Historically the complexity of transactions between insurers and salvage
companies has been low, in contrast to the relationship between insurers and repair
centres. The complexity of transactions between insurers and salvage companies has
been minimal as insurers viewed the transaction as a simple financial exchange
requiring limited information support. However, the capability of the salvage firm to
codify and execute the transaction to the satisfaction of the insurance firms and
government is high. Transactions are readily codified; product specifications are
simple and the salvage agents are capable of executing the transactions without
insurer support. The governance operated between insurers and licensed salvage
companies has been based on a market transaction model. When the cost of repair
exceeds the value of the car it is no longer economically viable to return the vehicle to
pre-accident condition. Depending upon the degree of damage to the car the insurer
may send the vehicle directly for crushing or it will be sold to a salvage company who
will salvage the car for parts and material recovery.