New guidelines for car sales and insurance released

Aftermarket car sale and insurance changes coming to SA in July

The Competition Commission has released new guidelines to promote competition in South Africa’s automotive aftermarket that will come into effect in July 2021. This includes guidelines on manufacturing, repairs, insurance and financing.

Insurance provider Naked’s Ernest North said Naked supports the new guidelines that aim to ensure fair allocation of aftermarket repair work by insurers to service providers on insurance panels.

“The Guidelines signal a determination to encourage competition and the emergence of new entrants, which will be good for the economy,” he added.

According to BusinessTech, the guidelines were created to promote economic access, inclusion and greater spread of ownership for historically disadvantaged individuals and will be effective from1 July 2021.

Here are some of the measures proposed in the guidelines:

  • The unbundling of the new motor vehicle price from the price of the service and/or maintenance plan of that motor vehicle.
  • Original Equipment Manufacturers (OEMs) and independent third-party providers must transfer a service and/or maintenance plan to a replacement motor vehicle in circumstances where the motor vehicle is written off by the insurer;
  • The consumer must be afforded the right to cancel the service and/or maintenance plan contract and/or receive a refund for the balance of the product;
  • Approved dealers that sell new motor vehicles and products of competing OEMs must ensure that they do not engage in price co-ordination.
  • Approved dealers that sell new motor vehicles and products of competing OEMs must ensure that no commercially sensitive information (including information stored in the cloud) is provided or shared with competing OEMs.

Price bundling:

When customers buy a new vehicle, it is sold with a maintenance plan and/or service plan included in the purchase price.

Commission has confirmed that this bundling may make vehicle purchasing of these plans easier for some customers who would need to purchase warranty or service plans separately.

North also stated that bundling is commonplace in vehicle financing and insurance and that many people go along with the financial products proposed by the automotive dealer.

“We’re seeing this trend already starting to change thanks to digital platforms,” said North. “Consumers can now get a quote for car insurance from an app or website while they’re sitting with the dealer. It’s thus easier to shop around than it was when you needed to get quotes from the insurer’s call centre.”

Picture: Twitter/@ArriveAlive