It is a common escalated query that I receive from clients when the panel beater contacts them to advise that the insurance company has authorised them to use second-hand parts or generic parts on their motor vehicle.
This causes a lot of frustration and clients often feel like the insurer is cheating them into a cheap & nasty repair as there is an expectation from the client that the insurer is compelled when repairing the vehicle to use OEM (original equipment manufacturer) parts in all instances.
The insurers will use OEM parts if the vehicle is still under the manufacturers’ warranty/ maintenance plan; or a critical component of the vehicle is damaged. If your vehicle is out of warranty, maintenance plan or there is not a critical component, then second-hand or generic parts can be used by the insurer as long as it does not compromise on safety or quality standard of the vehicle.
When it comes to generic parts, clients often think that they are cheap knock offs from China. This is not the case when it comes to motor vehicle generics, as manufacturers themselves nowadays hardly even manufacture their own parts. These parts and components are sourced from a specialist manufacturer who will put the motor dealers stamp on it, and the motor dealer puts their inflated mark up on the part and sells it on to the public. When the public buys a generic part, they cut out the motor dealer, thus saving on the highly inflated price just because it carries the motor dealers stamp.
The costs of repairs to vehicles are astronomical and always on the rise. Please see blog post “Myth Busted: Car Insurance Premiums” which gives a good understanding into how repair costs effect your premium, so in the long term it is in your interest to ensure the repair is completed as economically as possible.
See below on page 8, in Issue No. 2 of 2009’s Official Newsletter of the Ombudsman for Short-Term Insurance, the Ombudsman at the time, Brian Martin, notes:
The Office of the Ombudsman for Short-Term Insurance frequently receives complaints from consumers concerning the use by Insurers when repairing motor vehicles of so-called “pirate parts” as well as second-hand components. There is a perception on the part of the public that an Insurer is obliged, when repairing a motor vehicle, to use new original factory supplied parts in all instances.
The Ombudsman, Mr. Brian Martin, says “the cost of repairing damaged motor vehicles has risen significantly over time and is a major factor in the high cost of motor vehicle insurance. If premiums are to be kept at reasonable levels and increases in premiums within similar bounds, it is imperative that everything possible be done to keep repair costs down, but at the same time without compromising safety or quality standards.”
The Ombudsman points out that in the modern world very few motor manufacturers actually manufacture the components incorporated into their motor vehicles and a high percentage of these components are sourced from specialist component manufacturers. Components may be common to more than one make of motor vehicle. A distinction is to be drawn between components made by reputable manufacturers which conform to recognise safety or quality standards and those which may be classified as fake or unauthorised copies made by unspecified manufacturers, often in China (so called pirate parts). Original factory supplied components must be fitted whenever a critical component of the motor vehicle may be damaged or where the warranty or maintenance plan of a vehicle may be adversely affected by the fitment of other components. Depending upon the circumstance of each case and in particular the age and condition of a car, there is however no reason why components made by outside component manufacturers should not be used where this can result in cost savings, provided that issues of safety or reliability are not compromised. The use of second-hand parts, where appropriate, is also to be encouraged as a cost saving measure. The Ombudsman stresses that no hard and fast rule can be laid down and that each case must be assessed on its own individual merit. However, he appeals to members of the public to be reasonable and practical in their approach to the repair of accident damage and by insurers, pointing out that the underlying purpose of insurance is one of indemnification and not enrichment.