More than 700 mechanic shops have gone out of business in the last 12 months
It’s unlikely many insurers will back accusations that their relationships with body repair shops can be exploitative however, most will agree they have a role to play to help mechanics stay in business.
This week Insurance Times reported that 15%, or more than 700, repair shops have gone out of business in the last 12 months.
Those in the motor repair industry cite a number of causes for this including market conditions but say insurance companies, which generate 85% of business for repair shops and receive deals of up to 40%, have played a damaging role.
The declining number of mechanic shops has been an ongoing trend for the last 10 years with 31% going out of business and capacity dropping by 15%.
Regardless of where the fault lies, insurers admit that losing 15% of the motor repair market is concerning, particularly when policyholders rely on having vehicles returned to them speedily.
Leading motor insurance company Norwich Union said the amount paid to mechanics by insurers is fair considering the percentage of business the companies generating. However, Allison Stevens, head of NU’s supply chain said insurers can’t afford to pay repair shops more but admits mechanics can’t afford to take a lower cut.
And so insurers have a valuable opportunity to work with their directed repair shops to help reduce overhead costs without having to loosen the purse strings.
Stevens said NU has worked on ways to lessen the paper trail for repair shops by moving to more electronic systems. NU is looking to devise an online system to communicate with its repair shops and to determine whether there is room for a collision-damaged vehicle. Previously faxes would have been sent and numerous phone calls made in order to set up an appointment.
She admits the NU is not the only insurer trying to make the job less expensive for repair shops.
Fortis has also recognized there is a role it can play and started up its Solution Centres within its national network to make repairs more efficient for policy holders and mechanics.
Last June the company launched a new e-invoicing system which it claims has already proved to be popular. The system is said to allow the Solutions Centres to fill out a simple template form which they send to Fortis with the details of work carried out and the amount it has cost. The process allows Fortis to send payments promptly, which reduces processing times.
Rob Smale, claims director of Fortis Insurance, said: “We recognised the often previously imbalanced insurer/bodyshop relationship within the industry, and we take pains not to exploit anyone in our repair network. Our priority is to support our repairers and we are pleased the new e-invoicing system has proved to be so popular and has cemented the excellent working relationships which have developed between Fortis and the Solutions Centres over the last year.”
The Retail Motor Industry Federation has said mechanics often feel backed into a corner, forced to accept unacceptable prices from insurers because they are so reliant upon the companies for business.
But closed for business signs on the front of mechanic shops aren’t helping anyone and if insurers aren’t willing to increase payments then helping to reduce costs to the shops is a valuable step in the right direction.
It will be interesting to see what future measures are taken as there seems to be a keen interest on the part of insurers to keep these shops in operation.
