What Determines The Fate Of A Car In Case Of An Accident?

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Write-offs vs recoveries

Ever wondered what factors determine whether to repair or write off a vehicle that’s been damaged in an accident? 

Different insurers manage the process in different ways, but there are standard laws that govern the whole process, as set out by the Ombudsman for Short-Term Insurance. Insurers have different internal processes that they follow, but they should adhere to the guidelines set out by the ombudsman.

The following factors determine whether a car should be written off or repaired in case of an accident:

Damage assessment 

To determine whether the car is repairable or a write off, the first step in the process is having the car assessed to find out the degree of the damage and the costs of the damage.

The overriding reason that leads to a write off is if the car has been declared uneconomical to repair as the estimated damage has exceeded maximum repair threshold.

Threshold amount

The damage assessment on the car determines if the damages to the vehicle have reached the threshold amount, which is the maximum amount a car can be repaired for. The threshold amount varies from car to car, according to the value covered and the damage incurred.

Head of MiWay Blink, Keletso Mpisane explains, “To get the threshold amount, we look at the current value of the car without the damages and then we look at what is called the ‘salvage amount’, which is the value of the car with the damages incurred. So, when we take the current value of the car and deduct the salvage amount to get the threshold amount of the car”.

“For example, if the current value of the car is R100,000 and then after the assessment we find that the damages on the car are for R70,000 and the salvage amount is, let’s say, R50,000 for example, the car would be deemed a write off,” she explains.

Salvage amount

Each vehicle model has a specific salvage amount, or salvage value. The salvage amount of your vehicle is the value that would be received if the insurer sold it to a scrap yard for its parts and frame.

Insurers reserve the right to repair or not

Insurers reserve the right to either recover or write off the vehicle following an assessment. 

“We are a financial institution so our first option would be to settle with the bank if the car is still financed or the owner if it’s not financed,” says Mpisane. 

Availability of repair parts and the car model

The time it would take to repair the car and the likely inconvenience it would cause both the customer and the insurer is taken into consideration. The availability of the parts needed to repair the vehicle is also considered and impacted by the model and age of the car. These factors all impact the threshold amount. It’s common for certain parts to be sourced internationally to repair cars. This influences the overall write-off versus recovery consideration. 

Geopolitical tensions and pandemics can place constraints on the shipping industry, creating supply and demand pressures. Should an insurer have to repair a car using parts from affected regions, it could mean a rise in costs.

Write off has 3 codes that lead the process:
  • Code 2 – Write offs don’t mean that the car can’t be repaired, but rather that it would be uneconomical to repair  and the insurer will not be taking the risk to repair. 
  • Code 3 – There is major structural or unseen damage to the car, and it cannot be repaired back to a safe, roadworthy state. The insurer will not take the risk by attempting to repair this car.
  • Code 4– The car has to be permanently demolished.