Tackling vehicle crime

Statistics suggest the struggle against the unacceptable level of vehicle crime in South Africa is in limbo. FAnews investigates the reasons behind this reality.

The latest statistics released by the South African Police Services (SAPS) confirm that there were 85 964 reported thefts of motor vehicles and motorcycles in 2005/6, 86 298 in 2006/7 and 80 226 in 2007/8. Vehicle hi-jacking incidents increased over the three years from 12 825, to 13 599 to 14 201.

What happens to stolen vehicles?

How does organised crime dispose of 100 000 stolen and hi-jacked vehicles each year ? A guest article in the South African Insurance Crime Bureau (SAICB) June 2009 Report reveals that:

* 50% are absorbed by the local motor vehicle market;
* 30% are exported to other (mostly neighbouring( countries; and
* 20% reach the second hand parts market through chop shops.

We spoke to a Braam van Vuren of Braam van Vuren & Associates: Loss Adjustors and Investigators to find out how vehicle crime syndicates could so easily integrate stolen and hi-jacked vehicles in the domestic motor vehicle market. Surely the 'bullet proof' eNaTIS vehicle registration system offers protection ? Van Vuren reminded us that every system has flaws. When the eNaTIS system was launched, motor manufacturers could add vehicles to the system before the car left the assembly line. Vehicles were only 'dealer stocked' after delivery. Vehicle crime syndicates soon realised that exported vehicles remained active on the system. They would register stolen vehicles with the help of corrupt officials, who activated these eNaTIS registrations locally. A high level police task team has since plugged this gap.

But vehicle crime syndicates have found new ways to buck the system. They use three strategies to re-register vehicles while the wrecks lie at the salvage contractors, including:

* Obtaining duplicated documents by forging proxy detail of the insurance company;
* Falsifying documents, usually on stolen 'blank' original documents, with the correct eNaTIS control number; or
* Bribing corrupt licensing officials to print two documents in immediate sequence.

What currently happens?

The majority of gremlins in the current system stem from the assessment of vehicles as uneconomical to repair and the subsequent recovery of financial losses through the salvage process. SAIA says insurers have "processes in place to ensure that the vehicle assessors comply with the spirit of the salvage code". When a vehicle is seriously damaged, assessors decide whether to repair the vehicle or not. They determine the future status/code of the accident damaged vehicle too.

If the vehicle is assessed as uneconomical to repair, one of three situations arises:
* If the vehicle is safe to repair, but the repair is uneconomical, the client will be indemnified and the insurer (who then becomes the owner of the vehicle) will 'dealer stock' the vehicle and sell it as salvage;
* If there is serious structural damage to the vehicle and major repairs are required for it to become safe and roadworthy again, the vehicle will be de-registered. In this case the insured or finance house will submit the de-registration document (accompanied by a 'change of ownership' document);
* In some cases, vehicles are so badly damaged that they should never be repaired, in which case the insurer will demolish the vehicle and de-register it.

According to SAIA the vehicle "becomes the property of the insurer through subrogation" whether a claim is settled for a write-off or stolen vehicle. In each case the vehicle is 'dealer stocked', which requires a 'change of ownership' document. "The benefit of this practice to the consumer and finance houses is that the insurer is noted on the eNaTIS system as a previous owner," said SAIA.

We asked SAIA whether keeping the vehicle registered when it should be demolished represented a flaw in the current eNaTIS system. Their response was that "it was not within SAIA's mandate to monitor if member companies keep vehicle registration papers active when the vehicle is in fact scrapped." The organisation doesn't "condone any conduct which seeks to undermine road safety and vehicle crime combating initiatives."

There's clearly a problem with the current system, evidenced by the ease with which vehicle crime syndicates are legalising their 'product'. Van Vuren recently compared a sample of 1 000 vehicles marked as uneconomical to repair at one of the country's large salvage operations to vehicles registered on eNaTIS. He found that that 73% (today closer to 93%) of these vehicles were back on the country's roads and 20% of the re-registered vehicles now belonged to foreign nationals living in South Africa!

Solutions are simpler than you think!

When we questioned SAIA about possible misdemeanours by insurers and salvage operators they said that "insurers seek to act prudently in making decisions around vehicle salvage as far as it is within their control, which is the reason why the salvage code exists". They added that the "Code of Conduct agreed to between the members of SAIA and the Banking Association on how to deal with motor vehicle salvage sets out guidelines in terms of the coding of vehicles, which is aligned to member companies' internal processes". Criminal syndicates, and to an extent companies driven by profit motive, aren't going to lose too much sleep if they contravene a few provisions in these Codes of Conduct.

Targeting the 'write-off' definition

As long as the profit motive exists, stakeholders will abuse the system. Salvage operators will pay 30% of vehicle value for a Code 2 vehicle, and 20% for a de-registered vehicle. A car worth R100 000 is thus worth R10 000 more to an insurer as Code 2 rather than de-registered. System breaches inevitably lead to a vehicle theft or hi-jack. The cost implication is huge – new insurance claim of R100 000, rental car claim, trauma counselling, etc.

The first step to tackle systemic problems in the salvage space is to expand the legal definition of 'write-offs'. The Road Traffic Act of 1999 simply refers to 'permanently unfit for use' which doesn't cover all eventualities. Stakeholders should lobby the Department of Transport (DoT) to expand on this definition and add sub-sections for the treatment of 'write-offs' or 'uneconomical-to-repair' vehicles. The DoT should also create a new eNaTIS category for 'pending write-off /clearance required' to complement the existing 'stolen/clearance required' flag.

The second step will be for industry stakeholders to work together to create a single central national database of written-off (uneconomical-to-repair) vehicles, including photographic evidence of the damage and copies of the assessors' reports. Vehicle crime could then be combated by forcing all re-registration activities through a narrow control point – the police clearance process. The clearance official at the SAPS should only approve clearance requests after a senior, independently stationed police officer has checked the vehicle against the abovementioned database.

Failing this, the only solution is to scrap every economical to repair vehicle on the spot! Once the vehicle is de-registered as demolished, the certificate cannot be used again.