Fair Trading (Motor Vehicle Insurers and Repairers) Amendment Bill

Introduction and First Reading

Mr DULUK (Waite) (10:44): Obtained leave and introduced a bill for an act to amend the Fair Trading Act 1987. Read a first time.

Second Reading

Mr DULUK (Waite) (10:45): I move:

That this bill be now read a second time.

Mr Deputy Speaker, as you know, car accidents happen. They can be minor bingles, like small dings and dents from a parking accident—even I have done that—all the way through to serious accidents which can result in statutory write-offs and, even worse, fatalities or significant injury. This can obviously be a very stressful time for all involved.

In South Australia, most vehicle owners have car insurance and most of the insurance contracts have a right to repair clause, basically giving the owner of the vehicle the power to choose who can repair their vehicle in the event of an accident.

This all seems very simple and easy to follow. However, when you introduce multinational insurance companies, small business crash repairers and consumers who at times have little knowledge of their rights or how the vehicle is repaired to 'pre-accident condition', this process can indeed be very confusing.

The crash repair industry has been vocal for decades in raising issues with this system, highlighting the following key issues:

1. Insurers steering customers to their preferred repairer network;

2. Insurers setting repair allowances for altering a repairer's cost estimate;

3. Insurers using 'funny time, funny money' to convert a repairer's estimate to their preferred estimation methodology;

4. Insurers using a 'two-quote model' to force a cash settlement; and

5. Insurers requesting repairers to use non-authorised genuine parts or incorrect repair methods without consumer knowledge.

When I was the Presiding Member of the Economics and Finance Committee, we initiated the inquiry into the motor vehicle insurance and repair industry following discussions with a number of my constituents and crash repairers who service my community.

I would like to thank the current member for Colton, who followed me as the Presiding Member of that committee, for his work in continuing with the inquiry as witness after witness, small business after small business provided a public in-camera contribution attesting to how the current system is failing their industry but, ultimately, the consumers of South Australia.

I would like to acknowledge the repairers who made confidential submissions to the inquiry, despite their concerns of being cut out from future work by insurers should their businesses be named publicly. Above all, the inquiry extensively heard how the voluntary Motor Vehicle Insurance and Repair Industry Code of Conduct does not provide the appropriate protections to prevent insurers exercising their considerable power to the detriment of customers and small business operators.

Following the committee's report, the government created a working group to examine ways to make the national voluntary code of conduct mandatory in South Australia, with robust mediation processes and penalties for breaches by those who do not abide by it. As such, I would like to acknowledge the Consumer and Business Services department (CBS), who are running the motor vehicle insurance and repair industry working group, and for the Attorney for her work as the relevant minister in this regard.

Since I announced my intention to introduce this amendment to the house some two months ago, I understand that working group has been working overtime to prepare and respond to an options paper on this very issue. In fact, in my time as a member of this place, I cannot recall seeing a government working group moving so quickly.

While their work is admirable, report after report around Australia has proposed that the outcome achieved by this amendment I am proposing to the bill be adopted by various parliaments. Western Australia, New South Wales and now the South Australian parliament have all prepared reports that demonstrate the need for action now. New South Wales has passed legislation, but without penalties, and it has shown that their legislation does not have the requisite teeth to assist consumers or small businesses.

It has not just been parliamentary committees that believe that insurers need incentives to meet community expectations for their actions. Indeed, in his response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ASIC commissioner Sean Hughes said on 27 February 2019, and I quote:

People take out insurance for peace of mind, to protect their homes, cars and families. The value of an insurance policy is in the promise—so that a consumer can feel confident and secure that they will be looked after when something goes wrong. However, we also understand that the community expects their insurer to be there when something actually does go wrong, and to be treated fairly and with dignity and respect.

Unfortunately, testimony in the Royal Commission provided a sobering snapshot of a serious disconnect between community expectations and consumer experiences.

This was also the experience of the South Australian parliament's Economic and Finance Committee when conducting its inquiry into the motor vehicle insurance and repair industry. There will not be time today to go into the details of the committee's report which supports these proposed amendments, but I do not believe this to be necessary, as members interested can simply look at the recommendations from that bipartisan report of the committee at the time, which outlines why these amendments are necessary.

Eleven members of the parliament heard testimony on this issue through the committee process, including the members for Wright, Newland, Schubert, Enfield, Lee and Chaffey. The Presiding Member obviously, as previously indicated, was the member for Colton. They all held membership of the committee at the time of the report's unanimous and bipartisan publication. To summarise, the following statements are taken from that report:

The Committee received 53 written submissions and heard from 35 witnesses across seven public hearings and two in camera hearings…

During the Inquiry, the Committee heard from many crash repairers and consumers about the issues they had encountered while trying to get vehicles repaired as part of an insurance claim. These issues included:

difficulties in consumers accessing their repairer of choice and claims of insurers steering consumers toward their preferred network of repairers;

the use of second-hand and/or non-original equipment manufacturer parts in repairs and related safety, warranty and liability concerns when using those parts;

a lack of transparency of information, with consumers often not being made fully aware by insurers of all the details related to their repairs and/or insurance policies;

disagreements over the methodology used by crash repairers and insurers to assess the repairs needed, and the cost of said repairs, to restore the motor vehicle back to pre-accident condition, and the quote negotiation process; and

insurers choosing to provide cash settlements to consumers instead of repairing their vehicles.

The report goes on:

The Committee makes 11 recommendations aimed at increasing transparency, consumer choice and awareness across the motor vehicle insurance and repair industry, while maintaining consumer safety by ensuring that at all motor vehicles repaired as part of insurance claims are restored to their pre-accident condition.

The primary recommendation from the report was:

The South Australian Government introduce legislation to mandate the Motor Vehicle Insurance and Repair Industry Code of Conduct (Code of Conduct) in South Australia as well as provisions for:

a binding mediation process to enable the expedited resolution of internal disputes between motor vehicle insurers and crash repairers, overseen by a suitable independent authority, such as the Small Business Commissioner or the Commissioner for Consumer and Business Services;

appropriate financial penalties for breaches of the Code of Conduct to ensure compliance by all parties; and

an ongoing review process to ensure that the Code of Conduct remains up-to-date and relevant to the current industry requirements.

Insurers are on record in the committee as supporting the code being mandated in South Australia, and I understand that there has been a suggestion that insurers may not support penalties for breaches. I can understand that. I am sure many members of the house support speed limits on our roads but are not happy when they are caught speeding, as they may have to pay a rather substantial fine. However, the main way to increase and enhance best practice in this regard is to ensure that there are penalties in there as well.

Many people have appealed to insurers to be good corporate citizens. Just as we continue to ask people not to speed on our roads but to help ensure that people do the right thing, it is important that in this regard there are some penalty provisions. Insurers are only doing what they need to do, which is to look after their shareholders, which is vitally important, and their policyholders. The only way to get insurers to change their behaviour is to create a framework that will impact them, where they will notice that if they do not act suitably there will be a financial penalty.

One issue that has been raised with me is whether the Motor Vehicle Insurance and Repair Industry Code of Conduct will stand up to any challenges. My understanding is that any feedback from legal or other areas would actually be welcomed by crash repairers at a national level. Crash repairers and their industry associations want to have a system that is fair and functional and, if exposing the code of conduct into the full sunlight to get better compliance is found wanting in any way, insurers and crash repairers in the national code of conduct administration committee can then sit down in a room and thrash out an agreement on the best way forward.

One of the benefits of the proposed amendment before the house as it has been drafted—and indeed I want to thank parliamentary counsel for their support—is that, should a change to the Motor Vehicle Insurance and Repair Industry Code of Conduct be required, this can be done via regulation and the appropriate minister of the day and not through further changes to the act.

Small business forms the backbone of our economy, and I say that all the time. The crash repair industry is a collection of small businesses that have been crying out for a champion for a long time. That is why this parliament needs to pass this bill—not wait for another report, not wait for another committee or even wait for the federal government to drive this at a national level.

South Australia should and can lead on this issue and, given the bipartisan nature of the report from the Economic and Finance Committee, I would hope that the bill before the house is passed this year and through the parliament. I can see no reason to delay the debate on this bill. It is hard enough for businesses to operate during COVID. Let's make a small difference for an important industry in South Australia.

In finishing my remarks can I say a big thankyou to the Motor Trade Association (MTA) for their work in this regard, especially to the CEO, Paul Unerkov, and to Dario Tonon and Jeff Williams, who are leaders in their industry and here in the gallery today, and also to Daniel Forbes from the MTA for his work in bringing the industry together and really driving this issue. I commend the bill to the house.

Debate adjourned on motion of Dr Harvey.