Insurers weigh in on the car debate parts

“Many people take no care of their money until they come nearly to the end of it, and others do just the same with their time.”

NOTHING riles a car owner more than an insurer’s decision to repair an accident-damaged vehicle with aftermarket rather than original equipment manufacturer (OEM) parts, but the practice is commonplace and, subject to circumstances, considered acceptable by both the South African Insurance Association and the Ombudsman for Short-term Insurance (Osti).

An OEM part is a component that is manufactured for or on behalf of the manufacturer and fitted to the vehicle on the production line.

Aftermarket parts are generic versions of manufacturer-approved parts. “They may carry a Certified Aftermarket Part (CAP) certification, which is proof that the item will fit, perform and last like the OEM equivalent,” says Malcolm Rajah, the general manager of motor procurement at Hollard Insure.

The Osti receives countless complaints from policyholders who are unhappy with the use of aftermarket parts, which they feel compromise their car’s performance or safety.

“Our approach to the OEM versus aftermarket part debate has been consistent over time,” says Peter Nkhuna, senior assistant ombudsman at the Osti. “We hold that the replacement of damaged parts with aftermarket parts can be undertaken where this is feasible and does not result in the consumer being prejudiced.”

Prejudice arises from the compromise of service and maintenance plans or warranties, as well as safety considerations. Nkhuna notes that whether or not the use of aftermarket parts results in prejudice must be judged on the merits of each dispute.

South Africa’s insurers have slightly different views on replacement parts, but are reasonably aligned on the overarching principles. They can, and often do, elect to use aftermarket parts when repairing vehicles that are outside of a manufacturer’s warranty.

“It is international best practice to fit CAPs during repairs on motor vehicles outside of warranty or motor plan; our focus is on quality and meeting safety standards (with due consideration for) the cost benefits to both the policyholder and insurer,” says Gerhard Genis, the head of quality management at Santam.

He says CAP parts cost a fraction of their OEM equivalents, and the use of these parts often means the difference between repairing a vehicle and writing it off.

“An insurer has a legal obligation to indemnify you and to be reasonable in doing so; what is reasonable will depend on the specific circumstances of each claim,” says Nkhuna.

Genis says the central premise of insurance is to put the policyholder back into a similar position as before the loss or damage. But he says insurers are inconsistent in describing their replacement parts practices in their policy wordings. “Most local motor policies are silent regarding what type of spare parts should be used in a repair, and it is not usually addressed in the contract between insurers and policyholders,” he says.

Santam’s policies are underwritten on a like-for-like basis, which gives the insurer the right to use alternative parts as long as these do not compromise the quality or safety of the repair.

Rajah says Hollard’s practice is to ensure that the vehicle claims assessor discusses the use of CAPs with the policyholder. You should, therefore, keep a close eye on the quote and interrogate your insurer or panel beater on the parts approved for use in the repair.

An insurer should seek your consent before instructing a vehicle repairer to use aftermarket parts, Rajah says.

Nkhuna says the law is the final arbiter in replacement parts disputes: “Regardless of the provisions contained in an insurer’s policy, an insurer still has a legal obligation to be reasonable in its approach. The party that can substantiate its case will be the one that ultimately prevails.” This means you cannot insist on an unreasonable repair where an equally effective but less costly repair is possible. Likewise, you cannot insist on a replacement where a repair would be adequate.

“The approach of keeping costs down is generally good for the collective of insurance consumers, even though it may compromise individuals in specific circumstances,” Nkhuna says.

Consumers also raise concerns that vehicle manufacturers might sidestep their ongoing liability if aftermarket parts are used in a repair.

“Once a vehicle’s warranty has expired, the manufacturer, unless undertaking a specific parts recall campaign, carries no liability should a part failure occur,” says Rajah. “Where CAPs are sourced and fitted on vehicles that are out of their manufacturer warranty period, the parts supplier holds the guarantee.”

In 2009, the Osti issued a statement saying that “original factory-supplied components must be fitted whenever a critical component of the motor vehicle is damaged or where the warranty or maintenance plan of a vehicle may be adversely affected by the fitment of other components”. This position holds to this day, although it does not describe all circumstances in which OEM components should be fitted.