Insurance provider Naked has welcomed new guidelines from the Competition Commission that aim to promote more competition in South Africa’s automotive aftermarket, including manufacturing, repairs, insurance, and financing.
The company said that the guidelines will bring more transparency into pricing practices and give consumers more choice if they are widely supported by the automotive industry.
The guidelines were developed to promote economic access, inclusion and greater spread of ownership for historically disadvantaged individuals and will be effective from 1 July 2021.
Some of the measures proposed in the guidelines include:
- 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.
While they do not have the force of regulations, the guidelines will set new benchmarks for the consumer experience with the automotive aftermarket sector, said Ernest North, co-founder of Naked.
“South Africa has a well-regulated insurance sector, underpinned by rules and practices that help to protect consumers,” he said.
“These new guidelines from the Competition Commission are a good example of how our regulators are advancing the rights of consumers, while also creating growth opportunities for the insurance industry.”
North said that Naked also supports the new guidelines that aim to ensure the 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 said.
“It’s interesting to note that the need for accrediting service providers on a regular basis will place a greater reliance on user feedback in evaluating service providers and harsher consequences for service providers that deliver inferior service.
“This echoes the shift we have seen towards consumer power on digital platforms, where consumers have a real voice through ratings and reviews.”
In South Africa, when consumers buy a new vehicle, they are typically sold a maintenance plan and/or service plan, included in the purchase price of the vehicle.
Most consumers are unaware that the purchase price of the vehicle is bundled with these value-added products.
The commission said that this bundling may make the purchasing of these plans easier for some customers who would otherwise have to seek these out separately.
The guidelines therefore provide for the unbundling of maintenance plans and service plans at the point of sale from the purchase price of the vehicle.
“This will make it far easier for consumers to get competitive quotes for these offerings, based on an informed view of the price of the vehicle and of the value-added products and services,” said North.
He said that bundling is commonplace in vehicle financing and insurance and that many people go along with the financial products proposed by the automotive dealer.