Fairly allocating work amongst service providers
On 27 August, FAnews published an article which discussed the proposed Competition Commission Code of Conduct for the Automotive Industry and the effects that it could possibly have on the insurance industry.
This article raised a few concerns amongst our readers regarding the tough measures that insurers could face in the future. FAnews spoke to Nico Esterhuizen, GM of Insurance Risks at the South African Insurance Association (SAIA), to find out whether these concerns are valid.
At your discretion
One of the suggestions made by the Competition Commission is that insurers must fairly allocate work amongst service providers such as vehicle repairers. The immediate question that comes to mind is: what does this mean for insurers?
“The Code of Conduct does hope to spread work within the industry. However, this still needs to be done at the discretion of the insurer and will only be done across insurer approved service providers. This allocation process will be influenced by client information such as their location, the available approved service provider within that location, and the level of repairs that need to be done on a specific vehicle,” said Esterhuizen.
One of the concerns raised by a FAnews reader is that if the fair allocation of work amongst service providers forms part of the proposed Code of Conduct, insurers would not be able to build trust with service providers in the future. This could compromise the quality of the repairs done to a vehicle.
“This is certainly not the case. The fair allocation of work will be done amongst providers that insurers trust. At the end of the day, if an autobody repair shop does not meet the necessary standards the insurer will not be compelled to use them. Insurers take on huge responsibilities when it comes to repairing vehicles, and the Code of Conduct does ignore that,” said Esterhuizen.
Skills development
A key objective of the proposed Code of Conduct is to encourage skills development within the automotive industry.
“The reason that the Competition Commission came up with the code is simple. Two years ago, the Competition Commission started to receive complaints from independent autobody repair shops that they had very limited access to parts and the necessary services and information to repair certain vehicles,” said Esterhuizen.
He added that one of the things that the Code of Conduct will implement is an obligation on original part manufacturers (OEMs) to invest capital in skills development and to broaden their supply base to include independent autobody repair shops.
“This will hopefully mean that this will create more insurer approved service providers and more autobody repair shops that can specialise in fixing high value and new technology vehicles such as BMWs and Mercedes Benz as well as sport vehicles,” said Esterhuizen who added that a large portion of these independent autobody repair shops will be small black owned businesses.
International input
Esterhuizen pointed out that SAIA has been working with the Competition Commission for close to two years to come up with the proposals that should be included in the Code of Conduct. He added that this is an important document as was established off the back of international research.
“The Code of Conduct was drafted after research by the Commission into markets that faced similar issues in the past. These markets included the European Union, Russia and the US. Does this mean that the South African Code of Conduct is a perfect document? No, there are some concerns that SAIA has with the Code of Conduct and we are engaging with the Competition Commission regarding this through a position paper. However, we are confident that we can work around the concerns that we have,” said Esterhuizen.
He added that the Code of Conduct is in the process of being finalised and that the industry should see a revised Code of Conduct within the next six months. “After that, there will be an implementation period of between three to six months. This will then be assed by the Competition Commission after a year,” said Esterhuizen.
Back to the quality issue
Esterhuizen said that SAIA acknowledges the fact that there will always be concerns regarding the quality of repairs whether the Code of Conduct is implemented.
“We are not worried about these concerns because there are more than enough approved service providers in the industry who do produce quality work when it comes to automotive repairs. Further, the objective of the Code of Conduct is to develop the necessary skills within the industry to increase the number of approved service providers. At the end of the day, insurers will not have to compromise on the quality of the service that they offer clients,” said Esterhuizen. “We are however concerned about other practical challenges that the current draft code will introduce that requires further discussions with the Commission”.
This is a welcome relief for an industry that is working feverishly towards the obligations of Treating Customers Fairly. If successful, this will be a welcome boost to the economy as it has the potential to create jobs.
Editor’s Thoughts:
Currently, the Code of Conduct will be voluntary. Insurers will not be compelled to sign it. However, if the benefits are there, can they afford not to sign it? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
