$1bn NZ auto repair industry under treat from insurer model

$1bn NZ auto repair industry under threat from insurer model

New Zealand’s car repair industry could lose up to 15% of its revenue to offshore-owned rivals, industry experts have warned.

It comes as insurers under Australian-owned IAG (AMI, State, NZI and Lumley), rapidly vertically integrate their operations throughout New Zealand.

The groups, with a 60% share of the local market, have opened high-volume panel repair shops in Auckland, Wellington, Hamilton and Christchurch.

The insurance group’s facilities, which operate under the ‘Repairhub’ brand, can process four times the amount of work of an average repairer, representing 15% of industry volume.

Neil Pritchard general manager of the Collision Repair Association (CRA) said the insurers can selectively channel the more profitable, cosmetic repair work through their claims process directly into their own repair network.

He says prior to 2019, almost all 500 collision repair shops in NZ were locally owned and the additional competition faced by the new insurer model could not have come at a worse time for the industry.

“Since its inception, the local collision repair industry has been made up of hundreds of New Zealand owned panel repair shops,” he said. “With prices dictated by insurers, the industry does not operate under the same competitive forces that most other service providers do.

“The absence of these forces creates a high level of vulnerability to external cost changes for businesses and when this is coupled with the introduction of an insurer network which can artificially capture high volumes of work from the most lucrative jobs, it places our ability to develop infrastructure for more complex, structural repairs in jeopardy.”

“What we are seeing at the moment is the culmination of several economic factors which are threatening the long term viability of the industry and could see the reduction in services for Kiwi consumers,” he said.

Pritchard called for more oversight of the sector.

“Most consumers would be unaware that the repair facility being advocated by their insurer is also owned by the insurer and the profits flow offshore rather than being retained by local businesses.

“Our concern is that with the insurance industry now effectively self-monitoring the quality of their own work, and the resulting loss of transparency in the relationship with their repairer, there is little in the way of consumer protection.”