The parliamentary inquiry into the Motor Vehicle Insurance and Repair Industry in South Australia has released its report and recommendations in an 127 document which you can download here. SA Parliamentary Inquiry Report
The recommendations include mandating the code of conduct and working towards a national mandated code and including financial penalties for breaches. It also recommends the ACCC look into vertical integration of insurers and crash repairs and that the Government in South Australia considers legislating that only OEM parts should be used on vehicles that are still under manufacturer warranty. There were also concerns about customers being forced to accept cash settlements.
The Committee received 53 written submissions and heard from 35 witnesses across seven public hearings and two in camera hearings, help between October 2019 and July 2020. The public galleries at the hearings held in late 2019 were consistently full of observers which the report deduces highlights the significant importance this inquiry held for the South Australian crash repair industry. There were also recommendations for insurers to be far more transparent with consumers about choice of repairer and choice of parts.
Repair issues that the inquiry heard about included:
- difficulties in consumers accessing their repairer of choice and claims of insurers steering
- consumers toward their preferred network of repairers;
- the use of second-hand and/or non-original equipment manufacturer parts in repairs and related
- safety, warranty and liability concerns when using those parts;
- a lack of transparency of information, with consumers often not being made fully aware by insurers of all the details related to their repairs and/or insurance policies;
- disagreements over the methodology used by crash repairers and insurers to assess the repairs needed, and the cost of said repairs, to restore the motor vehicle back to pre-accident condition, and the quote negotiation process; and
- insurers choosing to provide cash settlements to consumers instead of repairing their vehicles.
The Committee also heard from repairers about issues with the Code of Conduct including a problematics dispute resolution process, a lack of enforceability and the need for financial penalties for breaches of the Code of Conduct.
The Economic and Finance Committee recommends that:
1. The South Australian Government introduce legislation to mandate the Motor Vehicle Insurance and Repair Industry Code of Conduct (Code of Conduct) in South Australia as well as provisions for:
- a binding mediation process to enable the expedited resolution of internal disputes between motor vehicle insurers and crash repairers, overseen by a suitable independent authority, such as the Small Business Commissioner or the Commissioner for Consumer and Business Services;
- appropriate financial penalties for breaches of the Code of Conduct to ensure compliance by all parties; and
- an ongoing review process to ensure that the Code of Conduct remains up-to-date and relevant to the current industry requirements.
2. The South Australian Government work with other Australian jurisdictions to amend the Code of Conduct to include provisions for:
• a binding mediation process; and
• appropriate financial penalties for breaches of the Code of Conduct.
3. The South Australian Government report yearly on insurance companies found either in breach of the Code of Conduct or with adverse findings against them.
4. The South Australian Government provide a portal to the Australian Financial Complaints Authority on a government website.
5. The South Australian Government require motor vehicle insurers to disclose any direct or indirect ownership or contractual arrangements in place when directing policy holders to specific crash repairers or providing crash repairer options.
6. The South Australian Government introduce legislation to ensure all South Australian motor vehicle insurance policies allow for, at the customer's discretion, the motor vehicle to be repaired by a crash repairer located within a reasonable distance of a regional customer's home address.
7. The South Australian Government write to the Australian Competition and Consumer Commission (ACCC), requesting they conduct a review into:
• vertical integration of motor vehicle insurers and crash repairers; and
• the use of second-hand and non-original equipment manufacturer (OEM) parts in crash repairs and the potential risks and issues associated with them.
8. It be a requirement for all South Australian motor vehicle insurance policies to explicitly state, in clear and concise language on the first page of their policy document, the location of the closest approved repairer to the policy holder, the insurer's ownership stake and/or contractual arrangements regarding that approved repairer, and whether the policy allows for:
• choice of repairer;
• choice of parts;
• use of non-OEM or second-hand parts;
• OEM windscreen replacement;
• OEM headlight replacement; and
• diagnostic scans.
9. Subsequent to ACCC work undertaken in line with Recommendation 7, the South Australian Government consider introducing legislation to mandate the use of only new genuine parts for motor vehicle insurance crash repairs where vehicles are still under the manufacturer's warranty period.
10. The South Australian Government encourage motor vehicle insurers and crash repairers to discontinue the use of 'funny time, funny money for crash repair costings and instead use costings based on the real time and cost of repairs, with guidelines for the time required to undertake repairs set by an independent party, such as the original equipment manufacturers.
11. The South Australian Government review the practices used by motor vehicle insurers to force their customers to accept a cash settlement instead of repairing the vehicle, and make it mandatory for insurers to publicly report on the numbers of cash settlements made to customers compared to repairs made to vehicles.