Why do I feel it is necessary to write about the salvage Code when it should be a document which all self-respecting motor insurance claims officials should know about and be fully conversant with. The fact is that from many contacts made recently it has come as a surprise to me that some of its details are not so widely known as one might expect and certain aspects are not fully understood.
Let me start by summarising some of the facts. The Code is now nearly 15 years old. It is the ‘bible’ of the vehicle salvage industry supported by all interested parties including the Police and Government departments. Its main aim is an anti-crime measure, namely to prevent ‘ringing’ of vehicles, insurance fraud and dangerous vehicles being returned to the roads. A most important role is the categorisation of total loss vehicles into four categories and the specification of those total loss vehicles which fall outside the Code.
What is not widely known is that there is a set of guidelines which are designed to assist in the vehicle categorisation process and to ensure that assessing engineers adopt a uniform approach. These guidelines produced by the insurance industry cover such aspects as – Is the damage sufficiently severe to warrant settlement on a total loss, constructive total loss or vehicle replacement basis?; Can/should the vehicle be repaired? Does the vehicle contain any parts which are economically viable for resale? Do repair costs including VAT exceed pre accident value (PAV)? Guide notes are provided for each of these questions.
One of the most controversial questions relating to the Code, which has arisen recently, is that some insurers use descriptions for their total loss vehicles not described as a formal category in the Code. This has caused great consternation particularly by the Police. It has even been suggested that such practice is a circumvention of the Code requirements thus undermining its operation! Obviously this is an undesirable accusation but I am pleased to say that it is without foundation. It is not so and the criticisms made have, in my view, been entirely due to a lack of understanding of what is in the Code and how it should be read.
The fact is that the flow chart at the back of the Code provides an entry which specifies those cases when the Code does not apply. These are described as Insurance repair cases, stolen and recovered undamaged or minimal damage (after the claim has been settled) and vehicles which are not repaired for other commercial reasons.
The guidance notes which, in effect, form part of the Code provide that in special circumstances, an insurer may settle on a total loss basis when repair costs are less than 50% of PAV. Examples are given such as to safeguard a valuable connection, to mitigate other losses or when parts cannot easily be obtained. It is pointed out that in these cases a vehicle need not be treated as a total loss and no entry need by made on the Motor Insurance Anti Fraud and Theft Register (MIAFTR). It is in these cases that some insurers record the vehicles for their own purposes as say, Category ‘X’, purely for administration purposes because, of course, they are outside the Code. The guidance notes in fact recommend that in such cases, vehicles with serious structural damage or requiring a new body shell, should be recorded on the MIAFTR and categorised accordingly.
So to sum up, whilst a great deal has been said in recent times about the ‘malpractices’ of some insurers putting total loss vehicles into a Category ‘X’ ostensibly for their own commercial benefit purposes, this perception must be disabused because the practice is, in fact, in line with the Code, albeit that no letter is laid down for recording (categorising) such cases. Is it perhaps time formally to recognise the position in such a way for the future?