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Salvage – is the ABI Code of Practice still relevant?

salvage issues
The poor classification of salvage has been going on for too long.
Last months’ article on the questionable salvage practices of motor insurers elicited a number of interesting responses. Perhaps the most shocking of all is the widespread agreement that this isn’t anything new at all – it’s been going on for years, but no-one wants to talk publicly about it.

Since then, we have been sent many further examples of the insurance industries cavalier attitude to salvage, particularly regards vehicles being sold for ‘repair’ with roofs cut off, extensively flood and fire-damaged, and category B vehicles being sold to overseas bidders. These all underline the points made in last month’s article.

Take a look at the Peugeot (Cat C) above we were sent. Heavy square frontal damage, impact crumpling up to front suspension turrets. Obvious structural chassis damage and with kinked roof. Probable engine and gearbox damage. Wiring loom damage and not to mention, all the airbags deployed. This vehicle is 10 years old and so heavily damaged that it could not economically be repaired, even with second hand parts. We believe that this should be a Cat B, and it’s hard to see why the insurer has said it could be repaired.

What all this brings into focus is the validity of the insurance industry’s Code of Practice on the Disposal of Motor Salvage (COP). With the insurers selectivity of application of the COP now being widely visible, many are questioning its continuing relevance. As one salvage agent recently said “I get the feeling that insurers choose whether to comply with it on a vehicle by vehicle basis, depending on how much money they need to save, but all this does for us is hamper our business to the point where we’re now only just surviving. At every turn insurers undermine professional vehicle recyclers. They demand that we work to the highest standards and lowest costs, and meet all the legislation. But when they’re in a tight spot, they don’t hesitate to save a few quid by contracting with companies that have been prosecuted on environmental grounds, or by turning a blind eye to the export of Category B vehicles. Airbags are another example. The ABI COP forbids us from selling airbags and yet just take a look on E-bay; every man and their dog is selling them”.

With the recent very wet weather, flood-damaged vehicles are once again very common. Another salvage agent told us “in the past flood-damaged vehicles were largely classified as category A or B. We begged insurers to be more flexible in classifying ‘low level fresh water’ cases, but they insisted on their destruction, and many perfectly repairable vehicles were needlessly destroyed. Now, the vast majority are classified as Category C or D, even though the level of immersion is often horrendous. But it’s all to do with money – as explained in your article. By classifying them as C or D, it means they don’t become waste, so anyone can buy them, even if they intend to ‘break’ them; international purchasing in particular is much easier and so prices rise. God knows what happens to some of these vehicles because the extent of water (or mud) damage makes their proper repair almost impossible”.
What needs to be done?
The problem with the ABI salvage code is that it is completely voluntary and vague in certain areas. For example: When is a vehicle category B?
Category D is when the repair costs do not exceed the value of the vehicle (i.e. repair cost is less than 100% pre-accident value).
Category C is when the repair costs are greater than the value of the vehicle (cost is greater than 100% PAV).
But, when it comes to defining a Cat B, it makes no mention of costs. The vast majority of damaged vehicles are repairable, so according to the COP there’s not a problem with an accident-damaged vehicle with a repair cost of 200%-300% (i.e. a vehicle valued at £1000 requiring a £2000-3000 repair). Of course, the reality is that these vehicles aren’t repaired. It’s common sense. We feel the COP should say that if cost of repair is more than X% then it’s a cat B.

The COP mentions that flood-damaged vehicles can be categorised, as A, B, C or D, as seen fit by the insurer. This overrides what it states elsewhere. We believe that flood-damaged vehicles should be classified in exactly the same way as all other salvage.

From the discussions we have had, we feel that the real problems with the COP are that it’s voluntary, it’s unenforceable, there’s no audit procedures, there’s no transparency, there’s no consistency and it’s vague. We should be calling for an overhaul of the COP, including a proper Cat B where cost of repair is say, more than 150%. We should also call for repair estimates (list of parts required) to be included with all salvage sales, improved audit trails for all salvage disposals including CODs and UK disposal for all cat A/B vehicles.

So far, we’ve not had any contact from the ‘insurance industry’ in response to the last article, but I’m sure we’d all be interested to hear their views on this subject. If you have any comments, please email us.

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