Do service centres authorized by car insurers overcharge?

There can be enormous difference in the insurer-authorized service centre estimation as compared to the roadside repair shops. Is it justified? Are insurance companies being fleeced which means you end-up with higher premium?

Imagine an ICICI Lombard-authorized service centre giving quote of Rs44,390 for labour and parts when you could have roadside shop fix your Honda City for only Rs5,000. It happened for one customer and hence it leads to the question whether insurance companies are ripped off by service centres they have tied up with? If so, are you paying extra premium to compensate for the profits made by the service centres? We know of some hospitals overcharging when you declare that you have a health insurance policy. If your car needs treatment, why should you expect authorized service centres behave anything different than hospitals?

ICICI Lombard did defend its position. According to Shankar Nath, Head- Direct Channel and Marketing, ICICI Lombard, “We did visit the service centre. As per them, the bumper, both tail lights and boot lock needed replacement. Repair of some panels, painting of all repaired and replaced parts and other miscellaneous work was mentioned. We could have assessed whether all of this was required or not by surveying the vehicle. Claims are approved and settled only as per policy terms and recommendation of the surveyor, and not solely on the basis of an estimate from a service centre. We did not receive any claim intimation for the said accident. In the absence of claim documents or photographs of the damaged vehicle, it is not possible to comment on what would be the cost of repair.”

Mr Nath explained the factors which affect the cost of repairs. He says, “The cost of repair depends on factors such as:

i)    whether parts are replaced or repaired (which, in turn, depends on the recommendation of surveyor considering the actual damage, roadworthiness of the vehicle after depreciation)  

ii)    labour cost; and

iii)    parts used while repair of the vehicle (whether locally manufactured or of authorized manufacturer, to ensure safety of the occupants of the vehicle).”

Do you replace or repair? Mr Nath adds, “In several instances we find that replacements can be avoided, thus bringing down the overall estimate. We also get discounts on the standard rates to minimize the claims cost. But we could not do any of that assessment in this case as the insured went ahead with the repairs without any claim intimation to us. I would like to assure you that we have robust internal systems for identifying and eliminating frauds in the claims process.”

It is worth getting a view from dealer service centre to know more about the working of a surveyor in this industry. According to senior official from a leading dealer service centre, “The main job of an insurance company surveyor is to check the veracity of the case. Whether it is accident damage or breakdown and to check if damage corresponds to the description in claims form? In few cases the surveyor will dispute the service centre for its estimate on car repair. This is because when the insurance company chooses the service centre for a tie-up after its verifications, there is an understanding on the levels of service.” If true, it is possible that the surveyor in the above case may not have really reduced the estimate.

Go with service centre or roadside shop? He adds, “There is huge difference in the approach of dealer service centre and roadside shop. A service centre has to work as per certain conditions, which ensures that the car’s problem is not temporarily fixed. The roadside shop does not care if the same problem arises again. It is like difference between eating at a good restaurant versus at roadside vendor. Service centres do have tendency to replace parts instead of repair, but it is about providing high service standards for customer satisfaction with quality work. Today, no one wants repairs. How many repair a laptop? They replace the bad part. Most foreign manufacturers do not believe in repair. Manufacturers make money on parts replacement, not service centres.” The reality is that service centres also have profit margin on parts.

Here is a view from KN Murali, head of motor insurance at Bharti AXA General Insurance, which is in line with feedback from ICICI Lombard:

The customer has the choice to leave his vehicle for repairs with any service centre. At Bharti AXA, we are concerned about the safety of the insured person and are focused on quality of repairs and genuineness of spare parts replaced. We are particular that post repairs the vehicle should be roadworthy and should not be cause for any other accident in future.  

It would be difficult to generalize that all authorized service centre unnecessarily inflate the quote. There may be a one-off situation where an authorized service centre artificially inflated the repair cost. We have competent surveyors in our organization who will be in a position to find out the actual repair cost. We invest in training to understand latest trends/costs in repairs of different vehicles. We bank on the competence or expertise of our surveyors who would save us from paying inflated repairs bill.

The customer is benefited in the short and long run if the claim outgo is controlled. There is an element of depreciation in every accident claim; depreciation is dependent on the age of the vehicle and the type of parts. Higher the cost of spare parts, the customer has to pay a higher amount from his pocket. Insurers might charge a higher premium from the customer at the time of renewal if the actual claim outgo is far higher

The example that you quoted will arise when repairer might insist on “replacement of a spare part” than repair the component.  Unless the damages are extensive and cannot be repaired effectively, it is not worth to go for replacement for all the parties concerned.

a.    Repairer has “profit margin” on spare parts and that could be reason to insist on replacement. However, if the service centre is assured of margin in body shop labour charges, many service centre accept the proposal to repair the component.  

b.    Customer does not have to bear the ‘depreciation’ portion.

c.    Insurer’s ultimate outgo is also restricted.

That would be win-win situation for all the parties—service centre, customer and insurer.  Convincing repairer and the client would help us to wriggle out of such situations.

To conclude, the insured will have to be wary of the estimate given by the service centre. It is better to get a final estimation after the surveyor has made an evaluation of the damage. If you think it is high and you end up paying high depreciation amount for the replaced component, it will be worth checking if the roadside shop can do the needful with fraction of the money. This way for small claims, your no-claim-bonus (NCB) will not be affected. If there is a genuine need for a service centre to work on your car, do not hesitate. You got the car insurance ‘Own damage’ cover for this very purpose. Let the insurance company worry if they are getting fleeced by service centres.

Dhruv Kaushal
5 years ago
Can customer get the copy of estimate that service center provided the surveyor?
D Mehta
1 decade ago
It is true that there is a substantial difference of repairing and replacement charges for vehicles when it is put before an authorised service dealer compared to the others in the market. This is formost reason for constantly increasing premium for insurance of vehicles.
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