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How
does a car become classified as a write-off?
An
Insurer will perform a reasonably precise calculation to ascertain whether a car
should be deemed a 'write off' (we prefer to think of damaged cars as 'write offs'
as opposed to 'total losses' as Insurers usually make a recovery from a damaged
car, if only the salvage value). The calculation made by the Insurer, or their
engineer is, simplistically as follows: For
an example: Damaged vehicle with a PAV (Pre Accident Value) of £10,000.
Repair Costs:
Parts £5,000
Paint £1,000
Sundries £100
Labour £4,000 Total
£10,100 |
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If the
total repair cost for the above vehicle is £10,100 and the vehicle has a value
of £10,000 it makes sense to write it off; pay £10,000 (less the excess - the
first part of any claim the Insured must pay) and save the extra £100 associated
with the re-building cost. If the repair amounted to £9,900, it may appear economical
to repair the vehicle but is it worth taking the chance?
There are always
the 'hidden extras' to consider; the additional damage that may be discovered
once work commences. If you repair a vehicle, there are other problems that may
arise; the owner may not like the standard of work completed, minor niggles may
arise from problems believed to be associated with the accident. These factors
can make writing a vehicle off more attractive than undertaking repair - easier
to agree a wad of cash for the vehicle and let the owner replace their vehicle
- end of liability (whilst problems associated with repair may be referred to
the repairer to reconcile, they can reflect badly on the Insurer who approved
the repairer). But
what about the salvage value. If the car were a 'write off' and the Insurer decided
to pay their Insured £10,000, the salvage would become the property of the Insurance
company and could be sold. Many Insurers have fixed fee arrangements with salvage
agents. In the above example, if the Insurer has a fixed fee arrangement with
a salvage agent which results in their obtaining, for example, 20% of the P.A.V.,
the Insurer would receive £2,000 (20% of £10,000, the PAV) the loss is reduced
to £8,100 by recovery against the salvage - still more reason to write the car
off. In this example, if the repair exceeds £8000, it makes sense (economical)
to write it off. Vehicles can also be written off by adding hire charges to the
equation; the damage may not in itself be sufficient to write the vehicle off
but, take into consideration an Insured or a Third Party having use of a hire
car attracting daily costs the loss soon mounts up. Courtesy cars can off-set
the loss but are not always available. If the Insurer makes payment to the Insured
(or third party) that person is now in possession of funds to purchase a vehicle,
ending the need for a hire car (with associated charges). Additionally, vehicles
replaced under 'new for old' schemes (often where the damage exceeds 60% of the
PAV) increase the pool of total losses. A
vehicle can, as will be realised from the above, undergo a substantial amount
of damage before it is deemed a write-off. If the vehicle has been deemed a write-off
it will appear on a central register, such as Hpi. An enquiry of the vehicle will
reveal the history and enable a prospective purchaser to undertake an examination
to ascertain the vehicle's condition. You can learn of this history. What of the
vehicle involved in a substantial accident but the calculation caused the repair
cost to fall just below the amount required for an Insurer to deal with it as
a total loss? In theory, an Insurer arranged repair of the vehicle and (given
approved repairer schemes) the condition of the vehicle should be commensurate
with a vehicle of similar age and mileage. The vehicle will have been returned
to the insured, repaired and put to use. Total loss vehicles have not been repaired
on the authority of an insurer; they have not been returned to their insured,
someone who knew the vehicle's condition prior to the accident and who subsequently
had use of the vehicle. An
insurer approved repair will involve bona fide repair facilities using new parts
in a relatively controlled environment. The repairers are accountable to the insurer
and the insured, the acquisition of parts and the work entailed will be documented,
an audit of the repair can occur if necessary. How has the vehicle been repaired,
if not under the authority or supervision of an insurer? The immediate concern
is that some one, to reduce costs, has cut corners; effected a cosmetic repair.
We are not discussing category B salvage (bent chassis - heavy damage) in respect
of which the DVLA will not issue a V5. These are vehicles which an Insurer, possibly
using relatively high labour charges and new parts, has calculated to be too costly
to repair. On a vehicle over 3 years old (as an example), using secondhand or
other than the manufacturer's parts may have a dramatic effect on the costs. Similarly,
savings can be made on labour charges.
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