MMA, CIS, Fortis, Highway and Provident are aiming to cut their combined £500m spend on motor repair by using recycled parts.
The consortium, together with Thatcham, is developing a network of suppliers to cut costs and develop a more environmentally friendly approach to motor repair.
MMA chief motor engineer Gary Brench said: "We are looking at reducing costs so we can capture more business through lower premiums, as well as pursuing a green approach."
Early estimates suggest a successful recycling operation using salvaged parts could shave as much as 10% off insurers' repair costs.
Brench said: "Customer acceptance is one of the biggest issues we have to overcome, but a pilot scheme showed that 50% are happy to use recycled parts."
While consumers will not see any immediate impact on premiums, MMA is looking at a scheme whereby excesses could be reduced in fault claims when the policyholder agrees to use salvaged parts.
The consortium will hold a beauty parade of parts suppliers before agreeing to a UK network.