A burgeoning shortage of automotive spares in the Sultanate of Oman has motor insurers fretting that the resulting delays in the repairs of vehicles and settlement of claims may impact on their financial statements and expose them to legal action and penalties.
Their concerns were recently relayed by the Chairman of the Finance & Insurance Committee at Oman Chamber of Commerce and Industry (OCCI) to the Vice-President of the Insurance Sector at the Capital Market Authority (CMA).
“We approached the CMA, as the regulator of the insurance sector, to use its good offices to take up this problematic issue with, among others, the Ministry of Commerce, Industry and Investment Promotion,” said Murtadha M J Ibrahim al Jamalani, Chairman of OCCI’s Finance & Insurance Committee.
“Their urgent intervention is necessary to find practical solutions to the long-standing problem related to the dearth of auto parts in the country. Although insurers are not to blame for this shortage, they are under severe pressure from their policyholders whose vehicles are held up in garages and workshops for want of the requisite spare parts.”
The spare parts crunch dates to the start of the pandemic two years ago when global lockdowns disrupted the supply of automotive components, among scores of other types of products, sourced from around the world. While supplies have resumed in the wake of the easing of the pandemic in many parts of the world, shipping bottlenecks and supply chain challenges continue to pose a problem, say experts.
Speaking to the Observer, Al Jamalani noted that motor insurance firms feel susceptible to legal action in the current circumstances. “If, for example, a taxi driver whose livelihood is derived only from the operation of his cab, which is stuck in some garage for want of parts, the courts or Consumer Protection Authority may order his insurer to compensate him for loss of earnings.”
Significantly, the shortage has also hampered the timely repairs of vehicles that were damaged in flash flooding linked to Cyclone Shaheen last October. “This is making the insurers increasingly concerned that they are exposed to legal risks stemming from the lengthy delays in the repairs of the vehicles of their policyholders.”
While the dearth of auto parts is primarily attributable to the lingering effects of the pandemic, Al Jamalani also holds the local automotive industry partly responsible for the protracted nature of the crisis.
“In part, the scarcity has been compounded by what we believe is reluctance on the part of auto companies to invest in adequate stocks,” he stated. “Even standard items, such as windscreens, bumpers, and lights are not in stock. The agents say that some parts have to be airfreighted in the circumstances, which leaves the insurer bearing the additional cost.”
Faced with higher bills, coupled with the prospect of compensation payouts, insurance firms may have to consider raising their premiums, Al Jamalani said. “Motor premiums have remained stagnant for the last several years due to severe market competition, as well as pushback from consumers against any attempt to raise premiums. But if the crisis over auto spares is not resolved, then the insurance companies will have no other option but to raise premiums,” he pointed out.
In this regard, Al Jamalani urged the Ministry of Commerce, Industry and Investment Promotion to step in and bring all stakeholders together to explore speedy and practical solutions to the spare parts crunch.