Car Repair Industry To Get Fixed
Car insurance companies must tell motorists if they can choose their own panel beater and whether new or second-hand parts will be used to fix vehicles under a proposed overhaul of the $3.5 billion smash repair industry.

Federal Small Business Minister Fran Bailey has set a 6-month deadline for insurers and panel beaters to agree on a voluntary code of conduct based on the findings of a just-released Productivity Commission report that said the industry was riddled with mistrust.

In a major win for the nation's 5000 panel beaters, the commission recommended setting up an independent and low-cost dispute resolution process. It also said when a business was sold the valuable "preferred smash repairer" status awarded by insurers should remain in place for at least six months.

But insurers appear to have escaped earlier warnings from the Government that it would regulate the industry because of "bullying" behaviour.

Ms Bailey said she was keeping that option open if a voluntary code was not agreed on. "An industry code will inject transparency and certainty for smash repairers, and will go a long way to resolving the longstanding disagreements between the two sectors," she said.

The executive director of the Victorian Automobile Chamber of Commerce, David Purchase, said a voluntary code would "redress the imbalance between the large insurance groups and the small independent repair businesses".

Insurance Australia Group chief executive of personal insurance Rick Jackson said his company would "do whatever we can to ensure a voluntary code is developed and adopted". The group has 50% of the car insurance market. It includes NRMA and CGU and has a joint venture with the RACV.

The Insurance Council said it supported increased transparency for consumers and a voluntary code.

Federal cabinet last week approved the plan, which does not mandate consumer choice of panel beater but will require insurers to explain clearly to consumers if their policy allows them to choose their repairer. Some companies charge a higher premium for this. Insurers also would have to explain their policy on the use of new and second-hand parts and guarantees attached to repairs.

But the Government rejected the commission's call to abolish a controversial scheme known as "funny time, funny money" where panel beaters compensate for their low hourly rate (which does not cover their costs) by inflating the number of hours charged for.

Ms Bailey said 70% of the industry did not use it or were moving away from it, while in the other 30% of cases there was a good relationship between insurers and repairers. The Government agreed with the commission that a code should not regulate minimum hourly rates or prices.

The smash repair industry has been under severe pressure, with its operating income shrinking from $3.9 billion in 2000-01 to $3.5 billion in 2002-03. In the past 15 years the number of panel beaters has fallen from 6500 to 5000 and is tipped to shrink further.

The commission said panel beaters faced severe cost-price pressures as insurers tried to force down repair costs.

There was some evidence that better roads, safer cars and more stringent policing of road safety had reduced the incidence and severity of accidents.

Four insurers control the industry. Apart from Insurance Australia Group's 50% market share, Suncorp, which includes GIO, has a 22% market share, Promina, which owns AAMI, has 20%, and Allianz 7%. They generated $4.8 billion in motor vehicle insurance premiums in 2001-02.