Turkey: Use of equivalent auto parts to help cost control
Source: Middle East Insurance Review | Apr 2017
A law enacted in January, which allows insurers to replace damaged motor spare parts with equivalent parts instead of original spare parts, is seen as leading to lower auto insurance premiums.
Mr Mehmet Akif Eroglu, Secretary General of the Insurance Association of Turkey, said that the use of equivalent parts provides the opportunity both to avoid excessive increases in original spare part prices and to provide cost advantages to consumers through the use of certified parts that are equivalent to the original, reported Insurance Gazette.
He said that the expectation that premiums will be reduced with equivalent parts will be possible if the costs of insurers are well-managed.
Aksigorta General Manager Ugur Gulen underlined that a positive step had been taken with the adoption of equivalent parts usage. He said: “We anticipate that costs to be reduced through this arrangement, which will be reflected in motor insurance premiums. But it is too early to talk about precise numerical data.”
Commenting on the use of equivalent parts, AIG Insurance Loss Manager Semra Buyukmurat said that the completion of certification studies, the increase in the use of equivalent parts to be provided at a more reasonable cost and the control of damage costs, will have a positive impact on the loss ratio.
In addition, insurers are facing higher prices for imported parts because of foreign exchange rates. The Turkish lira has weakened by 22% against the US dollar over the past 12 months. Thus, the use of equivalent parts produced in Turkey will be more economical as nearly all original parts are imported.
For those concerned about the quality of non-original spare parts, industry players say that it would be useful to raise awareness that policyholders have the right to examine and inquire whether the equivalent parts fitted to their vehicles are certified.
A labelling regime was set up for spare parts that allows certified spare parts to be tracked so that insurers can monitor repair processes and the parts.