BMW April 2022

The media have recently brought attention to the manner in how vehicles considered uneconomical to repair by short term motor Insurers are disposed of. In the article SAMBRA comment that they have been investigating this process through discussion with the South African Insurance Association (SAIA), custodians of the records database, and with the intent of opening access to the consumer on registration details of these vehicles with the aim of verification of the status of the vehicle they may intend to purchase.

Insurers dispose of the vehicles through salvage auction operators where they are sold through a bidding process to prospective buyers, with the knowledge that under e-Natis protocol these vehicles are still recorded as Code 2, and as such, treated as second hand vehicles in road worthy condition. However, this is far from reality.

In a major move through the South African Motor Body Repairers Association (SAMBRA) they held a conference which included stakeholders from, banks and finance houses, OEMs,  other key traders and interest groups who attended the RMI conference at Emperor’s Palace. The aim was to bring under the microscope the many and varied problems that operate in areas of the process and disposal of vehicles deemed uneconomical to repair vehicles, as well as the recording in the salvage data base. It is being proposed that a vehicles’ VIN number would have to be displayed or a notice given of the fact that it has become uneconomical to repair. It should also show that it had been written off for severe damage as a Code 2 vehicle.

Currently Code 2 damaged vehicles do not need to be reported in any way for the fact that they were seriously damaged above the average cost of their trading value or their retail value in the write-off situation.

The trade has seen an explosion of these so say “write-off” vehicles from insurers who tend to dispose of them at rock bottom prices. It is then believed that they operate in bad faith against their insured client, by procuring back at the auction house, the vehicle at an inflated rebate payment which is to their coffers. There is little or no transparency in their dealings in place as the salvage is disposed of by various insurers with contracts placed. This is in a market where it is estimated that 3 000 such vehicles are written off each month by fleets, car hire and government departments.  It should be remembered that the insured car parc comprises only roughly of  33% registered vehicles on the road. What is made of the vehicles outside of the domain of SAIA and the vast majority that are uninsured? The insurers are the clear winners in this current salvage proceedings for their approximate cost of the write-off in place and can often balloon to become a significant return on a customer insured salvage unit. All too often they’re able to double their money in this dubious cycle of a car’s demise, but more importantly, against the safe passage of the unsuspecting consumer who is attracted by a lower than normal sale price, post unscrupulous repair.

All this plus the vehicle repairs that take place after a vehicle is auctioned often enters a hidden world where it is poorly repaired without the right tools or repair methods simply to be returned to market by dubious traders. These who position the vehicle are often alleged to be laundering money from drug trade deals and are normally sold off as a vehicle that was previously owned by a little old lady. This is not true for all sales and some are returned to similar condition before the incident and require consideration.

The other key fact which lies underneath all of the above market practices is that vehicles are very often hi-jacked and stolen to order for their replacement parts. So, there is a vital need to stop this dangerous practice taking place and reduce the crime rate. Many insurers are knowingly contributing to these very dangerous practices in vehicle salvage for they are now hands on with some very prominent body shops in vehicle rebuilds. It’s a whole industry all on its own and one that is costing the consumer at the end of the day by over-investing in a written-off and poorly repaired car, or God forbid, with their lives as these are death traps on wheels mostly.

It is a long overdue and very important step forward to try and formalise this whole secretive salvage process which is currently in full motion. It needs complete transparency for consumers to be able to exercise their rights when purchasing a second-hand vehicle and to develop a visible record for each and every vehicle VIN number. With cross-industry effects of banking, insurance and original equipment suppliers, collision repair centres and consumer groups as well as testing stations, industry authority feel that for once we are on the right track going forward. We need to right some of these wrongs that rule the salvage process as we know it today, and move to reach our commitment for a consumers’ right to know obligations.

 

By Steve Kessel