Auto Parts Importers Urge Transport Ministry to Reject Insurer-Driven Pricing
The Association of Vehicle Parts Importers, operating under the umbrella of the Israel Chamber of Commerce, has submitted a detailed position paper to the Ministry of Transport regarding the pricing of spare parts during vehicle damage assessments following accidents. The association supports Alternative 1, which differentiates between contracted and non-contracted garages, while acknowledging ad-hoc discounts with insurance companies. However, their support is contingent on the implementation of several critical amendments they have proposed.
In a letter dated August 6th to Lena Gershkovich, Director of Economics at the Ministry of Transport, the association emphasized its vital role in the Israeli automotive market, asserting that they provide essential competition against direct imports and prevent spare parts and repair costs from skyrocketing. They detailed their operational costs, including maintaining large logistics centers, significant inventory, frequent distribution, providing credit to garages, and the impact of rising sea freight costs. The association argues that these factors are not adequately reflected in the proposed pricing models.
The importers expressed strong opposition to Alternative 2, which suggests setting market prices based on data provided by insurance companies from their framework agreements with suppliers. The association deems this mechanism opaque and uncontrolled, granting insurers "absolute power to dictate confidential prices for the entire market." They cited a previous judicial ruling by Judge Kenaf-Steinmetz, who noted that such prices are effectively set by insurers through an "uncontrolled and opaque mechanism." The association further contends that Alternative 2 could undermine the independence of appraisers, turning them into rubber stamps for insurers and exacerbating inherent conflicts of interest, given the insurers' direct financial stake in reducing payouts.
To ensure Alternative 1 is effective and fair, the association demands the integration of four mechanisms: regulating information databases with objective criteria for inputting prices based on available inventory and standards; preserving the ad-hoc mechanism by recognizing garage agreements for specific repairs without arbitrary insurer veto power; mandating full upfront pricing by appraisers, including discounts, before work commences to prevent retroactive adjustments; and prohibiting retroactive deductions, such as demanding reimbursements from garages months after vehicle delivery, and excluding parts like electronic components from discount mechanisms.
This submission comes amid an ongoing dispute between the automotive and insurance sectors over the rising costs of vehicle repairs and mandatory insurance premiums. The importers' association previously presented data suggesting that while original spare parts prices increased by approximately 20.3% between April 2021 and April 2025, prices for alternative parts decreased by about 9.1% during the same period. They argue these figures demonstrate that spare parts are not the cause of rising insurance prices. The association warns that without their proposed amendments, the new regulation could "perpetuate market failure" and severely harm garages and parts importers, ultimately impacting the end consumer.
