The Bottom Line / In cahoots with car thieves
The outgoing chairman of the Automobile Importers Association, Avihu Bin-Nun, launched a harsh attack this week on the practices of insurance companies in the automobile market.
The outgoing chairman of the Automobile Importers Association, Avihu Bin-Nun, launched a harsh attack this week on the practices of insurance companies in the automobile market. Bin-Nun listed a series of the insurance companies' practices that, in his opinion, work to the detriment of policy-holders.
Among his charges, Bin-Nun claimed that the insurers repair damaged vehicles with spare parts of their own choosing, sometimes using secondhand parts of poorer quality, even when dealing with cars that are only two years old.
He added that the insurance companies take cars deemed total write-offs and sell them to car dealers. Some of these cars, Bin-Nun charged, are then repaired by the dealers or others with stolen parts and find themselves back on the roads. These cars, he said, were usually sold to unsuspecting citizens.
Bin-Nun also accused the imposition of extortionist criteria that require garages that work with insurers to submit to low prices that the insurance companies demand. The result, he said, was usually low-quality repairs.
The outgoing chairman also claimed that although automobile thefts had dropped off sharply - by some 40-50 percent compared to 2000 - the premiums exacted by the insurance companies had hardly come down.
The insurance companies hit back predictably to Bin-Nun's charges, stating: "These are empty claims of parties with vested interests."
Most of the charges voiced by Bin-Nun do indeed shed light on the interests of the Automobile Importers Association. After all, the importers earn a living from the sale of original-brand and expensive spare parts, as well as the operation of certified repair garages whose rates are higher that the prices charged by other garages.
The development of the used-parts market and the increasing use of "tied" garages has taken a large bite out of the automobile importers' revenues and profit. Bin-Nun and co. would be happy to serve as exclusive suppliers of spare parts and expensive repair services, and their anger toward the insurance companies' undermining their livelihood is, therefore, understandable.
Notwithstanding this, among the numerous charges raised by Bin-Nun, at least two are worthy of a closer review; high automobile insurance premiums that have not been adjusted in keeping with the marked drop in vehicle thefts; and the cooperation between the insurance companies and car dealers that provides a livelihood to the car thieves as well.
For many years, the insurance companies complained that the vehicle industry fluctuates and that its contribution over the years to their profitability is negligible. The past two to three years have seen a sharp fall in the extent of car thefts, while the insurance rates have eroded only very slightly. The results can be seen in the profits of the vehicle insurance industry, which totaled some NIS 262 million in 2002.
The second charge is far more serious because it depicts the insurance companies as being in cahoots with the car thieves. It is estimated that a certain rate of car theft is good for the insurance companies because it serves as a sales pitch for policies. Nevertheless, there is no doubt that deliberate actions involving the sale of parts from cars defined as write-offs to dubious elements strengthens the car thieves.
This, therefore, is an improper phenomenon that must be uprooted; and the way to do it is to impose tighter control over the trade in spare parts.