Insurers have been in the spotlight this month with two investigations currently ongoing. Last week the Royal Commission into misconduct into the banking, superannuation and financial services industry turned its attention to the insurance industry. Despite many submissions being made in regards to car insurance and the body repair industry, there was no questioning of insurers in this area although add on insurance through dealerships was discussed.
Meanwhile, over in Western Australia the parliamentary economics and standing committee is deliberating submissions and evidence given during its inquiry into WA's Automotive Smash Repair Industry. You can download the pdfs to read the uncorrected transcripts online following the links in this article. MTA WA has proposed that the Code of Conduct become mandatory in WA, as it is in NSW. There was a great deal of discussion about how few Internal dispute resolutions (IDRs) had been lodged in WA. The insurers pointed to this as evidence that there were no issues, the MTA suggested that repairers were too frightened of losing work to lodge them. Repairer interviews were conducted 'in camera' and are therefore not in the public domain.
There is a great deal of interest to read in the transcripts of these interviews as they tackle many of the prevailing industry issues. Some excerpts from IAG and Suncorp demonstrate this. Rob Bartlett from Suncorp was one of three insurers giving evidence. IAG and RAC WA were the others.
Bartlett stated that Suncorp has 13 audited and approved recommended repairers in Western Australia. Nationally there are 282 recommended repairers with 20% of work going to non-recommended repairers. He explained to the committee about Suncorp’s relationship with Capital S.M.A.R.T. and stated that 55% of work in WA goes is carried out by Capital S.M.A.R.T. The chair asked about the cost of repairs.
The CHAIR: It has been put to us that there is a take it or leave it–type arrangement and that there is basically a race to the bottom, or smash repairers are being driven to the absolute least cost and, in some respects, below‐cost pricing and that is being driven by a power imbalance between the insurance companies and the smash repairers.
Mr Bartlett:"I think we do have a responsibility to our customers to make sure that pricing in the market is fair and reasonable—that we are not just taking any price that is proposed to us, that we do review it carefully, we do consider it in terms of the whole market price, and we do not just take whatever price is put to us. We also do need to consider the repair methods being proposed— whether they are actually over the top, whether or not there are simpler, more efficient methods.
"So I think sometimes the question is whether or not those repairers actually fully understand what the market price can be in a really efficient repair model. As a result, I think our understanding of the smash repair industry and smash repairs in general is pretty high."
IAG was questioned about its choice of repairer, how it handles customers who may wish to use a certain repairer and its policy on lifetime guarantees. It was represented by Steven Fitzpatrick, executive general manager, Short Tail Claims and Troy Johns, specialist industry relations, governance and risk.
Fitzpatrick explained that IAG has a 20% slice of the car insurance market in WA and has around 36 approved repairers. When quizzed about working with every repairer even those outside the network Fitzpatrick said.
“We work actually right across WA. So, essentially, customers have choice across pretty much every single policy that we have, like SGIO and so forth. There might be a small difference in terms of Coles around buying a choice policy, but generally, yes, they can choose where to take their repairs. Therefore, if they choose to take it to any smash repairer, we will assess the vehicle to make sure it has been done to the right level of quality, make sure it is the right method of repair, make sure the costs are fair and reasonable, and we would authorise the work.
“Ultimately, the customer has choice, so if the customer says, “I want to go to John’s Smash Repair”, and they are not part of our network, then they can take the customer there based on the fact that their policy states that they have choice. We would let them know that we have a preferred network, that we guarantee the work there, that we know that they have the right standard of equipment, the right licensing—all those types of things. So we would always make them aware that there is a preferred network that we essentially work very closely with."
There was discussion about the background of assessors – in that they came from the trade and then some discussion over pricing with the chair suggesting that some repairers could not repair the car for the remuneration offered.
The CHAIR: "Is there an imbalance, though, in the relationship between the insurance company and the smash repairer in terms of price‐taking for the smash repairer?"
Mr Fitzpatrick: "I guess it is not in our best interests to not have smash repairers in a sustainable position; it is about finding that right balance. I think there are a lot of new technologies out there, so it is about repair businesses being able to keep up with advances in technologies, which actually means that some of the things that might have taken a day to do take only half a day to do, so therefore the repairers that are investing in those technologies are the ones that are winning more work because they are willing to actually put the investment into their repair shops."
Repair times, Funny Time, Funny Money, The Code of Conduct and IDRs were also discussed.
To find the list of submissions and transcripts of evidence click here.