It’s interesting to see that some major insurance short term players in neighbouring Namibia have pleaded guilty to a form of price fixing on the rates that are awarded to panel beaters and body shops across the country. It appears they conspired in secret meetings to pay a maximum amount on their claims and with international companies like Santam and Hollard agreeing to pay R20.5 million for an unintended contravention (whatever that means) and pleading guilty to the charges. Other players like Old Mutual Short-Term Insurers Namibia, Outsurance Namibia, Phoenix Namibia, Alexander Forbes Namibia and Momentum Short-Term have also been fingered in this price fixing ring. They are probably deep in discussion in a damage control situation to work out their upcoming fines that may or not be due to the Namibian Competition Committee under Section 23 of the Act.
Having just returned from Namibia I was actually quite surprised to see an average labour rate of some R400 per hour being the amount on offer. In South Africa our trade is still bickering over rates that vary on approximate levels of some R280 up to just over R300 an hour for labour charge out rates. It boggles the brain that we are not earning at least R450 per labour hour. If one computes into the equation of a ten-year increase drought being seen from mainly large motor book insurance players.
All this is proof positive that you simply can’t help an industry that can’t help itself. Insurance dominance is something that we as a magazine have been banging the drum about for years for it makes absolutely no commercial sense for an insurer to pay out over R900 to a mechanical concern for a warranty repair and then squeeze the labour rate back to R300 per hour for a body repair operation, now does it?
That is unless you calculate the sheer greed of these insurance companies who seem to pursue and focus on their own maximum profitability ethic against all in the trade. The system that’s employed on a global basis of a one-on-one negotiation in my opinion pursues their aim of divide and rule on collective labour rates. Let’s face it, with little or no opposition they are gainfully achieving just that. Why? Well work is definitely in short supply in some areas of activity and the fear of being bundled off some approved repairer list seems to be a challenge too big for many body shops to face. Meanwhile it’s not uncommon now for a whole lot of repairers to be seen falling behind with their trade creditors, in some cases.
The top down dominance of insurers which develop and make today’s body shop their own in-house secretarial service in re-quotes, emails, photos and all manner of out sourcing costs also contributes to their profitability.
Mulitple meetings, conferences and debates has delivered little or no progress in pursuing the insurance companies for a more equitable remuneration deal. Our friends in Namibia caught them red-handed with their commercial fingers in the labour rate cookie jar. It makes you wonder if our South African insurance short term trade are also guilty of conspiring against the body shop partners to deliver minimum profits all round in their onerous business model.
This could be the last time I even write about the state-of-the-trade for my policy of ‘I can’t be bothered to talk about apathy’ seems to be coming home to roost as nothing ever changes.
Clearly where insurance companies only receive an average of 5% of claims per annum on their motor books, the approximate 95% premium income profit they receive disqualifies them from telling this to the repair trade. They are not making any profits on car insurance in South Africa. I would challenge them all and say it’s an absolute fabrication and a claim often without foundation.
In closing, they are enjoying a divide and rule empire because panel beaters take no action on their only key profitable area of doing business – the charge out labour rate. When will some trade bodies wake up and realise that only unity is strength. Clearly some things need to be done about this malpractice or we will continue going down a rocky road in a handcart to hell while our greedy insurance partners are laughing all the way to the bank!