A day has hardly gone by this year without a new service level agreement landing on the desk of the Collision Repairers Association (CRA) from one insurance house or another. There is still the usual “now sign it or else your workflow will cease” clause tucked away in the devilish small print. If it is not them, then following hot on their heels will be an assessing assisting concern laying out new protocols for some new process to be followed for a major client in the motor insurance business.
On the subject of leadership and the guidance roll that we at CRA are mandated to perform, one can’t help but wonder at how our members seem to rush forwards to sign up. These are often profit punishing agreements and seem to be taken without researching what the actual outlay of running the body shop in today’s market are currently costing.
Sadly, mathematics does not always come into the decision-making process. I mean, you can achieve a full matric these days without doing much in any way with the prickly subject of maths. This could be a bad omen for our business survival with new entrants coming in to ply their business plans in auto body repair. As everyone is going in different directions, the trade battle plan of long term sustainability just seems to take a back seat.
This month I have set out to show our members, and other aspiring CRA recruits, how a simple calculation using our inflation rate of around 6% has eroded the current labour rate on offer of R260 per hour. This falls way short of keeping pace with a normal repairer’s overall costs. It is based on figures from around 2009, when upheaval in the national protocol developed a proposed labour rate of some R260 per hour. With the lack of overall direction and trade unity, it is still largely in play at about the same offer currently.
The chart on this page shows how the CPI costs should have changed your income line on labour. CRA are of the opinion that repair versus replace is the methodology for ensuring lower turnover but better margin and keeping the work provider happy on reduced costs per claim paid. We see practises are forced into maximising parts replacement as the only method of keeping the doors open. It is best to also bear in mind that this year a 12% increase has already been racked up on refinish paint costs alone without consideration on overheads which are not directly recoverable and we will be subject to wage increases of 7% come September 2018.
The past decade has yielded a year-on-year increase of 78% in inflationary costs in real terms. The average body shop’s labour rate, in our opinion, and as many insurance costs also increased, are based on average at a lower rate of 2%. It just complicates the ongoing and real problem of the everyday inflationary cost spiral and leaving you financially worse off each year.
Now having read this calculation it is about time that a resurgence of unity makes itself known once again. With everyone just simply grabbing any work they can get at any cost, the trade is doomed to another business period of poverty where few, if any, will make a comfortable existence as they work under their actual cost levels.
Objectives of the CRA for the year ahead
The CRA, in the interests of transparency and openness to free and equitable competition, trust we can make representation to the greater insurer community to refrain from appointment of unfair commercial practices, which in our opinion are based on principles to the detriment to repairer sustainability, consumer rights and more specifically, in support of safety through standards and repair methods undertaken against those dictated by the manufacturer.
The CRA, through association with the initiatives of the Motor Transformation and Sustainability Forum (MTSF) – a forum represented by the industry for the industry, one that encompasses the participation by insurers and all auto body repairer associations, under SAIA management – have a memorandum of understanding which agrees the adoption of protocol. It was initiated as a primary goal implementing audited grading standard as a barrier to inclusion in quality service provision, amongst other initiatives.
The CRA fully support the implementation of transformation agendas and the process of improving the distribution and access to broad based procurement, inclusive of all previously disadvantaged business operators. The operandi agreed on procurement should be phase two, and if the basis of accredited and qualified staff with investment in equipment is taken into consideration for equitable reward from professional service, this should in all respect be the reward for your customer satisfaction.
The CRA are currently aware that agendas appear to be in place where bias is observed and in breach of agreed terms of reference where favouritism is being afforded as a premise to drive down cost. This preference to procurement direction is against the principle of fair and equitable policy and is to the detriment of a selection of the auto body repairer industry. This must be viewed as anti-competitive and negative against the process of open democracy and should be dismissed in the interests of collaboration under the MTSF success.
The CRA advocates free access to procurement for all auto body repairers and do not subscribe to market division on the premise other than quality through standards. We therefore urge all insurers to review the policy of reserving work for networks, associations and group deals as a base.