Falling numbers of bodyshops blamed on insurers’ demands for low-priced repairs
Insurers risk not meeting collision repair deadlines promised to policyholders following reports that 15% of UK mechanics’ shops have gone out of business in the past 12 months.
Sources in the motor retail industry place much of the blame on insurers and the low prices companies pay for repairs.
Insurance companies have expressed concern over the decline in bodyshops, claiming to be looking at ways to help shops reduce overhead costs.
Mike Owen, head of bodyshops for the Retail Motor Industry Federation, said 15% of UK repair shops – varying in size – had gone out of business because mechanics were unable to stay afloat in the face of low margins, a soft economy and poor prices paid by insurers.
In the past 10 years, the number of bodyshops has decreased by 31% and capacity has dropped by 13%, according to a report by Trend Tracker.
Insurers generate about 85% of business for collision repairers. Owen said that if there were fewer mechanics’ shops to choose from, companies ran the risk of not returning vehicles to policyholders as quickly as promised.
Owen said insurers pay up to 40% less than the market charges for repair work.
Motor insurers agree the declining number of repair shops – a drop from 4,770 to 4,054 in the past year – could be problematic for supply, but they argue that lower prices paid to mechanics is due to the high volume of business insurers generate.
Allison Stevens, head of supply chain for Norwich Union (NU), said: “We’re considering the risk that if that trend continues [shops going out of business], there could be a shortage of supply.
“It’s not in our interest to drive prices to a level where they can’t afford to do business in the future. We can’t afford to keep paying more and they can’t afford to reduce margins.”
Stevens said NU was in discussions with body repairers to develop an online system that would reduce overhead costs by using a website to determine whether a workshop had space for a damaged vehicle, instead of faxing over documents and placing phone calls.
She said: “We are looking at ways to work with people in the market place to have a lower cost of repairs and lower margins for repairers.”
Norwich Union uses about 500 body shops for its policyholders directed repairs.