A growing number of vehicle owners in South Africa are choosing to accept upfront cash payments from insurers, rather than paying the required excess and using an accredited repairer.
This is according to the South African Motor Body Repairers’ Association (Sambra), which recently put out a statement warning that many motorists are jumping in on this trend without fully understanding the risks involved with this approach.
Juan Hanekom, the national director of Sambra, explained that the industry term for this practice is known as “cash in lieu,” where insurers settle claims by offering a monetary payout instead of authorising proper repair or replacement of damaged parts.
“Essentially, this payment absolves the insurer from any further liability and leaves the consumer exposed if problems arise later,” he said.
Hanekom explained that while the offer of immediate cash may appear attractive especially for those struggling to cover their excess, it can leave consumers vulnerable in several ways.
The first is under-compensation, as the payout offered by insurers may not fully cover the actual cost of the repairs or replacement parts.
This is because the payout is often calculated on a net rather than the full replacement and labour cost.
Those who opt for an upfront cash payment can face lengthy disputes if the settlement proves insufficient to cover the necessary repairs.
Another issue concerns vehicle safety, as going through a non-accredited repairer may lead to sub-standard service that can compromise the function and safety of the car.
Motorists must also be made aware that following this process has resale and warranty implications.
“Vehicles repaired without manufacturer-approved parts may lose resale value, and warranties could be voided,” said the association.
It’s also important to note that insurers will deduct the excess for a cash-in-lieu payment.
If, for example, you had a R100,000 claim and the excess was R10,000, the cash-in-lieu payment will be R90,000.
Consumer awareness
Hanekom noted that motorists should do their homework before agreeing to a cash settlement, bearing in mind the rising cost of vehicle parts.
“SAMBRA believes consumers should be fully informed about the implications of accepting a cash-in-lieu settlement,” says Hanekom.
“While insurers may see it as a cost-saving measure, the real cost can fall on the vehicle owner in the form of safety concerns, diminished value, and inferior workmanship.”
It’s essential to get a comprehensive quote from a professional, accredited repairer to understand the true cost of repairs.”
Sambra advises motorists to confirm that the cash offer accurately reflects the full cost of the repair or quality replacement part.
It also recommends that you read the fine print and understand any waiver of rights or exclusions linked to the payment.
Lastly, consumers should get all agreements in writing, including any potential impact on warranties, future claims, or liability, to avoid any unwelcome surprises later on.
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