This article looks at the relationship between consumers, insurers and “green” parts. For the record, I am not against the use of reclaimed parts when they’re used with the consent of the owner of the vehicle and not in relation to an insurance claim. Insurers and anyone providing reclaimed parts will often use the term “green” because it is a nice-sounding word and suggests these parts are better for the environment.
The fact is that reclaimed parts generally come from Cat B vehicles – that is, cars that have been written off by the insurance company and a decision has been made that they can’t be repaired. These are cars that are having their shells “scrapped”, so I would suggest the term “scrap parts” would be fairer.
Each of these terms present a very different image to the consumer. Intentionally deceptive? For the purpose of this article, I’ll be generous and will refer to them as “second-hand parts”, for that is what they are, in truth.
As stated in the introduction, I am not against the use of second-hand parts in repairs. They have their place and can be beneficial when not used in relation to an insurance claim and are only used with the full consent of the consumer.
The contract of insurance is the provision of “indemnity” for the financial loss that has occurred. It has nothing to do with repairing vehicles as insurers would have you believe. Having the paymaster act as the “agent” of repair is, in my opinion, in conflict with a consumer’s lawful and contractual entitlement.
Can you also imagine the effort required for the ABI and Thatcham to apply new Group Ratings for every single vehicle? Especially having gone through the effort of seeing what bearing the cost of parts has on the Group Rating. Imagine having to do the same, pricing up the cost of second-hand parts?
The Group Rating system
Over half of all money paid out in motor insurance claims goes on repairing cars. The cost of spare parts and the time taken by repairers are therefore major factors in pricing motor insurance.
The factors used to calculate group ratings are:
Damage and parts costs – the likely extent of damage to each car model and the cost of the parts involved in its repair. The lower these costs, the more likelihood there is of a lower group rating.
Parts prices – a standard list of 23 common parts is used to compare one manufacturer’s parts costs to another.
The lower these costs, the more likelihood there is of a lower group rating. It is clear that the cost of parts has a direct effect on group ratings and the higher the group rating the higher the premium you pay. Yet Insurers want to use second-hand parts that save them money but do not want to reduce the premiums paid and pass those savings on to the consumer.
By Tim Kelly