The use of preferred smash repairers has added fuel to the fiery relationship between the smash repair and insurance industries, but the NSW Government hopes the introduction of a compulsory code will make the parties settle their differences.

Several inquiries over the past couple of years resulted in both industries working with the Federal Government to compile a voluntary code of conduct. However, the NSW Government has taken the idea a step further and made the national code compulsory for insurers and smash repairers in the state.

NSW Fair Trading Minister Diane Beamer says making the code into law will go a long way towards bringing an end to the long-running dispute between the Motor Traders Association and IAG’s NRMA Insurance.

Penalties for breaching the code include court injunctions, orders to disclose information, trading prohibition orders, civil action for damages and court orders to compensate for damage.

The Motor Traders Association says everybody will benefit from the requirements, but the insurance industry is, at very best, lukewarm.

Insurance Council of Australia CEO Kerrie Kelly says because the compulsory code has its own dispute resolution provisions, it may act as a disincentive for insurers and repairers to resolve their disputes quickly.

“This could occur when a vehicle is being repaired and could result in extensive delays at the customer’s expense,” she said. “For example, a party may form the view that it could get a better result from its dispute by pursuing an action under the Fair Trading Act 1987 than through existing code mechanisms.”

IAG’s controversial Care & Repair scheme – which uses preferred smash repairers and once charged policyholders a fee to use repairers outside its network – has been heavily criticised by motoring bodies. They say the scheme takes away business from independent repairers and prompts preferred repairers to cut corners to meet the insurer’s requirements.

Ms Beamer agrees. She says the smash repair industry, especially in Western Sydney, has been hit by the “double whammy of a diminishing market and new demands by insurers”.

Her discussions with the industries have brought about positive action, but new rules backed by penalties are needed to make sure all parties adhere to the code and consumers are better protected by a fair and transparent process.