The second public hearing for the NSW Parliamentary inquiry into the relationship between smash repairers and the insurance industry took place on Friday Friday 21 in Sydney's Police and Justice Museum.
It was an intense morning of questioning by the parliamentary committee with Allianz, NRMA and Suncorp answering questions from 9am until lunchtime. The room was packed with spectators, predominantly repairers as well as other industry figures.
The insurers all responded to MTA NSW's submission disputing certain aspects, such as high rates of unsafe repairs, the prospect of independent assessors and all agreeing that government legislation and an end to competitive tendering could see drivers' insurance premiums soar.
The committee questioned the insurers predominantly about the code of conduct, the idea of independent assessors, steering, 'onsies' – which they all denied having anything to do with, rectification rates, incentives for assessors and commercial relations with repairers including funny times and realistic rates.
While the committee questioned each of the insurer representatives, one member, Ray Williams, who comes from a smash repair background, had a different tack. Brandishing the list of 130 poorly repaired cars provided by the MTA NSW, he took a more aggressive approach with a great deal of statements to the insurers along the lines of: “Let me put it you that your practices are leading to unsafe repairs.”
The committee's recommendations will be published on May 30. Below are some extracts from insurers' opening addresses and a selection of responses to some of the questions posted by the committee.
A number of other submissions from smash repairers and other stakeholders have now been published.
Allianz
David Krawitz, CEO; Nicholas Scofield, corporate affairs; and Peter Harman, national technical manager motors assessing of Allainz were the first to appear before the committee. They were mainly quizzed over funny time funny money methodology, steering and assessor bonuses.
In their opening address they cited a rapidly changing industry with a plummeting accident rate (down 20% since 2000 in NSW) and suggested that this was a commercial environment that did 'not warrant a regulatory response'.
On the MTA NSW submission the company said: 'In our experience, for example, many of the allegations in the MTA’s submission are best described as exaggerated, unsubstantiated, and misleading.
'Firstly, Allianz strongly disagrees with the repeated assertions made by the MTA of alleged systemic quality and safety issues, and we note that the MTA submission provided no rigorous evidence in support of these allegations.
'We further find it troubling that the MTA is asserting that smash repairers—including we presume its own members—are knowingly allowing unsafe vehicles back on the road on a regular basis.'
'These allegations made by the MTA in no way reflect our experience and we strongly believe that the repairers we work with would never knowingly allow an unsafe vehicle back on the road.'
Allianz also said that if MTA's recommendations were adopted they would be in breach of the its own code of ethics which state members should 'perform duties in free competition with fellow members.'
The concluded that, 'overwhelmingly, we find repairers to be honest, competent, and savvy commercial operators.'
On the subject of penalties for code violations Scofield insisted that penalties already exist but aren't used and said that he didn't know how much penalties would achieve. The company pointed out that its 0.5% rectification rate bore out the correct repair procedures carried out by its repairers and also stressed that those cars needing rectification were not necessarily unsafe repairs.
Committee member Greg Piper was clearly bemused by the funny time funny money quoting methodology employed by Allianz saying that it needed to be 'cleaned up.'
When asked about incentives for assessors, Allianz responded by saying: “I can't think of any business that doesn't have an incentive program in place.”
Piper asked if there were incentives in place to direct customers to preferred repairers and the reply was: “While we have an overall program in place to direct people we don't have a program in place to change their minds.” Insurers were pressed on whether they knowingly used repairers after they had produced unsafe repairs.
2014 NSW parliamentary inquiry opening statement Allianz
NRMA
Steve Bubulj, acting head of supply chain and Roy Briggs of NRMA defended themselves against 'fixed price repairs' saying that having an average cost of repair was a very large distinction. They also stated on the subject of steering that their scripts had been investigated by AAA with no adverse comments.
Briggs spoke specifically about the recommendations of MTA NSW in his opening address: “I found parts of the MTA statements on Monday extraordinary (MTA NSW opening address parliamentary inquiry.),” Briggs said. “It would be fair to say that in a ‘MTA State’ there would be no competition between repairers because all repairers would be made equal.
“Under an MTA state independent assessors - who do not value customer service as a priority - would be used to set a price with no regard to the quality of a repairer, their capabilities and track record or their ability to provide great customer service.
“The fact is under the state the MTA desires NSW motorists could not afford to insure their cars. Instead they would pay for the lack of process and quality the MTA encourages. And the repair of their vehicle and the service experience provided would be a complete lottery.”
Briggs suggested that the MTA was keen to distract from: “the fact that our model was designed in collaboration with our partners and built around what they wanted which was a process which allows repairers to be rewarded for running an efficient business".
NRMA was commended by the committee for providing three years of data on rectification rates which it said stood at no more than 3 per cent.
Commenting on the idea of a 'name and shame' list Briggs said: “Name and shame has been on the agenda for some time. I don't see it as a panacea to cure quality issues. I'm not sure it will serve to deliver the quality outcomes we're looking for.”
Assessor bonuses were also discussed with NRMA saying that there are bonuses for 'overall financial results' but that only 2 per cent of the remuneration is related to cost and that the rest was customer service, quality and other issues.
Download NRMA opening address here. 2014 Parliamentary inquiry NRMA opening statement
Suncorp
Suncorp's Sean Dempsey from shared insurance ventures, Rob Bartlett national industry relations manager and Craig Summers from motor claims discussed choice of repairer, vertical integration strategy, rectification rates, the two quote system and the code of conduct with the committee.
A strong warning about interference with the Suncorp business model affecting consumers' pockets was delivered in the opening address by Dempsey.
“Removing Suncorp’s ability to oversee repairs on behalf of our customers in the way we currently do could raise premiums significantly for consumers. Just as importantly, regulation with unintended consequences - such as empowering unscrupulous recovery agents, repairers and assessors, or returning us to the days of tow trucks duelling at accident sites to win illegal repairer drop off fees - could have severe ramifications for the quality of service to NSW consumers and certainly on the cost of insurance.”
When questioned on choice of repairer Dempsey referred to the statistics that 69% of Suncorp customers say they don't want to manage their repair.
On the subject of steering Summers said: “Choice is very important to some customers, around 27% of policies are created specifically for that need. There is no steering [sic of these customers], there are no incentives to steer a customer in any direction.”
On Suncorp's vertical integration policy (LKQ, Capital SMART, Q-Plus) Committee member Piper suggested: “Because of this model you will drive repairers out of business. They are being leveraged out of the industry faster than a natural evolution.”
Suncorp's Bartlett referred to significant industry consolidation and pointed out that with 79% of repairs are carried out by independent repairers. (In NSW Suncorp states in its submission that 21% of repairs are carried out by joint venture companies).
Q-Plus came under the spotlight for a high number of rectifications according to the MTA NSW list and questions were asked about its assessing practices. Suncorp submitted a response to MTA NSW's claims (2014 NSW parliamentary inquiry Suncorp statement re rectifications) that they 'did not actively set out to compile a list' of these rectificationsm saying that they repeatedly solicited for such examples.
2014 NSW parliamentary inquiry opening statement Suncorp
A full transcript of the hearing should become available on the NSW government website.