The most contentious issue at the present time for repairers is the participation in the Approved Repair Schemes run by insurers or accident managers. Two questions need to be answered: are they a boon to the industry, in providing individual companies with regular flows of work? Or are they a milestone around the neck for those repairers participating in them?
Approved Repair Schemes have been likened to heroin addiction – easy to get into, difficult, painful and sometimes impossible to get out of. It needs to be understood that in the overall context there are agreements in existence that are commercially viable to many repairers given the right circumstances.
However, many repairers are participating in schemes that will slowly drive them into bankruptcy due to restrictive classes, contractual penalties and free service required. When the work provided under these schemes also becomes an apparently irreplaceable proportion of a company's business, a no-win situation exists.
It is important to understand how the repair industry found itself controlled by the customer and also to understand what the future holds unless there is dramatic upheaval led by the repairers themselves.
Repairers queued up to participate in approved contracts being offered by insurers and accident managers; a repair company could fill its repair capacity by taking five or six approvals. There were so many to choose from, no one customer needed to provide more than 20% of the company's requirement; if a customer was lost there were plenty more to replace the loss.
Repairers were encouraged to take on more volume year on year. They did not notice that pay rates were not increased sufficiently, or if they did, they began to convince themselves that increased turnover made up for static rates.
By the time that specific computer estimating systems were required, with acquisition and access costs landing at the repairer's door, and free services such as collection and delivery, storage and courtesy cars were expected, many repairers found themselves with a multitude of computer systems, each catering for an individual customer's whim, vast expensive fleets of cars to lend out at no charge to customers, and an unhealthy ratio of non-productive staff.
But most importantly, they had reached the point of being unable to turn away large percentages of their total business without damaging their company. Sadly, few realised that they had elected to face a long slow decline, as control of their businesses had in many cases, passed to the customer.
Some repairers actively based their business strategy on previously unthought of volumes of work at low margins, even to the point of allowing the insurer to install a resident engineer on site to oversee their interests. Did these repairers ever consider who really paid the salary and expenses of this engineer?
Let us now consider the up-to-date position.
The control of 75% of the total accident repair market is now in the hands of six major insurance groups, due to the merger activity over the past three to four years.
Due to the economies of scale in staffing levels and office occupancy, plus the fairly severe increase in motor insurance premiums during the last two years, many insurers are now returning to respectable profits from motor business. For example, one major motor company using approved repairers, whose basic agreement has not changed for four years, made £21m profit last year.
Armed with the knowledge that repairers who are trapped within approved schemes, and are more likely to opt for a slow decline in their business rather than re-structure their businesses towards a free market and reject direct approvals, insurers will not improve generally the terms on offer to repairers. The better times that repairers have waited for year on year will not materialise, especially as there are larger repairers with vacant capacity, caused by losing up to 40% of their business without warning, when a major insurer decided to reduce its network in favour of running its own repair operation in some parts of the country.
We believe that the insurance industry abuses its position of dominance over the body repairers and left unchecked, will continue to do so. The evidence of this abuse is there to see. Repairers have been forced into investing specific equipment for video and live image reporting, or computer estimating only to find that much of this equipment becomes redundant at a whim, if the insurer's ownership or customer base changes.
There is also evidence of contract terms being applied rigorously, or conversely, totally ignored to suit the insurer's needs. Contracts have become vast, involving documents that require legal scrutiny before acceptance. Many clauses are realistically unworkable as they contain performance criteria that is impossible to meet at all times. Post repair audit penalties sometimes remove the repairer's right to rectify faults and back charges for audit failures may be onerous.
It is the VBRA's belief that the future lies in diverse ways, some repairers will still participate in approved schemes, but we urge these repairers to reject those areas of existing contracts that are insupportable; there is no place for blanket discounts, or free car provision at the depressed labour rates currently being paid.
Other repairers will force a change to a free market by turning away from direct approvals. This will take courage and commitment and will be a painful process. This is the only way for many repairers to stabilise their companies and ensure survival.
As an industry, we have already given away control of our own destiny to the work providers, helped in no small part by repairers prepared to work for low rates in exchange for volume. Now is the time to take control, even if it means re-structuring businesses – while there are still businesses to re-structure.
It was interesting to see a major insurer indicating a willingness to accept estimates from repairers outside its approved network, using an alternative estimating and imaging system to that used by its approved repairers. Perhaps this is an early indication that change to the market is anticipated.
The VBRA, sees our role as supporting members in identifying the most suitable future route for their businesses, using the services of our field staff or specialised consultants, to advise on optimum size and staffing levels, providing assistance in work procurement and marketing, ranging from VBRA helpline activity to securing fleet, insurance and credit repair business.
To sum it up the market is controlled by a decreasing number of major work providers; action by any parties is unlikely to influence either domination of the market place. And repairers who agree to work for unrealistic terms in exchange for volume will only further damage the industry. It is this sort of action that caused today's problems.
The future of the body repair industry is in the hands of those companies prepared to co-operate with each other to achieve change, which can only be accomplished by the actions of a large number of determined repairers who are prepared to reject the realistic terms currently being offered.
Even though we believe there is more than enough work available to keep quality repair shops permanently busy, we also believe that failure to accept the need for change will mean than many competent repairers will not be in business for much longer.
