We’ve seen a high level of aggregation in the car insurance sector in recent years, and Insurance Group Australia (IAG) now dominate the car insurance market in NZ, particularly the commercial fleet market including their interestingly named Crash Management Fleet Fit product. If you can remember the NZI advertisements of the 90’s you’ll recall the slogan “bloody Aussies, always stealing your stuff” – rather ironic now in light of IAG’s ownership of NZI, State, Lumley, AMI and many others. It’s estimated that IAG now controls as much as 60% of the NZ car insurance market, and edging closer to monopoly status year by year. This has led to significant changes in relationships and behavior towards their service provider market – the collision repair industry.
There are continuous reports in the media including industry magazine PanelTalk about the effect of this David & Goliath dynamic and the impacts on the predominantly small owner-operator businesses at the coal-face of car insurance claims. Just this month Motor Industry Association CEO David Crawford heavily criticised the recent IAG mandate that damaged vehicles older than 2 years be repaired using SECOND-HAND/RECYCLED parts in NZ. This policy leads to implications for car insurance claims including structural integrity, and is in direct contrast to IAG’s own policy for Australian-based repair guidelines that mandate NEW parts for new vehicles. It’s all starting to look a bit Aussie Versus New Zealand, not unlike recent onerous Australian government legislation changes that strongly disadvantage Kiwi’s living and paying tax in Australia, compared to NZ’s generous treatment of Aussie’s here. David Crawford urges IAG to “rethink their policy in NZ”.
New Zealand collision repair facilities are now forced to work in an increasingly hostile car insurance claims market, many players in the the car insurance company sector dictate low hourly rates that are almost half the average Dealership mechanical charge out. Some tightly control parts procurement & margins, and pay only a token allowance for co-ordinating any outsourced ancillary work. Repairers are expected to fund these expenses from their own cash flow that can run into thousands of dollars, all for a maximum of $100 handling fee, despite what can involve multiple hours of management.
As business operators, we have no issue at all with optimising business processes and practices, however the collision repair sector as a whole is now expressing extreme distress with the current environment – BUT, it’s about to get much worse!
We suspect the only viable response to this type of monopolistic behaviour would be based on sound economics theory – ie the only way to combat an increasingly aggregated tightly held buyer market would be for the supplier market (ie collision repair sector) to follow suit and aggregate.
Again, those “bloody Aussies” lead the way. In other hostile markets internationally, large scale owned or franchised collision repair facility groups dominate insurance company service contracts for car insurance claim repairs. The concept has gained traction in Australia over the past decade. These multi-branch repair organisations benefit from corporate level management, funding & efficiencies of scale. The phenomenon has contributed to the decimation of small owner-operated panel shops who simply cannot compete of cost. They often still excel at service and customer satisfaction, but that’s of less interest to some BIG BRAND insurers.
One well known collision repair sector aggregater is Gemini Group and they’ve recently made a move into the NZ market so the writing appears to be on the wall – beware the “green sheds” coming to a neighbourhood near you. Like our well known “red shed” dominator that has managed to destroy so many small businesses in many small towns and suburbs – the end is neigh!
Personalised service levels for car insurance claims will fall and customer choice/control will disappear in the BIG BRAND car insurance company space. All the more reason for consumers to think with their feet. The rate of conversion to a niche kiwi-owned car insurance company (there are a few left!) would be the logical outcome – a trade-off that may still be deemed financially justifiable to the Australian owned car insurance companies that dominate the NZ market.
Suze
Its all true CM and it will get worse. IAG now totally controls the panelbeating market in NZ, without having to actually outlay any investment in buying those businesses but they pull all the strings as if they did own them. The contract terms dictate every dollar as wel as and margins on parts and subbies, and the times get ground down further and further. There is no profit left, we’re just working for a low wage to pump up off shore profits. There’s no cash left now for reinvestment in modernising equipment or training the new generation so the result is cronic shortage of qualified tradesmen as they all retire now or get into better paid work. We cannot get qualified staff. IAG keep buying up all other insurers so the end game will be they’re the only car insurance company left in NZ and Ozzie owned Gemini Group will buy up every decent panelshop in the country for a pittance because those businesses are now worth nothing. Sorry NZ customers – one insurance company and one panelshop group. Welcome to 1984
Hammer Head
Too right. The panelbeating industry is already screwed and everyones talking about when NOT IF State and NZI will bring in their shitty AVERAGE PRICE repair scheme. The money’s on Gemini or Car Craft group making a wholesale take over of NZ and picking off the best quality panelshops here for a fire sale price then scooping the IAG contracts. Bets are on they’ll cherry pick the profitable jobs and pass on the rest. And that’ll be all thats left for the rest of the trade. You’re right mate – its the end. Time to retrain for a cushy office job. Car insurance company maybe. Yeah right!
Debra
If this is true it’s a disgrace. One rule for NZ/better policy terms for Austalia – not acceptable.
The self-interest of IAG’s objection to Vero Insurance’s pending takeover of Tower Insurance is also not lost on me, their challenge is said to be the ‘market dominance’ the combined Vero / Tower Inssurance would create. Market gossip also tells me that IAG are planning a bid for Tower themselves. IAG controls a 70% of the NZ market already – oh the irony!
Suze
Yes I can assure you it is all totally true. The panel & paint trades in a crisis – no profit means no labour. Watch out for the explosion. Then wonder why you can get your collision damaged car repaired, there will be no one left to fix it!
Adrian
If correct then this provides a logical explanation to yesterday’s post Rising Car Insurance Claims Mean Rising Premiums. Basic economic theory would suggest 60% market share by any one player will constrain or distort competition. I’m surprised insurance sector ownership & control was able to become so concentrated in NZ’s tiny market.. Was the Commerce Commission asleep behind the wheel! It seems they have a lot to answer for.
Peter
This seems pretty outragious its hard to believe. We just had a Tower Insurance Claim handled by Crash Management after we found the claim info at https://crashmanagement.nz/clients/insurance-claims/tower-insurance-car-claims/. The Ozzies can keep insurance companies and panelbeaters. We received awesome service from Crash Management Team and Tower Insurance THANKS and no problems at all.
Jan H
This compares very badly with the great service I had recently with my Medical Assurance car accident claim – well done MAS! And thanks to Crash Management too, great service and great communications all the way. The car claim process was helpful too
https://crashmanagement.nz/clients/insurance-claims/mas-medical-assurance-society-car-claims/
Changing Times for the Car Accident Repair Industry in New Zealand - Crash Management
[…] We’ve written on this subject before so it’s gratifying to see the subject discussed openly in the car accident repair industry magazine PanelTalk recently. See also https://crashmanagement.nz/bloody-aussies-not-car-insurance-fleet-fit/ […]