The IBISWorld Industry Report called On a collision course: Vehicle insurers are increasing their leverage over the industry was released last month. Here are some of its findings:
- Following the global financial crises a big spike of new car sales followed by strong year on year results means that more consumers drive vehicles with advanced safety features. As a result of this, industry revenue is forecast to fall by a compound annual rate of 0.2% to be worth $7.1billion.
- Although the number of vehicles crashes has declined in most years, minimising revenue volatility, it is the growing power of insurance companies within the industry that is significantly reducing industry revenue. The falling number of motor vehicle accidents has reduced demand for industry services and enabled insurers to pay smash repairers less, contributing to the revenue decline.
- Overall the industry revenue is foreceast to fall at a compound annual rate of 0.4% over the five years through 2019-20, to be worth $6.9billion.
- Population aged between 18-25 year old as a proportion of the population is projected to grow, this age group has more accidents.
- The industry’s only positive driver will be the growing number of motor vehicles on the road, which will increase the probability of accidents.
- The expected exit of marginal players and increasing industry consolidation are projected to improve profit margins in the next five years.
- The effect of preferred smash repairer (PSR) agreements on the industry is ambiguous. PSR agreements help to keep costs low and speed up work for claims. PSR agreements also give insurers more bargaining clout as they can dictate their own terms.
- The proportion of working proprietors to total establishments is estimated to have declined over the last five years.
- The report also states that there are no major players in this industry but that groups are growing. It then lists notable groups as Capital S.M.A.R.T, LSR Autobody, a single site operator in Sydney, and Car Craft Group.
IBIS describes itself as providing independent, accurate, comprehensive, and up to date research on over 500 industries, including statistics, analysis and forecasts.