The introduction by AA Insurance of a new approved repairer agreement that allows only a five per cent margin on new parts has not been welcome news to the collision repair industry. Stakeholders in the collision repair industry see this move by AA Insurance as further evidence of the company wanting to increase their profits and reduce consumer choice. For some approved AA repairers this has been the last straw, some Auckland based panel shops have decided that they will no longer take part in the “Dutch Auction” they are subjected to when quoting for work at an AA Insurance assessment centre. Owen Evans of Evans European said he would not sign the new agreement and would lose an average of two jobs a week which could result in some redundancies. Mr Evans believed that this was a dangerous move by AA Insurance that would ultimately encourage the use of more second hand parts because of their better margins, but could ultimately endanger consumers. The Collision Repair Association (CRA) is also seriously concerned that the move by AA Insurance to reduce margins on new parts will be just the tip of the iceberg and that other insurance companies may follow suit. “This sets a precedent that is not good for the consumer or the industry,” says CRA General Manager Neil Pritchard. “The CRA is seriously concerned at the effect this will have on the profitability and the ongoing viability for many of our members businesses. We have had discussions with AA Insurance about their decision but our pleas and protests unfortunately fell upon deaf ears.” “We believe this policy will have a negative impact on consumers, because repairers will seek used parts instead of new ones. They will have to use a parts procurement system which may cause unnecessary delays to vehicle repairs, this is not a win-win situation for either party.” “Furthermore, the Collision Repair Industry needs to be able to invest their profits into capital equipment and training for the technicians to keep their skill levels up to the task of repairing what are now highly complex modern vehicles. If the insurance companies start reducing our margins at every opportunity it will have dire effects on the repairers, the integrity of our work will be compromised.” Currently there are over 200 AA Insurance approved repairers in New Zealand who will be affected by this move. Like most retail insurers in New Zealand who are Australian owned, AA Insurance majority shareholder is Queensland based insurance giant Suncorp Metway. Another industry stakeholder commented that some insurance companies are hell bent on squeezing the finite number of quality repairers in New Zealand out of business with their ever decreasing margin policies and a refusal to increase the hourly rate paid. The margin percentage paid between trade and retail on new parts has gradually been eroded from a standard twenty percent to ten percent upwards, depending on the insurance company. IAG has capped theirs at ten percent and they, like other insurers will also not pay for remedial work to bring second hand parts up to scratch, often leaving the repairer out of pocket. AA Insurance has two assessment centres in Auckland where their approved repairers may tender for repair work to vehicles, often two or three businesses will end up tendering for the same job, which many find to be an unfair practise. A similar system was tried by IAG in Sydney, Australia but proved so unpopular the repairers rebelled. Federal government creating a code of conduct which was implemented in September 2006 and now governs the relationship between the motor insurance companies and the repair industry. According to Mr Pritchard the CRA and the New Zealand Insurance council enjoy a great relationship with good open dialogue and he hopes that will continue despite the stance being taken by AA Insurance.