Good morning. Thank you for that introduction and thank you to the British Vehicle Salvage Federation for the invitation to join your AGM today.
Firstly – an apology.
I know that the ABI was due to be represented at this event two years ago but that we had to send our apologies at the last minute due to one of my team being ill.
I hope that through my remarks today you will get the insurer perspective on some of the policy issues that provide the context for the important work that the BVSF and your members do.
So in my comments this morning, I’d like to cover:
- the background to, and current review of, the Salvage Code;
- the increase in vehicle crime and the link to salvage; and
- some of the public affairs and communications challenges that impact on the reputation of our sectors.
The Salvage Code
Starting with the Salvage Code.
In June 2017, the ABI announced that the Salvage Code was to be updated, ten years after it had last been reviewed, and that those changes would come into effect from October of that year.
The new Code was the outcome of two years of extensive work, coordinated by the ABI, but led by Thatcham, the motor insurers’ research centre, an organisation that I suspect many of you know well.
We worked with a whole range of interested stakeholders, including
- vehicle manufacturers;
- the Department for Transport;
- Government agencies;
- the Police; and
- the vehicle leasing and salvage industries.
As part of that process, the BVSF raised some challenges which we worked through together and, ultimately, you agreed to support the Code.
As such, the Salvage Code is a great example of the insurance industry working together with other stakeholders for the good of the general public.
When a vehicle is written off – or made a “total loss” in insurance parlance – the Code sets out guidance for insurers and salvage agents regarding how that vehicle should be categorised and, consequently, what should happen to it next in terms of it being scrapped or repaired.
The fundamental purpose of the Code is to help keep unsafe vehicles off our roads and, as such, it forms an important part of the insurance industry’s wider contribution to improving road safety.
And it is worth noting that as an industry, we have always approached any discussions about written-off vehicles from a holistic perspective that puts the safety of road users first.
While each individual insurer will have their own arrangements with salvage firms, the Code means that damaged vehicles should be dealt with consistently and in accordance with criteria that have been decided on, and scrutinised by, subject matter experts from multiple sectors.
Under the pre-2017 Code, a vehicle’s category was determined based on its estimated repair costs and pre-accident value.
Both of which are ultimately commercial and potentially subjective considerations.
But as part of the revised Code, from October 2017 the focus has shifted from vehicle categorisation to one that seeks to establish the level of damage to a vehicle from a technical perspective first.
As such, the main questions that the engineer should now ask when categorising vehicles for salvage are:
- should the vehicle be repaired? and
- can it be repaired safely using accepted industry standards?
By answering these questions with increased objectivity, our hope was that more severely damaged vehicles will be identified and taken out of the repair chain.
At the same time, those vehicles capable of repair will be clearly identified as such.
Broadly speaking, our ambitions have been achieved in this respect and all the feedback that I have received from both salvage operators and insurers is that the revised Code is an improvement on what went before.
Given the changing nature of the vehicle fleet – with electric cars and autonomous vehicles incorporating increasingly sophisticated systems and degrees of automation – waiting a further ten years to review the Code did not seem appropriate.
That is why, we have been undertaking a further review so that the Code continues to evolve and ensure that damaged vehicles can be repaired safely……
…….and that consumers purchasing second-hand vehicles have an increased level of transparency about the history of the vehicle they are considering buying.
As a result of the further review of the Code that we have undertaken, professionalism will be increased.
There will be a requirement that categorisation of salvage must be undertaken by an appropriately qualified engineer, making that person’s role come with greater responsibility and accountability.
That person will also need to have attained appropriate qualifications and be entered on the Institute of Automotive Engineer Assessors register.
In making their salvage categorisation, they will be required to enter their unique identification number which will provide an important audit trail.
Failure to adhere to these rules could result in an individual’s removal from the register.
These changes have been clear to the market for the last two years and, although some will not take effect until 1 October, we are already seeing the positive impact of some of these changes.
Insurers are reporting a significant reduction in the number of categorisation challenges.
This suggests that assessments currently being undertaken are more accurate and acceptable to all parties involved in the salvage process than has historically been the case.
Transparency within the categorisation process and about the individual undertaking the assessment is critical.
But we want to go further still.
Although we have seen a decline in disputes over categorisation, mistakes can, and will, happen.
So we want to ensure that there is a clear and straightforward mechanism to resolve any disputes if and when they arise.
We are therefore seeking to develop an appeals process for any categorisation challenges which will require each insurer to have a dedicated contact person with whom salvage agents can engage.
We hope that this will be useful to you as a sector and demonstrates the Code’s continuing evolution – to respond both to new technology and feedback from users.
It is no secret that we have long supported moving the Code onto a regulatory footing.
The advantages of doing so include:
- making all parties involved in the wider salvage supply adhere to its provisions, including self-insured vehicle fleet operators;
- by increasing adherence with the Code, fewer unsafe vehicles would be repaired with clear benefits from a road safety perspective; and
- those that adhere to the Code’s provisions are at a commercial disadvantage vis-à-vis those who do not given the additional burdens the Code imposes.
From a public policy perspective, such a market distortion should not act in favour of those seeking to maximise their financial return at the expense of public safety by failing to participate in the framework and obligations provided by the Code.
Our position on the desirability of the Code having a regulatory underpinning remains unchanged.
But I am a political realist and I think it is a slight understatement to say that politicians in Westminster are a little bit distracted – so I’m not holding my breath that we will see this moving up the Government’s list of policy priorities any time soon.
I am aware that some in this room may not agree with our position on the need for regulation.
But whilst the Code remains a voluntary, industry-led initiative, I welcome your continued collaborative engagement to drive incremental improvements in the Code’s provisions and operation.
The second key theme I wanted to discuss with you this morning relates to vehicle crime, which is on the rise.
In 2018, ABI members paid out a record £376 million for car theft, up 27% on the year before.
There are numerous factors that may be contributing to this, including the advent of keyless technology and criminals’ use of increasingly sophisticated technology to break into vehicles.
One of the most significant emerging trends is “Frankenstein cars” – written-off vehicles that thieves have brought back from the dead by using parts from other cars.
Criminal gangs are buying up damaged cars from salvage auctions and then stealing cars to order, for the parts they need to fix them, which are then sold for a hefty profit.
Concerns have been raised – most publicly by the West Midlands Police – that the way in which the Salvage Code operates has encouraged an increase in this criminal activity.
In particular, there are suggestions that the recent rise in vehicle theft is directly related to the number of vehicles sold at auction as repairable write-offs compared to those which should be scrapped for spare parts.
Our view is that this is an overly simplistic analysis of a complex policy problem.
That is why we are working closely with the Government and the Police with a view to better identifying some of the root causes of this problem and why we are actively participating in the Home Office Taskforce on vehicle crime.
One of the strands of work this Taskforce is specifically looking at is vehicle salvage and I am grateful for the BVSF’s constructive engagement there.
A number of potential loopholes have been identified through which criminals may exploit the salvage process.
- weaknesses in the online notification process of changing registered keepers of vehicles;
- deficiencies in the process for obtaining duplicate or replacement logbooks potentially enabling criminals to easily “clone” a vehicle’s identity;
- the fact that a vehicle can be written off as a category S or N but will retain its MOT certificate;
- the lack of a Vehicle Identity Check (VIC) for repaired vehicles;
- the lack of a sufficiently robust know your customer and ID verification process at vehicle salvage auctions;
- the ability for salvaged vehicles to be purchased at auction in cash.
It is because of this last point that we particularly welcome the move by SYNETIQ to stop this practice and would encourage more in the salvage industry to do the same.
Surely, as reputable firms, you don’t want to be doing business with criminal gangs?
All of these things are important.
And there may also be a role for the ongoing review and revision of the Salvage Code with a view to ensuring that it does not pose opportunities for criminals to exploit the system.
What we as an industry are not prepared to do, however, is to mandate an increase in the number of vehicles that should be repaired given the safety issues that would pose.
Nor are we prepared to crush a larger number of vehicles that are perfectly repairable. This would increase costs and represent significant unnecessary waste and damage to the environment.
That, it seems to me, would be a disproportionate response to the problem of increased vehicle theft.
But the point here is that the simplicity of the “vehicle theft problem” betrays the complexity of its possible causes.
The solution lies in a coordinated approach involving insurers, salvage dealers, vehicle manufacturers, Government and the Police.
I am confident that coordinated approach exists and it now needs to be given the opportunity to work through the issues.
But the public also have an important role to play – motorists should be wary of buying second hand cars that are much cheaper than might reasonably be expected.
The old adage applies – if a deal seems too good to be true, it probably is.
And in this instance, the car may have been poorly repaired with stolen parts, with all of the risks inherent in this for the purchaser.
Public affairs and communications
Finally, a brief word about public affairs and communications.
An industry’s reputation is something that can be easily damaged – I know – I work in insurance.
So my caution to you is to be careful how your wider sector is represented, especially in the context of social media.
The Twitter trolls accusing the industry I represent of being responsible for an increase in vehicle theft or car jackings is not only ridiculous, but it undermines the credibility of the wider industry.
I accept that it is not easy to stop the tiny minority who are determined to be abusive.
But any undermining of the credibility of our sector will not do any of us any favours when there is increased attention from decision makers and the media on the causes of vehicle crime that I’ve just been discussing.
We should be using that attention as an opportunity to strengthen our joint working and partnership, not to score cheap points through tweets or trolling.
In conclusion, I strongly believe the insurance and salvage industries have the same fundamental goals.
Firstly, a belief that the wider supply chain and regulatory framework should place road safety at its heart.
Secondly, the delivery of a framework which delivers an objective and transparent process for categorising salvage, with the ability to scrutinise and communicate in an effective manner.
Thirdly, closing loopholes that unscrupulous parties exploit at the expense of those who play by the rules.
Together, we have made significant progress against each of these goals over recent years…..
……and I look forward to our continued collaboration in the years ahead.
************** It appears the ABI completely miss the point, when you challenge bodies like the ABI you suddenly become a “Troll” Insurers are certainly the cause of the increased rates of theft, what they should be doing is repairing vehicles that they are constructively total losing, and they should be breaking vehicles that have structural damage **************************************************