Insurance Industry and its customers to be negatively affected by the proposed change regarding the use of second hand vehicle parts

“The proposed regulation that the parts of a Code 4 vehicle may not be used to build or repair other motor vehicles, will have severe unintended consequences to both the insurance industry and its customers,” said Viviene Pearson, General Manager responsible for Motor Insurance at the South African Insurance Association (SAIA), in Johannesburg today.

The SAIA is currently in the process of arranging a meeting with the Department of Transport with a view to discussing the concerns of the short-term insurance industry, and to discuss the way forward on this important topic, said Pearson.

The SAIA said that in their submission to the Department of Transport in July 2012 on this issue, it was stated that if undamaged parts of a permanently demolished vehicle may not be used again, it will result in a loss of revenue (for salvage) to insurers. In addition, if the usable parts of demolished vehicles cannot be used as second hand parts, the unintended consequence will be an increase in the cost of repairs as insurers will have to use new, much more expensive parts to repair older accident damaged vehicles. Insurers may have to declare vehicles as uneconomical to be repaired more frequently due to the unavailability of second hand parts which will further increase the repair costs. These factors will ultimately result in an increase in motor insurance premiums.

Uninsured motorists are also heavily reliant on the availability of good quality used vehicle parts in order to repair their vehicles in an affordable manner.

The SAIA believes that this proposed change could also unintentionally lead to an increase in vehicle crime as used parts will become scarce and sought after. This could further add to increases in motor insurance premiums.

In addition, this proposed regulation may also have a negative impact on the used parts industry, the salvage industry and the motor body repair industry with potential resultant business closures and job losses, said Pearson.

The SAIA strongly supports the fight against vehicle crime, but suggests that other processes should be explored to effectively prevent vehicle crime.

[Media Statement On Behalf Of South African Insurance Association]

Photo by Denese Lups

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