Some policies will pay to replace damaged parts with original equipment, while others specify lower-cost components from other makers. Does it matter?
Getting in a car wreck is bad enough, but having to jump through the hoops involved in the insurance claims process can be daunting at times. Even if an adjuster issues a repair estimate in a timely manner, there are important details to consider, including the type of replacement parts the body shop uses for your vehicle.
It seems not all components are created equal. Depending on the insurance carrier and level of coverage, the estimate could specify either auto parts made by OEMs – original equipment manufacturers, in this case, the automaker – or components fabricated by a third-party company, also called “aftermarket parts.”
Auto enthusiasts argue that there’s no substitute for OEM parts in terms of fit and finish, simply because they are essentially the same body panels, bumpers and other components that were originally used to build a vehicle. On the other hand, insurance companies tend to prefer aftermarket components, which are engineered based on the same design specifications as OEMs, since they are less expensive.
We’re not just talking nickels and dimes in terms of cost savings. According to the National Association of Mutual Insurance Companies in Washington, D.C., aftermarket replacement parts cost 26 percent to 50 percent less than original-equipment components. Their availability helps save consumers between $1.5 billion and $2.4 billion each year. NAMIC says more than 95 percent of all insurance carriers specify use of aftermarket parts in at least some situations.
Still, 73 percent of auto body replacement parts are made by OEMs, according to the Consumer Federation of America in Washington, D.C.
“Competition is the best form of consumer protection against excessive prices, and the vibrant aftermarket parts industry in this country has provided it for decades,” says Jimi Grande, senior vice president of federal and political affairs for NAMIC.
Proponents of aftermarket replacement components further argue that the quality is generally as good or better than OEM components. They carry warranties that are often longer than OEM parts, and they are more widely available, which can mean a car spends less time in the shop waiting for parts.
Either way, many states prohibit any surprises in this matter: According to the Insurance Information Institute in New York City, 39 states mandate that repair estimates indicate when aftermarket parts are specified, while 13 require an owner to give consent prior to installation of aftermarket parts.
Last August, the House Committee on the Judiciary held hearings regarding the so-called Parts Act, which would effectively restrict automakers from patenting the design of repair parts, to ensure competition from aftermarket companies. It was not, however, brought to the House floor for a vote.
As it stands, specific provisions regarding reimbursement for OEM or alternative parts vary from one insurer to another, so be sure to check with an insurance agent for details when shopping for an auto insurance policy.
For example, some carriers will only pay for aftermarket replacement parts, while others allow policyholders to purchase additional coverage at a modest cost that ensures usage of original-equipment components when possible, provided it’s a late-model car. An insurer might allow the claimant to choose which type of parts to use, but require him or her to pay the difference if that preference jacks up the repair bill beyond the company’s estimate.
© CTW Features