01.Dodgy car repairers
Being able to choose your own car repairer is one of our key criteria for recommending a car insurance policy. But the ability to choose may be trumped by the insurer, who can force you to take your car to one of its partner repairers if that repairer comes in with a lower quote – and there appears to be a good chance the preferred repairer will do a slapdash job..
The NSW government announced an inquiry into the links between car insurers and smash repairers in mid-November 2013. This was due to concerns that shonky repairers are getting the jobs and dodgy repairs are not being reported to NSW Fair Trading.
The Motor Traders Association of NSW (MTA), an industry body representing car repairers, has welcomed the inquiry, as have insurers Suncorp and NRMA.
The MTA told us it has received 110 complaints from people frustrated by shoddy insurance repair work organised by insurers but few of these cases were reported to NSW Fair Trading by insurers. Consumers' hands are tied because it's the insurer who authorises the repairs, so it's up to the insurer to report poor quality repairs to NSW Fair Trading.
According to the MTA, insurers routinely pay repairers outside their preferred network to rectify the original repairs in cases where policyholders complain, but keep the contract with the insurer-preferred repairer. Presumably, the cost of paying for correction work (in the few instances where a consumer is aware of the shonky repairs) is offset by the overall saving of sending policyholders to preferred repairers, who underbid the car owner’s chosen repairer.
The MTA is asking that insurers report poor quality repairs to NSW Fair Trading, and that NSW Fair Trading set up a name-and-shame list for shonky repairers.
To cut costs, insurers operate networks of "preferred smash repairers" that may be required to complete a volume of work for a fixed price. But many consumers prefer to choose their own repairer. In our most recent CHOICE member car insurance survey, 84% of respondents rated choice of repairer as a fairly or very important feature.
In many cases insurers use a "two-quote system". For policies that don’t offer choice of repairer, the insurer collects quotes from two preferred repairers, otherwise, the consumer gets a quote from their own repairer, but if the insurer’s preferred repairer quotes less, they will be given the work.
And the insurers put pressure on the preferred repairers to quote low. Some preferred-repairer contracts, for instance, require repairers to win the jobs for 50% of the quotes they write. The MTA says this drives the practice of quoting low to get the job instead of quoting to achieve an acceptable standard of repair.
Repair or replace
Shonky repairs done by insurer-preferred repairers range from poor workmanship – such as brackets held in place by pop rivets – to outright deception.
The MTA shared the story of one frustrated NSW car owner. The recommended repairer for this Range Rover quoted to remove and replace a structural part of the body; instead, the smash repairer cut the part, but did not replace it.
After trying to fix the dodgy repair at another smash repairer, the car’s owner – a former employee at the insurance company – called in a favour and took the agreed value of the Range Rover in cash.
The Range Rover has since been written off. The shonky repairer was not reported to Fair Trading, but returned to working on other jobs for that insurer.
What the insurers say
Suncorp told CHOICE the inquiry comes at an appropriate time, because there is a need for change in the smash repair industry. There were once only 10 car models made from one type of steel; now there are over 160 models, made with seven different types of steel, and some vehicles have 70 computing central processing units.
The Suncorp group – which owns AAMI, GIO, APIA and Bingle – are part-owners of smash repairers Capital SMART and Q Plus. Capital SMART offer minor repairs that allow consumers to drop off their car and pick up the repaired vehicle the next day. Suncorp say their relationship with Capital SMART saves them up to $400 on each car repaired. Q Plus specialises in ‘heavy hit’ structural repairs, and can fix up to 150 cars a week.
Suncorp's public policy manager, Duncan Bone, told us such streamlined shops are the way of the future and dispute the MTA's assertion that insurer-run shops have higher rectification rates than independent repairers. "They think it's unconscionable that we're involved in the process and are defining what's happening in their industry. In many ways we are, but we believe the innovative repairers we have invested in are benefiting consumers and consumer safety."
The MTA say there is a conflict of interest because all parties involved in the claims process - the assessor, repairer and claims worker - are ultimately employed by the insurer, although Suncorp argues that its lifetime guarantee guards against poor repairs.
Bone also contends that Suncorp brands offering choice of repairer do not use the two quote system and thus 99% of insurance customers who have opted for a choice-of-repairer policy end up using that repairer, though the insurer may negotiate the price if the quote is too high.
Given the nature of the ties between many insurers and their preferred repairers, however, it seems "choice of repairer" is a policy whose benefits can be limited.