Allianz Cornhill has agreed an inflation-busting agreement with the crisis-hit bodyshop industry over rising labour costs.
The insurer has increased its labour rates by £2 an hour to a maximum of £27 per hour.
It has also agreed to double its total loss payments covering administrative work for written-off vehicles and the provision of replacement courtesy cars, from the current £28 to £60.
Bob Hood, senior manager at the Retail Motor Industry Federation which represents independent bodyshops, hailed the agreement as a landmark for other insurers to follow.
He said: "Our members welcome the package and the work that Allianz Cornhill has done as a true partnership which we would like to see replicated across the bodyshop industry."
Hood said that bodyshops particularly in the South East of England have been battling to stay in business in the face of rising costs and low profit margins.
Diane Loosely, motor engineering services manager at Allianz Cornhill, said: "This agreement will deliver support for repairers and cost savings on insurance claims to the insurer."
Elsewhere, the RMIF was dealt a blow when the Government threw out its case against the VAT-exempt status of labour costs in insurer-owned bodyshops.
The RMIF had complained that insurers' own bodyshops enjoyed an unfair advantage because they did not pay VAT on the labour element of their business costs.
But the Paymaster General Dawn Primarolo rejected this. She told the House of Commons last week: "The insurers' investment in productivity helps the competitive development of the car repair market and I do not propose any change to the current rules."
