Between protecting the interests of car buyers and those of car dealers, insurance companies have taken a definitive stance, and they have chosen dealers.
This became apparent when the South African Insurance Association (SAIA) recently refused to publicize Code 2 vehicle salvage information in the public domain after previously stating that it would do so before the end of 2023.
SAIA represents 57 major companies within South Africa’s non-life insurance sector, including top car insurers such as Auto & General, Budget, Discovery, First for Women, Hollard, King Price, OUTsurance, and Santam.
No-go for Code 2
In September 2023, SAIA launched its new Vehicle Salvage Database (VSD) – also referred to as the VIN-Lookup website – which enables consumers to check whether a pre-owned car was previously written off by one of the SAIA members and subsequently repaired before they purchased it.
While a step in the right direction, the platform left much to be desired.
At its debut, the VIN-Lookup website only included Code 3 (rebuilt), 3A (spare parts only), and 4 (permanently demolished) vehicles, which by SAIA’s own admission covered roughly 3% of written-off cars in South Africa.
At the time, the organisation said: “The second phase of VIN-Lookup will consider inclusion of Used (Written-off Code 2) vehicles and is scheduled to be available by the end of 2023 at best.”
According to SAIA, a Code 2 designation means a particular car has had one or more previous owners, but that it has not been in a serious enough accident to be classified as a Code 3 or above.
Since the launch of the VIN-Lookup site, the South African Motor Body Repairers’ Association (Sambra) has been lobbying SAIA to expedite the introduction of Code 2 vehicles on the VSD, believing that it will protect thousands of consumers from buying dangerous pre-owned vehicles that are not what they appear to be at first glance.
However, SAIA recently made it clear in a letter to Sambra that it does not intend to do so despite previously stating it would.
“The VIN-Lookup website was established to contribute to the safety of consumers. It was determined that the most critical and urgent vehicle information to make available was for Code 3 (vehicles with structural defects that require substantial rebuilding), Code 3A (can only be used for spare parts), and Code 4 (must be permanently demolished). This information is currently on the website,” said the letter.
“SAIA is of the view that providing general access to Code 2 salvage records would compromise those who buy these vehicles and safely undertake repairs to the manufacturer’s specifications.”
As justifiable as this may be, neglecting to publicize Code 2 data could do more harm to consumers than good for dealers.
There is an alarming prevalence of cars on the country’s pre-owned market that were cheaply repaired, re-registered, and re-sold to unsuspecting consumers after being written off by their respective insurers.
Sambra dealt with many such cases just in 2024 alone, labeling one of these vehicles as a “rolling deathtrap on wheels” after an independent inspection uncovered 49 concerns ranging from uneven body panels and buckled rims, to missing airbags and a bent chassis.
“Based on the current example, Sambra questions again why SAIA is not equally concerned about compromising the safety of the end consumer?” said the association.
“The bottom line is that once a vehicle has been declared uneconomical to repair by an insurer and ends up at a salvage yard, it is then fair game for anyone and that is where we lose total control.”
Some of the faults discovered on said “rolling deathtrap”
Cradle to Grave
The optimal solution for protecting the end consumer, in addition to expanding the VSD to include Code 2 vehicles, is for South Africa to add legislation that determines the Code status of a car which in turn can be uploaded and housed on the existing national traffic information system (eNatis).
According to Sambra, as soon as a vehicle comes off the assembly line and is wholesaled to a dealer, a record must be kept of all its movements spanning the entire retail chain so that further down the line, any new purchaser, financier, or insurer will have access to the information, including the accident history.
This will enable accurate valuation of the vehicle and prevent previously written-off and potentially unsafe vehicles from finding their way back onto the market.
“The current VIN-Lookup tool created by the South African Insurance Association is a good start, but without all vehicle data, is not as effective as it could otherwise be, nor are the eNatis records complete,” said Sambra chairman Dev Moodley.
The critical problem facing South African consumers and motor body repairers is that cars that are still classified as Used (Code 2) on the eNatis documentation can certainly have been severely accident damaged or declared uneconomical to repair.
“We can see that there is a common thread occurring. Most of these vehicles end up on online sales portals and are sold to unsuspecting consumers,” said Moodley.
Taking into account international best practices, the National Automobile Dealers’ Association (Nada) notes that creating legislation specifically targeted at vehicle salvage codes may be the most effective way of ensuring consumer safety.
South Africa could look at the UK model for guidance, said Nada, where the vehicle codes are legislated from new to used to insurance write-offs to irreparable.
Write-off categories are also legislated for vehicles, for example:
- Code A – Cannot be repaired, and the entire vehicle needs to be crushed
- Code B – Cannot be repaired, the body shell has to be crushed but you can salvage other parts
- Code N – Where the vehicle can be repaired following non-structural damage, rendering it usable once again after being subjected to a roadworthy inspection
“Not only is this approach transparent but it will ensure information is available at the correct time to the relevant body in the value chain – whether that be a bank, insurer, motor body repairer, dealer, and/or end customer,” said Moodley.
“It will prevent the current scenario where written-off cars that have been poorly repaired are being refinanced and re-insured in many cases, and consumers are ultimately being sold these vehicles without the correct information.”
The legislation will bring many benefits not only to buyers but also to the industry as a whole.
From a trade perspective, it opens up the opportunity for insurance companies and banks to expand their offering to include “approved” Code 3 vehicles that have been safely repaired.
Further along the value chain it also positively impacts repairers, vehicle testers, parts suppliers, and vehicle maintenance workshops.
“Over the next couple of months, it is envisaged more robust conversation will be held to discuss this approach with all relevant stakeholders,” concluded Moodley.
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