It puts the insurance industry on notice after years of complaints from Australia’s smash repairers that centred on insurers being accused of failing to accept rising repair costs and squeezing many repairers to what has been described as “the brink of collapse”.

The Motor Trades Association of Australia (MTAA) said assistant treasurer Sukkar and the federal government “had not only listened to concerns about significant market power imbalances detrimental to consumers and small businesses but investigated and acted to address them.”

MTAA CEO Richard Dudley, interviewed by GoAutoNews Premium, said a code was now the only answer adding that it will be quickly enacted.  

“We – the MTAA, state MTAs and its members along with AMBRA (Australian Motor Body Repairers Association) – have now demonstrated that we have tried to make the voluntary code work. We have gone away and done what people told us to do, which was to see if we could get that voluntary code enshrined in state legislation like it is in NSW,” he said.

“And we’ve drawn blanks on all of that. So now there really only is one recourse and that is for the federal government to prescribe and mandate a code.”

Mr Dudley said the repairers are absorbing cost increases “that are going through the roof and several times over the past 14 months, in some cases.”

“And that’s just paralysing the industry. And it will in fact, cause some repairers to close down because they can’t do any more than what they’re already doing.

“So insurance premiums have to go up to reflect the cost increases. With the other natural disasters that have occurred, the insurance companies can actually absorb some of the cost rather than continuing pushing it down the line. 

“That’s just one of the behaviours and conduct that we’re concerned with. Another is they need to look at the vertical and horizontal integration of some insurance companies and the imbalance of power that it creates.

“Some insurers have control from selling the policy all the way through to fixing the car, including towing, and taking the car to a preferred repairer of their choosing or one of their own shops.

“It’s about making life difficult for an otherwise professional respectable business to compete in that environment and provide a choice to a consumer; if that’s what the consumer wants.

“It’s the sort of stuff that, frankly, has got to stop in 2022. We should be, in this day and age, having a much stronger, more respectful and transparent business relationship on both sides. 

“And as far as we’re concerned, the only way that can be achieved now is to have a deterrence – a penalty structure that forms that deterrence – and something that can be complied with and monitored by the regulator. 

“That’s what a prescribed mandated code will give us. The Productivity Commission said, as far back as 2004, that if a voluntary one doesn’t work, then you should go to a mandatory prescribed code.”

The Insurance Council of Australia (ICA) earlier this month said it will engage with the repair industry over its concerns that businesses are being brought to the brink of collapse by insufficient payments and surging costs.

Mr Dudley said the MTAA has been in discussions with the ICA seeking to resolve the issues.

The ICA said it was critical to have a sustainable and thriving vehicle repair industry.

A spokesperson said: “Insurers recognise and value the role and work of motor vehicle repairers. Iit is in all participants; customers, repairers, insurers and suppliers’ interests to ensure the motor vehicle repair industry operates effectively and efficiently.”

“ICA will engage directly with the MTAA to better understand the issues.”

The impending investigation proposed by the government follows decades of representations and advocacy for recognition of what the industry said was “the impact of constraining commercial conduct and detrimental behaviours by powerful insurance companies on smash repair small businesses and consumers.”

It has been a long time coming. In 2002 the ACCC facilitated a discussion with insurers, repairs and consumers after complaints. 

It led to the report in 2003 supporting a voluntary code of conduct and in 2004, the Productivity Commission called for a “Smash Repair and Insurance” review that was released in March 2005 and called for a code of conduct.

The national voluntary code of conduct “Motor Vehicle Insurers and Repair Industry Code of Conduct” was presented in June 2006, reviewed in 2016 and revised in 2017.

In WA alone, a report by the state government titled “Report into the WA smash repair industry” of November 2018, called for a Motor Vehicle Insurance and Repair Industry Code of Conduct to be legislated by the end of 2019 and that it seek permission from the Commonwealth Treasury by February 2019 to direct the ACCC to undertake “an in-depth inquiry into possible anti-competitive conduct and misuse of power in Australia’s smash repair industry.”

By Neil Dowling