Insurance payments to collision repairers not keeping pace with costs

AutoTrader NZ
Published 3 September 2020

The Insurance Council of New Zealand reports that for the 12-month period to September 2012 (the latest available figures), New Zealand’s insurance companies collected about $1.3 billion for commercial and private motor policies – up a massive $43 million from the previous year. However, during that same period, the cost of claims for these policies only rose by $6.5 million.

Motor Trade Association (MTA) is concerned many in the collision repair industry are struggling to survive – about 80 percent of vehicle collision repairs are paid for by insurance companies.

“Employers are struggling to pay skilled tradespeople what they are worth, so they leave – generally for better pay in Australia. Apprentice numbers are continuing to fall, too. Power, rates, insurance and administration costs are all up. From 2002 to 2012, inflation increased on average 2.9 percent per year. However, the insurer-controlled rates for crash repair work have not kept up, making many businesses unprofitable,” MTA Advocacy and Training General Manager Dougal Morrison says.

Safer vehicles, costlier repairs, poor returns: industry faces trouble

Every year, auto manufacturers make vehicles lighter, stronger and safer, from more sophisticated materials. However, these can be complex to repair, and require training and specialist equipment. Industry needs appropriate returns to carry out this work properly.

“Insurers are also dictating where businesses should buy automotive parts from, making for increasingly meagre margins for the industry. Admin, paint and material costs are also rising every year, and these costs are being carried by the businesses,” Morrison says.

“We’ve been seeing business owners closing their doors and walking away, rather than cutting dangerous corners. Reputable collision repairers are finding more repairs having been carried out that they describe as substandard, with some even being classified as dangerous. This is a major concern to MTA, and to vehicle owners – aside from the obvious safety aspects, substandard repairs drive down the value of a vehicle at resale.”