Auto policyholders turn to aftermarket parts to lower repair costs – report

The state insurance department registers circa 60% savings

Auto policyholders turn to aftermarket parts to lower repair costs – report

Motor & Fleet

By Josh Recamara

New Hampshire automobile policyholders and insurers are experiencing lower repair costs and premiums through the use of aftermarket parts following accidents, AM Best reported, citing the state’s insurance department.

Doug Rees, chief examiner for property/casualty market regulations at the New Hampshire Insurance Department, said in a recent webinar that aftermarket parts help reduce insurance premiums by increasing competition and lowering part prices.

State regulations prohibit insurers from requiring the use of aftermarket parts on vehicles that are two years old or newer or those with fewer than 30,000 miles. Leased vehicles must use original manufacturer parts if their contracts specify that aftermarket parts would reduce the vehicle’s value, Rees said.

Aftermarket parts must be of “like kind and quality” to original equipment manufacturer (OEM) parts, meaning they must match in fit, finish, quality, and performance, the insurance department said. This standard ensures that repairs meet comparable levels of quality.

Rees provided an example comparing costs, stating that an OEM left bumper for a 2020 Honda Accord costs approximately $315, while an aftermarket version costs around $165. The bumper’s aluminum reinforcement bar from Honda is priced at $1,155, while an aftermarket supplier charges about $181.

“You can see the difference is about 60% savings,” Rees said. “This could make the difference of totaling the car out and having to replace it versus keeping the car on the road.”

He noted that some aftermarket parts can cost as much as OEM parts, depending on the vehicle. The Honda Accord was used in the example due to its widespread availability.

According to Ryan Mandell, director of claims performance, auto physical damage at Mitchell International, an Enlyte company, aftermarket parts contribute to lower total repair costs, which can help stabilize insurance premiums.

“On average these parts, when utilized, provide $377 of savings on a repair,” he said.

Repair cost differences between electric and gas-powered vehicles have been significant in recent years, but Mandell said the gap is narrowing as electric and hybrid vehicles become more common and additional aftermarket parts enter the market.

Rees noted that one challenge with aftermarket parts arises when insurers specify their use but modifications are required for installation or the part fails.

New Hampshire regulations require insurers to cover costs associated with modifications, Rees said. For example, if an aftermarket bumper needs holes drilled for rear-facing collision avoidance technology, the insurer must pay for the modification if the repair shop determines it can be done safely.

Carriers are also responsible for the cost of removing and replacing any aftermarket part that is installed but later found to be inconsistent with OEM standards. Rees said this regulation was implemented to prevent policyholders from being caught in disputes between insurers and repair shops.

Insurers must also notify policyholders and repair shops when an estimate includes aftermarket parts, he said.

Rees emphasized that regulations allow consumers to decide whether to use aftermarket or OEM parts. If OEM parts are selected over lower-cost aftermarket options, policyholders may be responsible for paying the difference.

“I've seen many shops or dealers price match or offer a discount for an OEM if they know an aftermarket part is out there,” Rees said.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!