An independent review of the voluntary smash repair code has recommended that sanctions for non-compliance be introduced and a “thorough” rewrite be undertaken to address “vague” wordings as part of a 15-point plan to improve governance and consumer outcomes.

Former Australian Competition & Consumer Commission deputy chairman Michael Schaper, who led the review, also proposes greater clarity in relation to artificial intelligence (AI); appointment of an independent code committee chair; and closer engagement with regulators.

The code commenced in 2006 and is jointly overseen by the Insurance Council of Australia and Motor Trades Association of Australia.

In his final report released today he says the review of the Motor Vehicle Insurance and Repair Industry Code of Conduct “comes at a time of significant change” for the industry.

Since the last assessment in 2017, there have been a number of changes in dispute resolution availability, mandatory legislative regimes and new trends in the automotive repair sector such as use of AI and advent of other new technologies.

“Amongst stakeholders, the overall view is that while the main aspects of the current system are operating satisfactorily, there is a need for change in some areas,” Dr Schaper said.

“The future state of the smash repair industry in Australia is one of likely change and challenges.”

He says the review has highlighted the importance of the motor vehicle insurance and repair industry to the broader community.

Motor vehicle repairs make up the largest proportion of insurance claims from Australian consumers. In the retail insurance line there were 1.76 million smash claims made in the 2020/21 financial year, representing 45% of the total 3.9 million claims made by consumers nationally.

“Since much smash repair work is performed by repairers and paid for through insurance, there is often a marked imbalance in power between some parties,” the report says.

“Consumers are also important, but often do not have a direct contractual relationship with the repairers.”

According to the report a “substantial” current weakness of the code is the lack of penalties for failure to comply with its provisions, and its inability to prevent “undesirable” parties from joining.

“As such, there is currently no capacity to sanction signatories who refuse to do what they are required to under the code,” the report says.

“Many parties value their membership of the code, and see it as a desirable aspect of both internal practice and external stakeholder management. But if other parties can join and remain members whilst flouting the rules of the code, its value will be demeaned.”

Motor Traders Association of NSW CEO Stavros Yallouridis backs the proposal to introduce sanctions for non-compliance.

“It is important that there is accountability upon all businesses operating within the motor vehicle repair industry to comply with the purpose, intent and obligations under the Code of Conduct,” he told insuranceNEWS.com.au.

“This compliance leads to better performance for all industry participants and provides the consumer with the best possible outcomes.”

The code is mandatory in NSW and SA in February also made it compulsory, while Tasmania is considering it.

Click here for the report.