Vehicle write-offs are unfortunately part of the fleet management package. They’re not as simple as just signing a form, however, and the way write-offs are handled can have a big impact on your budget.
Vehicle write-offs are complicated and have everything to do with the value of the vehicle and the amount it’s insured for, rather than the actual damage incurred. In many cases, a vehicle with relatively little damage to the casual observer will be written off if the cost to repair exceeds the value, according to the terms of insurance coverage.
It is crucial that fleet managers weigh up and compare all insurance options, as this is the first step that will dictate when a vehicle must be written off, or whether it will be repaired. Finding the right insurance cover for your specific fleet requires a lot of research, negotiation, and consultation with experts in the field because the stipulations in your policy can have a big impact on your fleet budget.
At the same time, fleet managers need to ensure they comply with the SAIA Code of Motor Salvage. EQSTRA underwrites and supports the Salvage Code as it creates structure and discipline in an industry that could easily be misused by unscrupulous operators.
Insurance basics
Insurance companies work with strict underwriting policies and procedures when covering your vehicle. In exchange for the premium received, the insurance company agrees to finance the repairs needed to restore the car to the condition it was in prior to the loss.
However, in some cases, the repairs are deemed uneconomical and the vehicle is treated as a write-off. In this case, the policyholder can either receive the settlement amount or opt to replace the vehicle with a similar make and model (subject to the terms and conditions of the policy).
The write-off process
There will be small differences in procedure depending on your fleet management partner, but a general rundown of the write-off process is:
- Notification of an accident / incident is received.
- All relevant claim forms are compiled and completed.
- An assessor is appointed to inspect the damages sustained during the incident/ accident.
- The assessor calculates the cost of the repairs and makes a comparison between the damage and the value of the vehicle.
- The assessor also takes into consideration the availability of parts and the age and condition of the vehicle.
- The assessor then makes a recommendation as to whether the vehicle can be repaired, or if it is more economical or safer to have the vehicle written off.
What happens after a write-off?
Once the vehicle loss due to a write-off has been settled, the insurer essentially purchases the damaged vehicle from the owner and the insurer then becomes the new owner of the written-off vehicle. Once the vehicle is in the insurer’s possession it will be sold to a salvage company in order to recover the costs of the settlement.
What about vehicle finance?
If the vehicle is still under a finance agreement at the time of the loss, you must immediately notify the financing company of the loss and the potential for a write-off. The vehicle will remain the property of the finance house until the insurer settles the outstanding finance amounts with the bank.
It’s not always straightforward
In some cases, there may be a dispute around the insurer’s decision to write off a vehicle, especially if the vehicle owner, or fleet manager, believes the vehicle can be repaired instead.
The vehicle owner can appeal against a write-off. If this happens, the assessor can try to arrange an “all-in” for the repair costs. This means that the vehicle will be fixed, but it will not be insured for any future unforeseen damage.
It’s these details that require expert planning and negotiation to avoid write-off costs destroying your fleet strategy and budget.
Once the vehicle has been repaired, EQSTRA will require proof that the vehicle has been repaired and demand a roadworthy certificate.
Where legislation comes into play
The South African Insurance Association (SAIA) and the Banking Association of South Africa agreed on a Code of Salvage in 2006. This document is being revised in order to address current industry challenges. The SAIA is also exploring the possibility of implementing a salvage database to assist with salvage management.
Vehicle write-off management needs to be a core part of your fleet strategy. All aspects, from insurance to the potential for write-off disputes, can have a massive impact on your fleet costs. It’s vital to ensure your write-off strategy is in the best interest of your fleet and business as a whole.
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