Wednesday, 31 August 2005 17:00

Aussie shops fight insurer attempt to eliminate consumer choice

Written by Mike Causey

So you think insurers are pushing for more and more control of the U.S. collision repair process? You should see what they're up to in Australia. 

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 Causey

Australian insurer, NRMA Insurance Company, is introducing its "Care and Repair" program, an online quoting system for repair jobs. It sounds like a shop owner's dream, but it turns out to be quite the opposite as the company is sending the work to - you guessed it - the lowest bidder. And it's throwing the Australian collision repair industry into turmoil.

Australian repairers, or "smash repairers" as they are known down under, are United, with a capital U, in their revolt against the hardball insurer tactics of NRMA Insurance Company.

In July, Hundreds of repairers Wednesday closed up shop and staged a demonstration march in front of the Insurance Australia Group (IAG) offices in Sydney to protest the insurers launch of NRMA's online bidding program for collision repair work. Under police escort the marchers walked from the town hall, through the busy streets of Sydney, to the steps of IAG.

Major television channels, radio stations and national newspapers covered the march, which included the owners of some of Sydney's biggest shops.

Is it working?

Most U.S. shop owners fear that taking on the insurance industry or any big insurance company is a lost cause at worst and an uphill battle at best. Recent news reports from Australia show that the repairer revolt against NRMA Insurance and its giant parent company Insurance Australia Group (IAG), is not completely uphill. Some say the protests may even be causing delays in the complete rollout of the program as fewer and fewer shops are signing on, forcing the insurer to extend its contract-signing deadline with repairers.

Some body shop owners and repairers in Australia believe that this latest move to "further cut repair costs" could be "the beginning of the end" for the insurance company's dominance in many parts of Australia. Shop owners and others are urging consumers to switch to other insurers and cancel their NRMA insurance policies.

A little perspective please

To more clearly see what's happening, understand that NRMA is huge in Australia, controlling about 60 percent of the auto insurance market (or 6 out of 10 vehicles) in some areas, giving the insurer near-monopoly status. By comparison, State Farm, the largest U.S. insurer, has less than a 20 percent market share. And that's quite a market share, representing approximately 1 in 5 insured private passenger vehicles in the United States.

Now imagine this giant insurer rolling out a direct-repair program that seems to favor the "low-baller" over the quality repair shop. (Sounds all too familiar, huh?)

NRMA Insurance is trying to get a limited number of "selected" or "ap-proved" DRP shops to sign exclusive contracts to perform all the NRMA work. This move will effectively eliminate the freedom of choice by the insured car owners to use the body shop of their choosing. Under the NRMA direct-repair program, a majority of body shops will not be able to compete for NRMA customers and many could face closure or bankruptcy.

Under the new NRMA auto insurance policy, car owners will have no say in where their cars are repaired. That is, unless the insured pays an additional premium of $69 to "upgrade" their automobile coverage to a policy that allows choice.

The body shop doing the repair work, under the regular NRMA auto insurance policy and NRMA "Direct-Repair Con-tract" will write an estimate without physically seeing the vehicle. Instead, the shops competing for repair work through NRMA's online bidding system will see photos of the damaged vehicle on the Internet and make a bid on the job. Naturally, the work goes to the lowest bidder. Already some cars are reportedly being sent to Melbourne and other far away destinations (over 600 miles), because most Sydney body shop owners have refused to sign up with the new direct-repair program and online bidding system.

"It is impossible to quote from an image on a computer," says James McCall, executive director of the Motor Traders Association (MTA). "This won't deliver good outcomes for consumers. It will result in extremely poor quality repairs."

And amid claims of intimidation and collusion from both sides, the losers could well be the consumers whose cars will be fixed by the repairer who submits the cheapest quote in this controversial online estimating system.

"Consumers will have no choice about who fixes their cars," says Gary Mamic, the president of the Country North Vehicle Repairers Association. "And as the NRMA drives costs down, how can you be sure about the quality of the work?" Mamic, from Mamic and Sons Smash Repairs (Body Shop) at Broadmeadow, near Newcastle in New South Wales, established the association to fight the NRMA's unfair trade practices.

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Support from Parliament

In July, an influential Member of Parliament (equivalent to a member of Congress in the USA), Anthony Roberts entered the fray in support of local body shops in their fight with NRMA Insurance and IAG.

Member of Parliament (MP) Roberts symbolically tore up one of the 66-page NRMA contracts, and said, "You'd have to be an idiot to sign one of these."

Roberts stated that he was aware of the magnitude of this problem as he encouraged members of the public to cancel their NRMA insurance policy and switch to a more competitive and reasonable company.

Shops say "good-bye" to NRMA

Lyn Miller, the co-owner and a director of Stewart and Armstrong [Body Shop] in Sydney, says: "We repair about 20 cars a week, and about 80 percent of our business comes through the NRMA as a 'preferred repairer.' We've done work for the NRMA for 30 years. It used to have a good name. It used to be a good company. Not any more. We are not signing the new contract."

The NRMA set a July 1 deadline for repairers to join its new Care and Repair system, or face losing NRMA repair work. The deadline was extended, but Miller and others say they won't sign the new contracts, which they describe as one-sided.

The fallout for consumers in the short term could be long delays before cars are fixed, because the insurance company (NRMA) doesn't appear to have enough repairers signed up to do all its work. The MTA says more and more NRMA insurance customers are experiencing massive delays.

In the long term, repairers say, the quality of repair work will suffer.

The insurance company says their Care and Repair system "will make life as easy as possible for consumers who need to make an insurance claim."

David Brown, director of claims for NRMA Insurance, says: "Most of our customers don't want the hassle of having to go around to car-repair workshops and get quotes. What happens with the Care and Repair Centers is that the customer drives the car into a center. Then an [appraiser] takes over, and the customer gets a cab to wherever they are going. The customer is the focus of the whole operation. It is all about the customer experience. It is not about cost cutting. It's about the consumer."

Of course NRMA Insurance Com-pany also touts their "lifetime guarantee" on all work, which will, according to the insurer, "protect against shoddy repairs." Once again, does this sound familiar?

Brown also says the body shop group, the MTA may be ill advised in recommending that members "step outside the NRMA system."

He says the new contracts repairers have been asked to sign are very similar to contracts already in existence. The MTA, which has set up its own insurance policy, underwritten by Suncorp Metway, to counter the NRMA, says members consulted their attorneys before deciding not to sign.

Who stands to lose?

The insurer claims it's doing it all for the consumer. The shops say they're looking out for the customer. Who's right?

A spokesman for the Australian Consumers Association, Norm Carruthers, says if consumers don't have an existing relationship with a car-smash repairer [BODY SHOP], then being referred to an appraisal center "probably" works.

"The NRMA Insurance Company is essentially trying to get repair work done as cheaply as it can," Carruthers says. "There is some resistance to that from the [collision] repair industry. In the past, the way the work has been [appraised] has been very unscientific. But as long as your car is fixed, is it going to be an issue?"

A consumer lawyer and spokesman for the Consumers Federation of Australia, Denis Nelthorpe, says moves by the insurance industry to cut costs could result in unsatisfactory repairs over the longer term. But Nelthorpe adds, "The insurance industry has a sophisticated code of practice, an ombudsman and a dispute-resolution [program]. Repairers might complain long and hard, but they offer consumers very little in the way of protection. The [body shop association] is clearly more concerned with the livelihood of its members than with consumer rights. It's been that way for a long time."

Of course the association is looking out for its members, but the safety and satisfaction of its customers has to factor in for the industry or there simply will be no industry to consider. So are these types of programs the answer? Maybe not in Australia.

"We won't sign," says Richard Nathan, owner of one of Sydney's largest body shops, Nathan's Prestige Body Repairs. "We don't believe in that system. There is no way this can be good for consumers. I've seen shoddy, cheap repair jobs where the exhaust has been tied up with wire and the car body is distorted. Is that what we are going to end up seeing?"

Mike Causey is a consultant, lobbyist, writer and public speaker specializing in collision repair, auto glass, insurance and consumer rights issues. Causey's clients include the Independent Auto Body Association (IABA), Citizens for Healthcare Freedom and the NC Glass Alliance (NCGA). Contact him c/o Causey & Associates, P.O. Box 16725, Greensboro, NC 27416 Ph: (336) 210-1947; via e-mail: gocausey@aol.com.

 

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