Why Auto Theft Is a Growth Industry : Insurance: When thieves ‘borrow’ a car to remove its marketable parts, where do the replacements come from? Shouldn’t insurers be suspicious?

If Californians are serious about cutting automobile-insurance costs, one place to start is with auto theft. Last year, more than 250,000 California vehicles--1% of those registered--were stolen. Dollar losses exceeded $1 billion.

Why is auto theft so rampant? In part, because insurance companies and auto makers do little to discourage it. Indeed, existing practices actually stimulate demand for stolen parts.

Let me illustrate from my own experience.

My car was stolen twice within four months. Both times it was recovered, missing only the bucket seats (and the stereo once). To replace the seats with new ones would cost more than $1,000. My insurance company said I would have to pay $400 of this, for “betterment”--the supposed increase in my car’s value because of the new seats. But if I installed used (“reconditioned”) seats, there would be no betterment, and my insurance company would pay the full cost. I don’t have to tell you which seats I chose.

Where did the reconditioned seats come from? Totaled vehicles, I was told. But my car model had been produced for only three years, and not that many were sold.

How many could have been totaled in three years?

Quite a few, it appears. My repair shop had no difficulty finding reconditioned seats on either occasion. In the right color, no less.

But what of my nagging suspicion that I simply bought back my own seats, or those from another stolen car? The insurance adjuster and repair shop admit that this is a possibility, but they don’t want to look too closely. Certainly, by its willingness to buy reconditioned seats, and the $400 incentive it gave me to accept them, my insurance company is stimulating demand for stolen parts.

And that’s the problem: Neither insurance companies nor auto manufacturers offer strong incentives to deter auto theft. The insurance companies just pay the claims and pass on the costs as higher premiums. The auto companies supply replacement parts, often at exorbitant prices.

After the second theft, I asked about replacing my seats with new, cheaper seats from another manufacturer. If nothing else, I reasoned, this might save the frustration and inconvenience of yet another theft, since the standard seats were obviously hot commodities on the underground market.

My insurance adjuster said, well, maybe, but this exceptional practice would require a special addendum to the policy in case these seats were later stolen. And my repair shop did not want the hassle of making sure the other seats would fit.

In talking with detectives, I learned that any half-competent auto thief can break into a car, remove the steering column lock, insert a screwdriver where the ignition used to be and drive away. The whole process takes two minutes--less for the fully competent.

Why can’t auto manufacturers build an ignition lock that is not so easy to defeat? I’m sure they can, but they have no reason to. It’s easier and probably more profitable to sell replacement locks and other parts.

If we are to see any substantial decline in auto theft, we must alter the conditions that make professional auto theft so tempting. Increased enforcement cannot do the job; it is impossible to guard against a crime that can so easily be perpetrated.

As a start, I propose that those who are running for the position of state insurance commissioner meet with insurers and auto makers to develop plans to prevent the sale of stolen parts through legitimate channels, reduce the disincentive to use new parts, develop better theft deterrents and reduce premiums for car owners who have these deterrents.

Happily, there is at least some progress on this front. In order to protect car stereos (long a popular target of theft), one manufacturer has installed a computer chip that disables the stereo if it is removed from the vehicle. Unless thieves develop a way to override this device, the illegal market for this brand of stereo, and the incentive to steal it, should evaporate.

This example illustrates the potential for creative solutions to deter auto theft. All we need is a commitment to exploit this potential and put the solutions to work.