Almost anyone who has been associated with the collision repair industry for any length of time can recognise how absolutely dysfunctional it has become with an ethic of being purely transactional and rarely, if ever, transformational. This is probably because of the sheer scale of the task being a bit too daunting to undertake.
As such, we have come from a small and evolving trade with often an insurance repair model, which is not fit for purpose. Just because it still-sort-of-works, doesn’t make it in any way right. It’s true to say that before the pandemic, the industry already had its fair share of challenges with vehicle technology and new material in repair and a dearth of skill levels available, to name a few.
However, today perhaps the biggest concern to a small and medium repair concern is the poor levels of work supply given the lower rate of claim frequencies. So, the trade is fairing not only poor profitability, but a “survival” outlook which looks quite bleak at present.
It’s really time right now to bring out into the public domain what looks like a giant monopolistic trend of work steering that is assisting the growth of a major repairer operation. With multiple body shop sites across South Africa, the company are in some cases being assisted by a group of insurers in what looks like anti-competitive behaviour in the way that damaged vehicles are distributed with questionable and with exclusive arrangements that are in place.
The sum total of these business arrangements of industry capture has created a situation that sees customer choice on the right to appoint the repairer of his or her choice, being eliminated by work steering from certain insurance companies and call centres. The result of the steering in benefiting this repair group is starving the rest of the industry of workflow.
Some of these questionable business practises are clearly anti-competitive in the normal run of business supply and demand in a free market economy as South Africa claim to be.
The points of concern are:
Fair distribution cannot take place as long as these questionable exclusive arrangements are in place.
The industry is appealing to the Competition Commissioner on how and to whom these suspicious arrangements can be exposed and for further investigation.
Unfair retaining of work by charging excessive towing and release fees should not be allowed as it is used as a tactic to limit the consumer’s freedom of choice and is exploitative.
Steering and selling of work by towing companies is anti-competitive and limits consumer choice. This should therefore not be facilitated by insurers.
Any insurer arrangement that a repairer should retain a vehicle on the basis that it was towed to its premises should be discontinued.
Double standards in the implementation of insurers systems in use for work allocation and selected application and enforcement of ethical standards should not be allowed.
External controls, reporting and accountability should be mandatory for insurers as the absence thereof fuels corruption and anti-competitive behaviour.
Conflict of interest and bundling of services to the exclusion of others via simultaneous shareholding in insurance companies and ISPs’, towing, assessing, repairs and salvage should not be allowed in any form. A typical example is where a single grouping funded by Black & White monopoly capital with political influence have created a captured environment to the exclusion of the rest of the industry.
Insurance companies should apply BBBEE objectively and in line with the targets set in the Financial Sector Charter and not subjectively abuse the situation to steer work to repairers of their choice, often with questionable motives of possible self-enrichment.
BBBEE thresholds of R50 million annual turnover, to be measured as a Generic entity is creating unfair competition in the industry as many ISPs’ are either just above or below this threshold, with vastly different requirements.
The result is that medium-sized businesses that have transformed in terms of Black ownership can still be at a huge disadvantage to attain a good BBBEE level score, based on this “all or nothing” approach to compliance with BBBEE guidelines.
The compliance with BBBEE Codes should apply equally to all ISPs’ or the threshold should be increased to a more realistic level of between R100 million to R120 million annual turnover to differentiate between medium and large sized businesses.
Clearly these current statistics cannot be allowed to continue to grow as it puts in play an absolute monopoly of work distribution and restoration in the collision repair theatre right now with dire consequence of questionable quality of repair and drawn out cycle times of inconvenience to the vehicle owner. SMME operators should be afforded opportunity to take on this clearly anti-competitive trade practice going forwards to survive this questionable trade trend that has accelerated in recent years?
How long will the customer be last in focus instead of the first port-of-call for our attention as an industry? Why should certain shops house thousands of vehicles awaiting repair while other shops lay idle waiting for work, and are equally equipped to do so? Since when is it good practice to have constant quality control people in your business, appointed by insurance, but you still churn out sub-standard work and the customer waits months and months on end for their vehicle? The answer to all of these questions would be never, but it seems it’s what is playing out at present.
By Steve Kessel, CRA Operations Director