NRMA - choice at a price

With what can be described as elegant timing, NRMA introduced a new "Choice of Repairer" policy option on comprehensive motor vehicle insurance policies effective from 15 November 2004.
It came at a time when the Productivity Commission's hearing into relationships between repairers and insurers was in full swing and no doubt had the effect of softening criticism that had been directed at NRMA for concentrating repair work on its preferred repairers.
The essence of the policy change is that a customer must pay an additional $69.50 on top of his premium if he wants a choice of repairer in the event of accident damage. NRMA Insurance will provide a lifetime guarantee on smash repairs it authorises, regardless of whether the customer selects an NRMA Insurance preferred repairer to carry out the work. The lifetime guarantee on repairs previously only covered work carried out by a member of the NRMA Insurance preferred repairer network. NRMA says that the fee of $69.50 is revenue neutral since it only covers additional costs associated with non-accredited repairers, plus offering a lifetime guarantee on authorised repairs and the administrative costs of authorising repairs by non-accredited repairers.
By not paying the additional fee the policy holder is agreeing that his car will be repaired by one of NRMA's PSRs.
NRMA Insurance head of Personal Insurance Manufacturing, Paul Pemberton, said the policy option provided choice for consumers.
"This policy option is a response to those customers who have told us they want a lifetime guarantee over the quality of the repairs to their cars regardless of whether repairs are carried out by a preferred repairer."
?It is also a direct response to the needs of those members of the smash repair industry who have told the ACCC they would like to see this type of product.?
In a September 2003 Issues Paper (Discussion on the relationship between the Australian motor body / smash repair industry and the general insurance sector), the ACCC notes that ?repairer groups have called for consideration of a two tier pricing system. This
price system will offer consumers the choice of paying two separate prices for motor vehicle insurance. One price will enable the consumer to choose any repairer to perform insurance related repairs to the vehicle. The other price will enable the consumer to go through the insurers normal method...?.
Pemberton maintained that NRMA Insurance's preferred repairer network had brought benefits to consumers.
"We select our preferred repairers based on criteria including quality, safety, cost effectiveness and customer service, and we audit them on a regular basis, so customers who select preferred repairers know they are getting quality repair work."
Not everybody agrees with NRMA's interpretation of the benefits of its policy option. For instance, where a non-preferred repairer is selected by a customer under the choice of repairer option, repairs are still subject to approval and NRMA Insurance will still only pay the reasonable cost(in its opinion)of repairs. If NRMA judges repairs to be too dear, it will fall back on its former practice of making a cash settlement with the policy holder. This figure would be based on its own assessment of the work. Presumably, such an assessment would be based on PSR rates which are known to be among the lowest in the industry.
Gerry Raleigh, an executive member of the body repair division of The Victorian Automotive Chamber of Commerce, believes that few NRMA policy holders will choose the 'repairer of choice' higher priced option, thereby directing more

NRMA claim work to be carried out by its own PRSs and certainly more than was the case before the option was offered. Moreover he sees the change as spelling disaster for IAG's Associate Smash Repairers (ASRs).
Raleigh says that ASRs used to get repair business from their own customers who happened to insure with NRMA and exercised their choice of a non-PSR repairer under the former policy. But because these customers are unlikely to pay the additional premium, they will be fed into the PSR system, leaving the ASRs out in the cold.
"The majority of auto body repairers in Victoria and NSW have signed IAG's associate smash repair contract, and in doing so have had to invest in online imaging and claims handling systems which were part of the requirements after signing. The repairers were promised that after becoming an ASR repairer the arrangements and new equipment would simplify assessments and generally make it easier to do business with IAG (NRMA and RACV). The new, so called freedom of choice policy (unless the vast majority of IAC clients take it out) will completely do away with all ASR agreements and the investments made by them.
"This exercise by AIG is nothing more than an effort to take control of vehicles it insures by using smoke and mirrors and relying on motorists gambling on whether or not they will have an accident.
"In a newspaper article last October NRMA stated that paying for freedom of choice was something the auto body industry had called for. It seems far fetched that anybody in business would ask for something to be implemented which would guarantee to remove at least 50 per cent of their clientele, and put skids under their business."