Monday, 20 May 2013
Total Loss Protection for Consumers
Following an increased incidence of fraud involving vehicles written off by UK Motor insurers during the 1990’s the Insurance Industry worked together to produce a Code of Practice for motor Salvage which was endorsed by the Association of British Insurers and had to be adhered to by all ABI members.
The basis of this voluntary code was consumer protection, ensuring that vehicle information was made available to the industry and consumers, thus ensuring that vehicle history could not be hidden, that unsafe vehicles would not be brought back into use, and that the insurance industry could be better prepared to investigate and cut insurance fraud.
There are many parts to the code, relating to the initial vehicle inspection and total loss decision, the handling of vehicle documents, release of publicly available information, and the onward sale/use of the salvaged vehicle.
If a vehicle is deemed a total loss by the inspecting engineer then they will decide the salvage categorisation. There are four categories, A, B, C and D.
Category A is pure scrap, has no value and should be treated and processed immediately.
Category B is break only – The engineer has deemed the vehicle to be too badly damaged to be put back into use, so in this instance bolt on parts in the vehicle can be removed and may be re-used in another vehicle, however the vehicle structure must be destroyed – effectively taking the vehicle out of use.
Category C is repairable salvage, where the assessed cost of repair exceeds the insurance value of the vehicle. This repair cost should be determined using normal methods of insurance repair to the standard that is expected by a customer. Once in the salvage market, the use of second hand parts, cheaper labour costs, or a decision not to complete ‘cosmetic’ damage makes the vehicle repairable.
Category D is constructive total loss, where the repair cost is less than the insurance value. The gap here would be bridged by other costs, including the value of the vehicle in its’ damaged state and the loss of use costs associated with alternative transport.
Only category D vehicles will be supplied with vehicle documentation, enabling the vehicle registration to be transferred to the new owner.
Category C cars will have to go through a Vehicle Identity Check (VIC) to ensure that the vehicle is not stolen prior to any application for replacement vehicle documentation.
Category A and B vehicles are being taken out of use, so there is no vehicle documentation supplied, and the salvage customer is expected to complete a Certificate of Destruction to record the end of the vehicles life.
In all cases, the details of the claim are placed on the Motor Insurance Anti Fraud and Theft Register (MIAFTR), which records the claim, the vehicle, and any salvage category. These details are available to the UK Insurance Industry for future reference.
Additionally, the vehicle details, including the salvage category are made available to DVLA and HPI.
The DVLA use the data to control and administer the VIC scheme, and HPI make the information available to the public when they complete their own vehicle checks.
Bearing in mind that this is a voluntary code it achieves a great deal of consumer protection, by ensuring that the vehicle history is available to the general public through HPI checks, limiting the availability of vehicle documentation which could then be used for fraudulent activity, ensuring that unsafe vehicles are taken out of use, and that vehicle licensing records are complete.