THE pandemic and Russia-Ukraine conflict has caused havoc in the motor industry due to lockdowns across the world, parts shortages, computer chip shortages, and supply chain disruptions. This has led to a significant shortage of new vehicles.
For the first time, second-hand cars are increasing in value. Now a new threat looms – a possible glass shortage, which is being brought on by Europe’s energy crisis. News reports suggest that global car manufacturers are stockpiling components with glass, such as windshields and windows, or searching for new suppliers outside of Europe.
“Although this is not something that is impacting South Africa at the moment, it is likely to filter down to us in the coming months, which will most certainly either play out in a shortage or delay in getting parts for fixing car windshields, amongst others,” says spokesperson for Old Mutual Insure, Lizo Mnguni.
He adds that today’s rocketing car market may pose a problem for owners’ car insurance coverage in the event of a major accident, a stolen car or a damaged vehicle.
“The demand for used vehicles has exploded and this is having a knock-on impact on policyholders, who are finding themselves with the short-end of the stick when it comes to claims stage,” says Mnguni.
He explains that the retail values received from industry guides are no longer accurate due to the increasing value of second-hand cars. This has led to these values not following the usual trend where vehicle values decrease gradually on an annual basis.
“We are finding that a significant proportion of policyholders are currently underinsured and therefore in the event of a valid total loss claim, they find themselves unable to purchase the same or similar vehicle,” says Mnguni.
Mnguni says the trend of rising pre-owned vehicle prices is most notable in cars manufactured in the years 2019 and 2020. This is largely due to new car buyers who are not willing to be at the end of long waiting lists for brand-new vehicles opting to purchase a 2019 or 2020 model equivalent instead.
He adds that some insurers are adjusting to the times and responding to the trend by introducing new products to ensure that consumers are adequately covered and don’t find themselves out of pocket when it comes to claims stage.
“We realise that there is a price gap that could negatively impact policyholders at claim stage,” says Mnguni.
Top-up products, or extensions on existing vehicle insurance, are being offered by insurers like Old Mutual Insure, which allow the insured value of a vehicle in the event of a total loss or theft to accurately reflect the correct vehicle value available in the market.
“Policyholders can select from various percentage options to increase the insured value of their vehicles, so it allows consumers to choose what suits their pocket best,” says Mnguni.
He adds that it is automatically incorporated for new policies unless a policyholder chooses to opt-out.
“When it comes to optional extras like nudge bars, towbars, rollbars and spare parts, most insurance policies still maintain that these must be separately insured and it remains the customers’ responsibility to regularly review the values that these items are insured for.”
He adds that the onus is on the policyholder to ensure that the sum that the vehicle is insured for is accurate.
