Clean Up, Car Repair Firms Told
The Sunday Age
Sunday November 21, 2004
INSURANCE companies and smash repairers have been told to scrap a widely used "funny money" scheme and warned that if the industry cannot agree on a voluntary code of conduct a mandatory system would be imposed.
The Productivity Commission has described the $4 billion smash repair industry as being riddled with tension and mistrust.The Federal Government ordered an inquiry into the industry on the eve of the election. The commission's draft report found that the industry was dominated by just four insurance groups - Insurance Australia Group, Promina, Suncorp and Allianz.The number of smash repairers has fallen from 6500 in 1991 to about 5100, including 1544 in Victoria, and continues to fall.The commission was most critical of a system known as "funny time, funny money", which is used by repairers with the full support of insurers to set the price for repairs.Because the hourly pay rate for repairs is below the actual costs, panel beaters compensate by inflating the number of hours they charge for.Repairers have complained that they are underpaid by insurers and are forced to cut corners. They say the typical hourly rate has been frozen at $23 for a decade, although it should be $50.The commission did not support calls to set a standard hourly rate but suggested that parties choose whether to adopt a bottom-line price for all work or an itemised quote based on realistic repair times and hourly rates.The commission said a voluntary code of conduct could cover the way insurers select preferred smash repairers, rules for quoting the cost of fixing cars and issues about safety, quality and resolving disputes. It said a mandatory code would be imposed if a deal was not reached.Motor Trades Association executive director Michael Delaney called on insurers to begin negotiations with smash repairers.Insurance Council executive director Alan Mason has opposed a code, warning that it "could interfere with normal business arrangements and adversely affect the benefits of a competitive market" but said insurers would now look at it.Insurance company Allianz accused the commission of taking "the easy option of offering repairers a hollow industry-wide code restricted to specifying minimum standards".The commission backed the insurers' system of having an exclusive network of preferred smash repairers, saying it benefited consumers. It rejected calls for a national criteria to give all smash repairers the chance to join.The insurers also scored a big win against demands to follow overseas trends offering policy holders "open slather" choice of who would repair their car. The commission agreed consumer choice was already "reasonable".One of the criticisms raised by the Government, that insurers forced repairers to use second-hand parts, was not backed by the commission. It said this was acceptable if the owners were told and safety was not compromised.
© 2004 The Sunday Age