The big motor insurers are set to tighten the financial squeeze on body shop repairers after the Financial Services Authority placed Drake in provisional liquidation, warns body shop trade body VBRA.
Drake, which suffered an £8m shortfall in funds, blamed the liquidation on the tough market conditions.
The motor market is dominated by major players Norwich Union and CGU, Royal and SunAlliance, Eagle Star and Zurich, Guardian Axa and Direct Line.
The VBRA warns that the shrinking marketplace will force repairers to align with the major players leaving them little negotiating power to set rates.
Motor repairers may be forced to accept work at little profit, simply for a promise of work which has no secure market and only generates a business opportunity for others.
Alan Bird, spokesperson for The Vehicle Builders and Repairers Association, said: "Consumers always buy the cheapest motor insurance they can find.
"If smaller insurers cannot compete with these prices they will have to consider ceasing to write motor insurance or consolidating with other insurance companies."