Suncorp faces car wreck over repairs

SUNCORP has been warned that it risks a backlash from smash repairers similar to the one that engulfed NRMA Insurance four years ago over its plans to introduce a new claims discount system for vehicle repairs. The move, which will see Suncorp's national insurance brand AAMI switch to a competitive tendering system from July 1, has caused alarm in the repair industry. One of the peak bodies, the Motor Traders Association of New South Wales, says the attempt to drive down costs by sourcing volume discounts on parts and labour could put the quality and safety of the repairs at risk. The MTA's chief executive, James McCall, also raised concerns that the system would encourage smash repairers to undercut each other by such an extent that the work would prove uneconomic for Suncorp. "Repairers will quote low on the job and as a result they could take short cuts," Mr McCall said. "Repairs that then have been done very shoddily will have to be repaired so that a job that initially cost $3000 to $4000 could cost another $6,000 [to fix up]." Not only would the long-term bill be more expensive therefore completely undermining Suncorp's aims but it could also make vehicles unsafe, he said. This is what eventually happened when NRMA Insurance, owned by Suncorp's main rival Insurance Australia Group, attempted to squeeze the costs of its car repairers in 2006 and 2007. Its internet-based bidding system using company-selected smash repairers led to a revolt in the industry. It also offended some customers who had to drive long distances to centres which had tendered the lowest for the work. As well as suffering major damage to its brand, NRMA took a hit to its bottom line and lost millions of dollars of business before it rejected the system. Suncorp, which spends $1.5 billion repairing 500,000 cars a year, says it is seeking to avoid what happened to IAG by "building partnerships" with the industry - a move which has been praised by Mr McCall who gives the company credit for its negotiating approach. A similar tendering system operates in Britain and was set up by Suncorp's recently appointed chief executive Patrick Snowball when he worked for the British insurer Aviva. "In terms of what we're doing in Australia, I think you'll find its is different to the NRMA scheme," Mr Snowball told a company briefing to investors 10 days ago. Describing the MTA and other state bodies as "key stakeholders" in the new system, Mark Milliner, head of Suncorp's personal insurance business that includes the AAMI, GIO and Suncorp brands, said it was essential for the group to work with the industry.