Not too many people would argue that competition and technology is a bad thing. Especially when it enhances vehicle safety or keeps a lid on the spiraling cost of insurance premiums. But technology is a double-edged sword and insurance companies are struggling to both stay competitive and fulfill their obligations to policy holders. Car insurance companies have undermined the important relationships that car owners once enjoyed with independent smash repairers. This is having some very unfortunate consequences.
Modern motor cars employ a plethora of active and passive safety systems which give you confidence that you or a loved one is going to make it to their destination safely.
We now have SRS (airbag technology), collision avoidance, lane departure warning, stability control, radar and proximity sensors and the list goes on! We even have active pedestrian injury mitigation built into some vehicles. Have you ever heard of ‘Pop Up Bonnet Technology’? Google it if you are interested.
All these technologies are apparent and well-advertised to the general (read prospective) consumer.
But there is a lot of technology and complexity built into new vehicles that is rarely appreciated.
Computer aided design (CAD) and advances in materials science have made accident damaged vehicles much more demanding to repair. And when I say demanding I really mean expensive!
For instance, crash analysis mandate vehicle engineers to design cars that prioritise safety over the consideration of costs involved in repairing accident damage. Should the car be involved in any meaningful (non-cosmetic) collision, the repair process is both onerous and expensive.
Insurance companies have been quick to mandate that repairers demonstrate they have the technological equipment and knowledge (manufactures recommended repair documentation) to effectively and safely repair accident damage. For the most part our industry has worn the cost of this compliance with practically no return on investment. It is considered the cost of business when doing insurance repairs. Unfortunately, the pressure to drive down the costs of accident repairs is relentless and the master plan appears motivated to remove smaller independent repairers.
Principle strategy is to remove choice of repairer. The big players will argue that the economies of scale enjoyed by having contractual arrangements with big repair entities benefit policy holders by reducing the price of premiums. In reality, it means they get to employ terms of contract that exist on the edge of an ethical business model.
There is enormous pressure for insurers to contain the average costs per claim. I say average because while no two accidents are the same, they can tend to be grouped. One strategy that IAG (RACV, CGU, NRMA) have employed is to establish a regime of fixed price repairs. This effectively forces contracted repairers to group different makes of vehicles with different degrees of damage into classifications of small, medium, large etc. The payment system is fixed and contingent on classification only. What could possibly go wrong!
To be clear, I have little sympathy for those in the industry who with negligent naivety accept these kind of ridiculous contracts with insurers. I have been around long enough to know that fixed price repairs are just another get poor quick scheme invented by some executive accountant trying to worm their way up the corporate ladder. Eventually it will end. And the playing field should tilt more towards level, even if only until the next grand idea comes around.
Another strategy is for the insurer, (eg. Suncorp) to set up insurer owned (invested) repair shops (Capital Smart) to control the way accident damage vehicles are repaired. Promoted (at least initially) as cost effective, rapid repairs. Because they would enjoy generous supplier discounts, traditional bottlenecks in the repair process would be eliminated, by using new parts and ‘new ‘technology. Unfortunately the temptation to ignore unseen damage and contain the cost of repair simply becomes too attractive, particularly when you have sold the concept on quick repair cycle times. I don’t think it took too long for Suncorp to realize they had been sold a pup as the business model degraded into low performance repairs, unrealistic repair times, expensive rework costs and bad customer experience.
Capital Smart (a joint venture between majority owner Suncorp and a private entity) is becoming the failure that it was always destined to be. It is clear that Suncorp are desperate to pull the rip cord and as I write this looks to sell its interest to the AMA group.
Of course, there are winners and losers in this game of cost cutting. Arguably policy holders benefit through cheaper premiums and shareholders see higher company profits. But there is a price to pay for these arrangements. One that is not reflected by your ‘cheaper ‘insurance premiums. That includes the peace of mind that your accident damaged vehicle will in fact be repaired to ‘pre accident condition’.
Alarmingly we are seeing more and more unrepaired damage that has been ignored or covered up by cars previously repaired under the above regime. Often the unseen damage is only realized much later when the owner presents their car for a RWC inspection. Sometimes it is safety related, (bowed, damaged reinforcements, water ingress from poorly repaired headlamps), often missing or broken plastic components, (ducting, splash liners, energy absorbers) etc. Sometimes what is really broken is less understood.
So, imagine that you have a small accident whilst parking your car. You may consider it sensible to source some quotes with a view to paying for the damage privately, (i.e.. not claiming on your insurance). So, you go to your local panel beater and discover that the business has either closed or been sold and renamed. The new company are part of a big repairer network and they no longer provide estimates (quotations) for non-insurance accident damage. They have exclusive repair contracts with select insurance companies and if you’re not making a claim then ‘sorry we can’t help you’.
So, you manage to find one of the few remaining small independent repairers. It is your expectation that they will provide you a free quote. Problem is however you have no relationship with the repairer. They can simply no longer incur the costs of writing detailed written quotes for jobs that will go elsewhere if (and when) you decide to make a claim. They may choose to charge for the service of writing a quote. You are indignant about this because you have never had to pay before.
It gets worse. The repairer has zero expectation of being able to establish any good will with you going forward. Any meaningful amount of damage will mean you will make an insurance claim and have to go to the insurer contracted repairer. He will only see you for small private repair work. He quotes accordingly and that means non-competitively. There is no impetus to look after you cost wise because he will probably only see you when you are trying to source ‘cheap repairs’. The age-old adage of ‘what you loose on the bends you gain on the straights’ no longer applies.
And having a good relationship with a panelshop confers other advantages. A smash repairer can help you with general vehicle advice or a prepurchase inspection. They can help you in dealing with accident cost recovery where your insurance company are not involved. They are a resource that will save you money. You are losing all of that!
Probably worth considering next time you shop around for insurance.
