up costing the U.S. insurance industry up to $600 million.
Liberty Mutual, Nationwide, American Family and 65 other auto insurers, which comprise only a fraction of the country’s insurance companies, estimate that just their portion of the payout to owners who have been affected by the social media-driven crime wave could top $300 million.
The insurers, who filed a lawsuit in U.S. District Court in Orange County, Calif., in March, say they have already paid out $190 million. They are demanding that Hyundai Motor America, Hyundai Motor Co., Kia America and Kia Corp. reimburse them for funds paid to owners for replacement or repair of damaged or stolen vehicles.
The lawsuit said repairing broken windows and busted steering columns resulting from an attempt to break into a vehicle and hot-wire its ignition often costs an insurer more than $3,000.
It also said vehicles taken on joyrides and used to damage public property or commit other crimes can incur damages of over $10,000.
And if the vehicle is not recovered, it becomes a total loss and can be as much as $20,000.
“Hyundai believes this litigation is unnecessary,” the automaker said in a statement. “A subset of Hyundai vehicles on the road in the U.S. today — primarily ‘base trim’ or entry-level models — are not equipped with push-button ignitions and immobilizing anti-theft devices. It is important to clarify that an engine immobilizer is an anti-theft device and these vehicles are fully compliant with federal anti-theft requirements.”
But the lawsuit illustrates how problematic the hot-wiring problem is becoming for Hyundai and Kia. What began last year as a prankish TikTok video showing how easy it is to steal one of the vehicles has evolved into a nationwide legal headache with consumers, municipalities and now insurance agencies suing the automakers.
Alex Gerwer, a resident of Long Beach, Calif., told Automotive News that his daughter’s 2019 Hyundai Tucson was stolen from outside their house in the early morning hours in April.
After the vehicle was deemed unrecoverable by police, their insurance company, Geico, offered a payout of $23,000. Gerwer said in an email that the amount does not “replace the car with any similar model.”
He also noted it does not reimburse the two years left on the $1,300 warranty purchased with the vehicle.
Despite the legal actions against Hyundai and Kia by the insurance companies, Gerwer said any award won’t go where it should: “to the victims of Hyundai’s gross negligence.”
No one, he said, “will get the car that they wanted and out of which they were cheated.”
This is not the first pushback Hyundai and Kia have had from insurance companies. In January, State Farm and Progressive announced that they would no longer be writing new insurance policies for customers with vehicles lacking the anti-theft device.
An estimated 8.3 million of the targeted vehicles on the road are not equipped with an immobilizer — 3.8 million from Hyundai and 4.5 million from Kia.
To combat the lack of available coverage for the wide swath of vehicles, Hyundai announced a partnership with AAA last month to assist owners impacted by the crime spree. Kia has not announced any type of insurance program.
“The collaboration aims to assist Hyundai owners who are unable to obtain insurance after various insurance carriers decided to stop writing policies for some older Hyundai models, after deeming them too easy to steal,” Doug Shupe, a spokesperson for AAA, told Automotive News.
Shupe said he was not able to provide data on how many Hyundai owners have opted to obtain coverage from AAA.
Despite the negative publicity, some dealers are reporting that securing coverage has not been an issue for shoppers looking for used Hyundai and Kias.
Matthew Phillips, CEO of Car Pros, a dealership group operating seven stores in California and Washington, including CarPros Kia Glendale in California, the top-selling certified pre-owned Kia dealer in the U.S., told Automotive News they have not had trouble securing insurance for used-vehicle customers.
“We have not had anyone that didn’t buy a car because of lack of insurance coverage or lack of ability to obtain insurance coverage,” Phillips said.
“Most customers have been able to remain with their current insurance companies. There have been a few, in which case we just helped them find alternative coverage, and it hasn’t been a problem,” he said.
Peter Lanzavecchia, who owns three dealerships on the East Coast — Genesis of Cherry Hill, Burns Hyundai and Burns Buick-GMC, all in Marlton, N.J. — said his “pre-owned sales team has not heard any concerns expressed by shoppers and accessing vehicle insurance has not been an issue.”
The lawsuit filed by the insurance companies said Hyundai and Kia failed to follow Federal Motor Vehicle Safety Standard 114, guidance requiring that a vehicle’s starting system include a way to prevent activation of the engine and steering, or forward mobility of the vehicle, or both.
The National Highway Traffic Safety Administration, which polices vehicle safety standards, does not require a starter system to use an immobilizer specifically. But the insurer lawsuit said theft-prevention options could only be obtained by customers if they purchased “expensive trim packages having nothing to do with vehicle safety requirements.”
The lawsuit also said any disclosure of the lack of an immobilizer was buried in feature-comparison charts that “consumers generally do not receive, read and/or understand.”
Instead of issuing a national recall to install immobilizers on the 8.3 million vehicles, which attorneys say would cost $5 billion, Hyundai and Kia released a software update for the vehicles that extends the length of the alarm sound from 30 seconds to one minute and requires the key to be in the ignition switch to turn the vehicle on.
The update is available for all affected Hyundais; availability for Kia vehicles is more staggered.
Phillips said CarPros is performing the software patch on all Hyundai and Kias without immobilizers on their lots.
“We’re getting a lot of calls and as the cars become eligible for the update, we’re working to get customers in,” he said.
“We want to get as many cars protected as possible. It’s in everyone’s best interest.”