What determines the fate of a car in case of an accident?

Have you ever wondered what criteria are used to decide whether to write off or repair an automobile that was involved in an accident?

Although different insurers handle the process in different ways, the Ombudsman for Short-Term Insurance has established basic laws that apply throughout the entire process.

While insurers follow various internal procedures, they need also to abide by the ombudsman’s instructions.

In the event of an accident, the factors that follow decide whether an automobile should be written off or repaired:

Damage evaluation

The first stage in the procedure is having the car evaluated to ascertain the extent of the damage and the associated expenditures in order to decide if the car can be repaired or is a write-off.

The primary cause of a write-off is when the estimated damage to the vehicle is deemed too great to repair, making it uneconomical to fix.

The threshold sum

The car’s damage assessment establishes whether the damages have surpassed the threshold, the highest amount that can be fixed on a vehicle. Car to car, the threshold amount varies based on the value covered and the extent of damage.

In order to determine the threshold amount, the car’s present worth is examined first without any damages, and then the value of the vehicle with the incurred damages—also known as the “salvage amount”—is examined. Thus, in order to determine the car’s threshold amount, they take the car’s current worth and subtract the salvage amount.

For instance, the car would be considered a write-off if its current worth was R100 000 and after assessment they discovered that the car’s damages were R70 000 and the salvage amount was, let’s say, R50 000.

Salvage amount

Every car model has a particular salvage value, or salvage amount. The amount your insurance would receive if it were sold to a scrap yard for its frame and parts is known as the salvage amount of your car.

Insurers retain the option of making repairs or not

After an evaluation, the insurers reserve the right to write the vehicle off or recover it. As a financial organisation, if the car is still funded, their first choice would be to reach a settlement with the bank; if not, they would seek to settle with the owner.

Repair part availability and vehicle model

Considerations include how long it would take to fix the vehicle and how much inconvenience it would probably cause the insured and the client. The model and age of the car are also taken into account and have an impact on the parts’ availability for repairs. Each of these elements affects the threshold amount.

In order to repair cars, it is usual practice to seek specific parts from overseas. This affects the overall analysis of write-off against recovery.

Pandemics and geopolitical unrest can restrict the maritime sector and put pressure on supply and demand. In the event that an insurer must replace a vehicle with parts sourced from impacted areas, expenses may increase.

Three codes drive the write-off process:

Code 2: Write-offs do not indicate that the vehicle cannot be fixed; rather, they indicate that doing so would be expensive and that the insurance company will not assume the risk of fixing the vehicle.

Code 3: The vehicle is beyond repair and cannot be brought back to a safe, roadworthy condition due to significant structural or invisible damage. The risk of trying to fix this car will not be assumed by the insurer.

Code 4: The vehicle must be completely destroyed.

• Information from MiWay