WHY DO CONSUMERS AND THE VEHICLE REPAIR INDUSTRY HAVE SUCH A POOR VIEW OF INSURERS
The question of why consumers and vehicle repairers often hold a negative view of insurers begins with understanding the fundamental purpose of insurance itself.
Historically, insurance was established to indemnify policyholders – to restore them financially to the position they occupied before a loss occurred. Consumers purchase insurance expecting that, when needed, their policy will provide the protection promised and that they will be treated fairly throughout the claims process.
However, many consumers and repairers believe insurers have moved away from this core principle. Concerns about transparency, claims handling, repair practises, and profitability have contributed to growing distrust across the industry.
A lack of transparency
One of the most common complaints relates to how premiums are calculated. Consumers are expected to often accept substantial premium increases without any meaningful explanation of how prices are determined.
Repairers are routinely required to provide detailed, itemised repair estimates, yet insurers are not expected to offer a similar level of transparency regarding premium calculations. This imbalance contributes to public scepticism and fuels negative perceptions about the industry.
The whiplash and fraud debate
For years, consumers have been told that fraudulent claims and a so-called compensation culture are major drivers of increasing insurance premiums.
However, critics argue that insurers themselves played a significant role in creating the claims environment they now criticise. Research cited by Access to Justice (A2J) suggested that a substantial proportion of personal injury referrals originated directly or indirectly from insurers through claims management companies and legal referral arrangements.
At the same time, insurers frequently highlighted the cost of fraud and whiplash claims as justification for premium increases. Yet industry figures indicated that proven fraud represented only a small percentage of overall claims.
The industry also promised that savings resulting from reforms to whiplash compensation would be passed on to consumers. Critics argue that these savings have never been clearly demonstrated in the form of reduced premiums, further damaging public trust.
Are repair costs really driving premiums higher?
Another explanation often cited for rising premiums is the increasing complexity of modern vehicles and the higher cost of repairs.
While advanced technologies undoubtedly increase repair complexity, critics question whether this fully explains premium increases.
Firstly, repair costs are already considered when vehicles are assigned insurance group ratings. Secondly, an insurer’s liability is ultimately limited by the market value of the vehicle. Thirdly, many new technologies, including Advanced Driver Assistance Systems (ADAS), are designed to reduce accident frequency and severity, potentially lowering future claims costs.
As a result, some believe the relationship between rising repair costs and premium increases are often overstated.
Repair networks and profiteering concerns
Perhaps the most controversial issue concerns the way insurers manage vehicle repairs and recover costs from third parties.
Court cases such as Coles v Hetherton highlighted situations where insurers arranged repairs at discounted rates but subsequently sought recovery from third-party insurers at higher retail rates.
Critics argue that while the customer is entitled to have repairs valued at a reasonable retail rate, insurers should not profit from the claims process itself. They question why insurers frequently demand discounted labour rates, rebates, and concessions from repairers while recovering higher amounts elsewhere.
This practice has led to allegations that insurers are benefiting financially from claims while independent repairers face increasing commercial pressure.
The impact on the repair industry
The body repair sector has undergone significant consolidation over the past two decades.
Many repairers argue that insurer-controlled repair networks and aggressive cost pressures have reduced profitability across the sector. Smaller businesses have struggled to survive, leading to fewer independent repairers and greater concentration within larger groups.
Some industry observers believe this trend could eventually shift bargaining power back towards repairers as capacity becomes increasingly limited and specialist repair skills become more valuable.
Regulatory and consumer risks
Critics also raise concerns regarding regulatory obligations and customer disclosure.
When an insurer settles or recovers a claim, questions arise about who ultimately benefits from any profit generated during that process. Some argue that if an insurer repairs a vehicle at one cost but recovers a higher amount from another party, any resulting gain may belong to the original claimant unless full disclosure and consent have been obtained.
There are also concerns about whether insurers are consistently meeting their obligations to act in a customers’ best interests and disclose fees, commissions, or other financial benefits associated with claims handling and repair arrangements.
Improving public perception
If insurers wish to improve their reputation among consumers and repairers, several changes are frequently suggested:
- Greater transparency in premium pricing and profitability.
- A stronger commitment to the principle of indemnity.
- Fair and consistent treatment of repairers.
- Payment of realistic repair costs without imposing unreasonable restrictions on consumer choice.
- Greater focus on repairing vehicles to original manufacturer standards.
- Improved communication and customer service during the claims process.
- Clear disclosure of any financial arrangements connected to repairs and claims management.
- Responsible handling of salvaged vehicles to ensure public safety.
Conclusion
The negative perception of insurers among consumers and vehicle repairers stems largely from concerns about transparency, fairness, and trust. While insurers play an essential role in protecting motorists from financial loss, many stakeholders believe the industry has drifted away from its core purpose of indemnity.
Rebuilding confidence will require greater openness, fairer treatment of repairers, improved customer engagement, and a renewed focus on acting in the best interests of policyholders. By addressing these concerns, insurers may be able to strengthen trust and improve their standing with both consumers and the repair industry.
By Tim Kelly
