How Auto Part Choice Can Impact Insurance Premiums

There was a time in our history when insurance wasn’t required for motorists in most states. And yet, many people still had it.

Why? Because, while insurance premiums might seem like a lot, the cost of repairing a vehicle, or replacing it if it’s too badly damaged, is much higher, not to mention medical bills, time off of work, and so on.

Clearly, auto insurance serves a valuable place in the lives of drivers. Still, it can be a challenge to fit the expense into your budget.

Now imagine if insurance rates were even higher than they are now. That’s a potential reality if car companies get their way. You see, car companies want consumers to only use their parts for repairs, and doing that could cause the cost of auto insurance to skyrocket.

You might think car companies are justified in pushing for Original Manufacturer Equipment (OEM) parts to be used on their cars. Or that you don’t have a choice in parts when your car is being repaired after an accident. You might even think that to protect your car’s warranty or to keep you and your family safe, OEM parts are the best option.

It’s time to clear the air about your auto parts choices, especially when it comes to your insurance.

Insurance, Parts Choice, and Your Costs

For some people, when their car is in the shop, they just want it back. They don’t want to think about parts choice, they just want this all to be over.

For others, they want to be in the details. They want to ensure that what’s being put into their car is what they want – it is their car after all, not the insurance company’s.

And of course, some people fall in between these groups. They care about what goes into their vehicles, but they are also in a hurry to get back on the road.

Whichever groups you land in, you should still understand how your parts choices impact the cost of your repairs and, long-term, your insurance premiums. That requires educating yourself on the different kinds of vehicle replacement parts and what the use of each of them means

What’s the Difference Between OEM and Alternative Parts?

You can start with the basics. When it comes to car new replacement parts, you have two options: Original Manufacturer Equipment (OEM), or alternative parts, which were previously known as aftermarket parts. Your insurance may allow for one or the other, something we’ll cover below.

OEM – these parts are made by the original manufacturer of your vehicle

Alternative (aftermarket) parts – these are made by a third party

There are differences between these two categories of parts, but where they differ may not be where you’d expect. 

The most obvious difference, of course, is who makes the parts. 

OEM parts must be purchased from the manufacturer or dealer. This can make them harder to come by, causing delays in your repairs.

Alternative parts are easier to come by since they don’t have to be sourced from the dealer and there is a wider variety to choose from.

You may have heard that insurance companies prefer alternative parts, which is true because alternative parts can be as much as 50% less than their OEM counterpart which helps them fix your car rather than possibly having to total it.

That doesn’t mean that OEM parts are inherently better, either. There are thousands of high-quality alternative parts. Many are even certified to provide extra assurance in their performance and workmanship so the consumer can buy with confidence, whether it’s a mechanical part or a body part. This testing, done by an independent, third-party organization, known as CAPA – the Certified Automotive Part Association – has tested and certified the quality of thousands of alternative replacement parts.

So, the question then becomes, if certified replacements are of equal quality, why use the OEM part when the alternative part is less expensive

Alternative parts play a big role in the replacement part industry and directly impact how much you pay to your insurance company. Next, we’ll look at why that is.

Parts Choice, Insurance Premiums, and the Bigger Picture

The story doesn’t end with knowing that many alternative parts are just as good, if not better than the same OEM parts. How your insurance company handles replacement parts, and what it means to your insurance costs, are part of the bigger picture, too.

Let’s start with what making a choice on replacement parts can mean for your pocketbook after a collision. To be clear, the insurer paying for your repairs can’t force you to use alternative parts. What they can do, however, is only pay for alternative replacement parts. In other words, you can request OEM parts, but they may not agree, so your only choices are a long, drawn-out battle with the insurance company, or to pay the difference yourself.

Sadly, the struggle starts even before an accident. You see, there are insurers out there who specify that OEM parts can be used for repairs. However, those policies have some of the highest premiums in the industry.

Despite this, the OEMs push for their parts to be the only ones used as replacements. They have gone so far as to release position statements on repairs – guides sent to insurance companies and repair shops that indicate how the OEM would like the repair done to ensure the operability of the vehicle. Of course, some car companies use these position statements to direct the use of OEM parts only, even when outside parties have certified the quality of non-OEM parts.

Imagine, for a moment, if OEMs were able to minimize or even push alternative parts out of the market. The existence of alternative parts in the market has been estimated by the APCIA Micra Report to reduce OEM parts by about 8% or nearly $18 a part. Without that competition in place, OEMs could raise their parts prices without offering consumers or insurance companies another choice.

This would have a snowball effect on insurance premiums. If the price of parts were to increase, repairs would be more costly overall. With an increase in repair costs, insurers would be forced to raise their rates. While removing alternative parts from the market might feel like the insurance companies are the ones who will suffer, the reality is that the pain will be passed along to the consumer.

Importantly, we’re not talking about a small amount of money. If alternative parts were eliminated from the market, it’s estimated that insurance repair costs would soar to $3.2 billion – a cost that would end up reflected in your insurance premiums.

Car companies and some repairer associations would have you believe that only OEM parts are appropriate for your repairs and that your car won’t work the same, look the same, or be as safe without them. They work hard to influence insurance companies, repair shops, and even the media to see things their way. 

In truth, many aftermarket parts are as good or even better than the OEM parts they replace. You don’t have to take the manufacturer’s word for it, either. With CAPA certification on a part, consumers can be assured of the quality of the parts being used.  In addition, most aftermarket warranties exceed the OEM’s warranties even if the parts are not certified.

It may seem like falling into the trap of insisting on OEM parts won’t hurt anything. It might cost you a little more today, but, according to the OEMs, will save you in the long run. But with high-quality and certified alternative parts, your vehicle will work as well as it ever did. Plus, you’ll be protecting the future of insurance premiums from seeing unprecedented increases – increases that will come out of your pocket.

Are you concerned about the impact that requiring OEM parts for repairs would have on your insurance rates?

If so, take action now. You can file a complaint with the Federal Trade Commission (FTC) using the FTC Complaint Assistant website. Also, contact your state and federal representatives and let them know that you want a choice in what goes into and onto your vehicle.

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