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WA parliamentarians want ACCC probe into insurers

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A WA parliamentary committee wants the Australian Competition and Consumer Commission (ACCC) to look into possible anti-competitive conduct by insurers in the smash repair industry.

The Economics and Industry Standing Committee made the call after wrapping up its inquiry into the state’s smash repair business, which heard a range of market abuse allegations involving insurers.

The insurers are alleged to have engaged in so-called “steering behaviours”, where clients are directed to their preferred networks of repairers, and introduced fixed prices for various repairs to unfairly drive average costs to unsustainably low margins.

They also have unequal bargaining power when agreeing to the scope of repairs and undertake what’s known among the smash repair industry as “funny time, funny money” to artificially price repairs.

While insurers have refuted these allegations, the committee says a number of inquiries at both state and federal levels have made similar calls for actions to investigate claims of anti-competitive practices.

“The apparent nationwide scope of the problem, and increased market concentration in other states, lends weight to the need for federal action,” the committee says in its report issued this week.

“Insurers’ market power and control continues and has changed the traditional workflow patterns that once filtered through the smash repair industry to now being directly under the control of insurers who dictate who, how, where and when repairs to their claimants’ vehicles take place.

“We have accordingly recommended that the WA Treasurer write to the Commonwealth Treasurer, seeking their agreement to direct the ACCC to undertake an in-depth inquiry into possible anti-competitive conduct and misuse of power.”

Five small smash repairers provided evidence in closed hearings, alleging they suffered financial pain to complete insurance repair jobs at the rates and hours requested by insurers’ assessors.

The smash repairers, who wanted their names not to be divulged, say they had not raised the issue publicly out of fear insurers would freeze them out of new jobs.

One of the small smash repairers in closed evidence said insurers could “punish” his business through a range of actions, including declaring a damaged vehicle a total loss even if it was economically feasible to have it repaired, or convince the customer to go to a rival repairer.

“In closed sessions, anecdotes suggest there are instances of market abuse,” committee Chairman Jessica Jane Shaw said.

“The committee has limited ability to investigate the veracity of these claims and counter claims. Only an appropriately convened and empowered Commonwealth-level inquiry can properly investigate.”

Click here to read the full report.