The strained relationship between insurers and body repairers doesn't benefit anybody. Now some have come together to negotiate a fairer settlement for both sides. Kathryn McCarthy reports.
Insurance companies provide by far the largest amount of work for motor repairers and account for more than three quarters of all accident repair demand. But approved repairer networks are reaching breaking point, as accusations fly that insurers are making unfair demands on some bodyshops, while turning their backs on others.
The top five motor insurers control more than 70% of the market and have been accused by bodyshops of exerting pressure to adopt specified estimating systems and terms and conditions under which they work. The arguments are becoming increasingly acrimonious and, until a compromise is found, there will be growing instability in the approved repairer network system.
Body repairers are calling for their comrades to unite and support the Body Repair Industry Campaign (BRIC), which aims to make the trading relationships between insurers and body repairers fairer. The campaign, which is supported by the Retail Motor Industry Federation (RMI), the Motor Vehicle Repairers Association (MVRA) and the Vehicle Body Repairers Association (VBRA), has strong support among repairers.
"Insurers have a stranglehold on the repair networks," says RMI director Bob Hood. "The BRIC campaign started off addressing the problem of VAT on the labour element of repairs - insurer-owned bodyshops don't pay VAT on this element, which we see as unfair. But we broadened the aspects of the campaign to the wider problems facing repairers and now other associations have joined."
The future certainly looks bleak for bodyshops. Closures are increasing, primarily due to the low labour charge-out rates paid by insurers, and operating overheads are increasing due to tougher environmental legislation and vehicle collection, delivery and storage costs.
A recent study by Market Facts and Business Information (MFBI) predicts that, by 2006, peak winter repair capacity shortages will increase by 28%.
Claims services and support manager at Groupama Insurance, Stephen Crowe, believes it is important to stem the tide of reduction in bodyshop capacity. "This can only be achieved by encouraging a more profitable repair industry. Rather than the conflict-based system of repair cost assessment presently in use, ways have to be found to harmonise insurer and repairer objectives."
Many insurers feel the key to higher profitability for bodyshops is to increase productivity and efficiency and push for repairers to invest in high-tech estimating systems. Yet many bodyshops are reluctant to invest their money unless they are able to share in the profitability gain.
The annual value of UK motor insurance claims is around £5bn. It is estimated that the repair element of a claim accounts for less than 20% of the total cost, yet almost half is attributed to handling the claim.
Outsourcing the claims handling element is one way to achieve greater savings and accident management companies are becoming more popular with insurance companies.
"The role of the accident management company is to work the process and prevent any unnecessary leakage. It's a strategic role," says head of supplier management at Claims Plus, Stuart Ballantyne.
There is, however, hope on the horizon that, through compromise and mediation, the deadlock between insurers and bodyshops can be overcome. Allianz Cornhill is one of a handful of insurers tackling the problem through face-to-face negotiations, using the RMI as facilitator.
"Our philosophy is that we try to operate in partnership with the body repairers," says motor engineer services manager Dane Loosley. "Each of us shares the desire to please and retain customers, and we can't do this on our own."
But Loosley is concerned about the worrying hardening of attitudes. "Some insurers seem to be digging in for a long fight. The RMI has done a great deal - for example, producing a generic contract - and we have signed up to this. I can't see why other insurers don't."
A need for partnership
The RMI is pleased with the success of the scheme, and describes its role as consultative, not confrontational. There are signs that other insurers recognise partnership working is the way forward. "At MMA, we recognise there is a need for a strong partnership with the approved repairers we use," says chief motor engineer Gary Brench. "It is the only way to make the system work. This means having agreements in place that work on both sides - we agree certain volumes of work and to pay repairers promptly and they agree quality standards and to give priority to our work."
Brench believes it is important to keep the network relatively lean to help develop long-term relationships with bodyshops and manage them effectively. "For example, we are running a series of workshop sessions at our offices next month for our approved repairers and we conduct regular reviews of the volume, quality and cost of work undertaken. We also use customer feedback to make sure that repairers are delivering a good level of service. After all, they probably have more contact with the customer than we do."
Insurers and body repairers have little in common apart from the customer, but this is a key point. Insurers may be in a strong commercial position to dictate terms to their supply chain, but not at the expense of their front-line partners.If the approved repairer network is an extension of the insurer's customer service offering, only fairer negotiations can provide a way forward.
The success of the RMI as intermediary is a positive sign that some at least are willing to come to the table to negotiate a fairer settlement for both sides. Before long, the others must surely follow.