VACC has, for many years, wanted Insurers to stop the process of steering customers and hiding issues of customer choice deep within Product Disclosure Documents.
Having approached State Government twice and raised our concerns, as part of the Code of Conduct, nothing has happened.
Hopefully this is about to change.
The issues have been addressed by Channel 7’s ‘Today Tonight’ program. On Thursday, March 11, 2010, Today Tonight ran a story featuring Body Repair Division, Vice Chairman, Brad Kreymborg, who has been particularly vocal on this topic. His calls for change were strongly supported by VACC Executive Director, David Purchase.
The following is a transcript of the entire interview with David Purchase, conducted by Today Tonight’s reporter, Georgia Main.
February 5 2010
Georgia Main (GM) – In VACC’s view, what is wrong with the insurance industry?
David Purchase (DP) - We have had a gutful of the treatment we have been receiving from the insurers. Repairers have simply had a gutful and it is getting worse.
We have two major concerns. Firstly, increasingly, insurance companies are steering damaged vehicles into their preferred repairer network. They are taking away the choice of repairer from the motorist.
Secondly, they are unfairly and unreasonably and, in many cases arbitrarily, reducing quotes such that repairers cannot repair the vehicle properly. As a consequence, we now have unsafe vehicles out on the road. The repairer often has to cut corners in order to repair the vehicle for the quote the insurer has put on that vehicle.
GM – What tactics are insurance companies using?
DP - VACC members are telling me this is increasing. More and more, insurers are attempting to control the repair process from go to woe. They want to remove choice and they want motorists to deal only with insurer’s preferred repairers. They are taking away the choice that some people want. Not everyone wants choice, but many do. I do. I want to be able to go to a repairer of my choice. I don’t want to be told that I have to go to the insurer’s preferred repairer. And the other issue, as I said, is reducing quotes in an unfair and unreasonable way, leading to repairs that are not done in strict accordance with manufacturers’ specifications. We are simply being forced to cut corners and that leads to vehicles, going back on our roads, that are not safe.
GM- What are insurance companies saying to repairers to force them to underquote?
DP - For instance, they make the motorist get another quote and that will be a quote from another repairer, which is a lower quote and say we want you to meet that quote. They are forcing repairers to meet those lower quotes. Some of the reductions in quotes that are being made are being made without even looking at the vehicle. What a lot of the assessors are doing is called ‘desk top’ assessing.
They’re not even looking at the vehicle; they’re looking at a screen and arbitrarily, and unfairly, reducing the quote. And if the repairer doesn’t do it for that price, they don’t get the job, simple as that.
GM – Are insurers saying to repairers ‘if you do this cheaper, more cars will come your way?’
DP - They’re saying to their preferred repairers ‘if you do it for that price, then you’ll get volume’. But they’re actually taking choice away from consumers, or motorists, who can’t use the repairer they want to use and they’re being forced to use a preferred repairer who, as I said before, is being forced to do it for less because they are promised volume.
GM – One of the worst offenders is AAMI. Tell me more.
DP - I don’t want to refer to any specific insurance company, but there are a number who are doing what I have just described. They are forcing motorists to take damaged vehicles to preferred repairers and there are many insurers who are unfairly and unreasonably reducing quotes. There are many insurance companies doing that. Some of them, surprisingly, offer choice but it is buried in the print. It is very confusing and complex. I have been through most of the insurers’ policies and they’re very confusing. I have difficulty understanding them. One the one hand, you are offered choice; on the other, it is taken away.
There was one policy I saw this morning which said you have choice, but if we don’t like the repairer of your choice, then you have to cooperate with us while we “agree” on another. So, you can have choice on the one hand but have it taken back on the other. Absolute nonsense, because the insurers want to control the process from go, to woe.
It’s not as if the insurers are doing it tough and need to screw us to the floor boards in order to survive. They are making enormous profits. I saw in the newspaper recently, IAG profits described as ‘astonishingly good’. We are paying the price for them achieving the profits they want. Insurance companies and their shareholders are getting fat at our expense, and we have had enough of it. We’re calling on the Government to bring the insurance companies to account.
GM – How does the voluntary Code of Conduct in Victoria compare to other states?
DP - We do have a Code. It is voluntary and that is one of the problems. It should be mandatory. The insurers are not complying with it. There is one clause in the Code which says you can’t reduce a quote unless you change the repair process and therefore become responsible for the repair process. They (insurers) are doing it every day of the week.
The Code is designed to promote efficient, fair, informed and honest relationships between the parties. It is not. The whole process is becoming non-transparent and there are all sorts of other provisions in the Code that are not being applied. In many respects, I think the Code is not bad. I think the Code is pretty good. It is just that the insurers are not complying with it when, in fact, they said they would. That is why we want it made mandatory so they are forced to comply, so they can’t unreasonably and arbitrarily reduce quotes, so they can’t offer choice on the one hand and take it back on the other, and so they can’t confuse the policy holder. Go and ask policy holders out on the street, whether they have choice of repairer in their policy. They wouldn’t have a clue. And if you are looking through the policy documentation, choice, if it exits, is on about page 50 of a 52 page document – way down the back, hidden in all sorts of obscure language.
The insurers are very good at asking you and I questions, in order to determine what the level of risk is and what their liability is. Not too keen about asking us if we would like choice of repairer. Why don’t they ask that question in the same way they ask all their other questions?
GM - If the Code were to be mandatory, would insurance companies have to tell us about ‘choice of repairer’?
DP - If it was mandatory, there would be more pressure on insurers to do the right thing. I think that they would be more transparent. They know that if they don’t do precisely what is in the Code, nothing much is going to happen. They are not going to be penalised. But if it was mandatory then action could be taken against them. So I think if it was made mandatory, they would become more transparent, they’d be more careful about unreasonably and unfairly reducing quotes and getting up to all the shenanigans which they get up to.
GM - In the Insurance Act, you can have choice of legal action, but who’s going to go down that track, having a car off the road, while going to court?
DP - That’s right. If you want choice badly enough and the insurer won’t give it to you, you can pursue your rights through the law. But what motorist is going to do that? What motorists want, with a damaged vehicle, is that vehicle back on the road as quickly as possible. What individual is going to take an insurance company to court? Insurance companies have very deep pockets and an individual is simply not going to take an insurance company to court. Insurance companies know that. I have worked for insurance companies and they operate on that basis. So what I am saying is that there is a lack of transparency and a lack of integrity. The relationship between insurers and repairers is getting worse in many respects. There is not a good faith element to the Code and all these things are getting worse and we are calling on the Government to do something about it.
I think in this country, small business has had a gutful of big businesses with whom they have to deal. It’s not just in this sector. If you have to deal with big supermarkets, with big oil companies, with big insurance companies as a small business, you are pretty much frustrated. As a representative of small business, I can tell you, we have had a gutful of the way big business treats us. Sooner or later, something has to change.
GM – You have had discussions with insurance companies and Ministers over the years: why has nothing changed?
DP - Because big business has got Governments in Australia intimidated. Now, there are always two sides to the story. I am not suggesting every repairer that I represent is lilywhite and comes to the table all the time with clean hands. I am not suggesting that. But what I am suggesting is that big business treats small business, basically their suppliers, very badly in this country.
And I think big business has all Governments, including the Federal one, intimidated in this country with their threats to take business off shore. They simply intimidate and that’s why, I think, Governments are not prepared to take them on. Look at the oil companies, or the big supermarkets. It’s usually not Governments who take them on; it’s usually other big companies. Supermarkets are all getting friendly now, and so are the banks, because we are getting new competitor supermarkets coming in. We’re getting pressure put on banks. We’re getting adverts on the TV where the banks are trying to show a human face. A few years ago, they couldn’t care less. We are a small business organisation and we have had a gutful of this treatment. We are going to, along with others, do what we can to change the attitude towards small business. We’re constantly reminded that small business is the engine room of the country. Well, how about treating us that way.
GM - Overseas there has been anti-steering legislation. Would that work here?
DP - The anti-steering legislation overseas has assisted and we would like to see that here. But in some ways, you don’t need anti-steering legislation. You need insurance companies to behave themselves and be fair-dinkum. You need them to stop getting fat at our expense. To stop making enormous profits for shareholders at somebody else’s expense. As I said before, insurance companies are not cutting corners with us, or putting pressure on us, because they are going out the backdoor themselves. They are making vast profits at the expense of the small business supplier with whom they deal.
We just want them to be fair. We don’t want any special favours from them. We just want a reasonable commercial environment in which to operate and we don’t have that.
GM - These repairers who are being told to cut corners are putting unsafe vehicles out on the road, but if anything happens, any legal repercussions, it comes back on the repairer?
DP - Absolutely. VACC is very concerned about this. If a vehicle goes back on the road, that hasn’t been properly repaired because the insurer has belted down the repairer’s quote, and the car is involved in an accident and heaven forbid, someone is killed, one day someone is going to sue, and they’ll sue the repairer. If the public can sue someone in America for serving more alcohol to someone who is already drunk and who then causes an accident, one day someone is going to sue a repairer. This is becoming less and less academic. This is becoming of great concern to us. And if we’re sued we’ll be standing up in court with the insurer beside us. But they don’t seem to understand things like that. Sooner or later, there will be an unsafe car out there that hasn’t crumpled where is should have crumpled. That hasn’t responded as it was built to respond and the injured person, or estate, will sue. We need insurers and Governments to take notice of this.
GM - We have spoken to two people who, on principal have taken insurance companies to court, who wanted to use their preferred repairer. It ended up costing the insurance company, but they won’t really care about that will they?
DP - They probably don’t and you can take that action which can be very costly. It is very costly if you lose. There is no guarantee that you’ll win. But if you do lose, it is all that more costly to the individual. But insurance companies can wear these costs. They want to control the whole repair process from start to finish. They want to lock individuals into their system and by doing so, they want to cut costs. And if they cut costs, their profits go up. It’s all very good for their shareholders, but we are paying the price. And consumers are paying the price. We are, in fact, facilitating the increased profitability of insurers in this industry. They’re taking it out of our hide.
GM - Customers have to take this up and ask the right questions, right?
DP - Consumers should demand proper disclosure. Insurers demand proper disclosure from you and me. They are pretty good at getting information from us and that information is used to calculate the level of risk of what they’re insuring. The questions that we have to answer are very good – they ask the right questions. Now, just as they require proper, adequate and truthful disclosure from us, and if we are not truthful they can decline a claim, we should require the same from them. And if they offer choice, it should be clear and unequivocal – not something that is given on the one hand and taken from the other. They also ought to stop this terrible process of cash settling, where you will take your car to a repairer, and he’ll give you a quote.
You then take that quote to the insurer who’ll reduce that quote and then offer a cash settlement at that reduced amount. Some motorists will take it and then can’t get the vehicle repaired for that sum because that reduced quote is not sufficient to cover all the damage.
Cash settling is something I think ought to be banned. So, it is a one way street as far as I am concerned with insurance companies. They require from us all the details to assist them to minimise the risk, and that is not matched on our side. They don’t disclose in a proper and transparent way all of the things they ought to disclose.
GM - Would you say the majority of insurance companies are doing this?
DP - There are not a great number of insurers in this sector, but I think, many of them are doing one or another of the things I have outlined. Some are doing what I think is the wrong thing with choice of repairer, others are doing the wrong thing by reducing quotes, some are doing the wrong thing in the area of cash settlements and some are doing all of those things. I am sure that they are not as transparent and as up-front as they require the policy holder to be.
GM – Thank you, David
DP – Thank you.
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