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Members of The South African Motor Body Repairer’s (SAMBRA), a constituent association of the Retail Motor Industry Organisation (RMI) and their short-term motor insurer business partners in South Africa, two umbilically- linked industries, face an extremely challenging short-term future “during which we will undoubtedly see a paradigm shift,” says Richard Green, National Director of SAMBRA. Green believes both partners are overtraded and require substantial overhaul to remain relevant and profitable.
He says in both industries there exists a cost structure that can no longer be maintained. “The cost structure has accumulated over time and contains irrelevant and duplicated costs. Unless these structures can be revised to ensure they add value to the entire system, they need to be removed,” he says.
Green’s concern centres around the slow erosion of margins and transfer of costs from insurers to the motor body repairers. Although this has happened slowly Green says they have now reached a point where he believes the viability of the members’ business is under threat. These businesses currently carry out repairs on over 80% of all insured repair claims in the country.
The erosion of margins can be attributed to a number of different factors including:
- Poor business management within insurer and MBR operations.
- In some instances, the transfer of administrative costs to SAMBRA members by insurer partners.
- In general, huge accumulated auditing costs are not being effectively managed.
- Deterioration of profit margins over the last fifteen years.
- Consistently high capital equipment costs of maintaining manufacturer approvals.
- Uncollected or delayed cash payments for repairs resulting cash flow implications
“As we see it, the short-term insurance industry faces equal or greater challenges in their sector. The industry is also completely overtraded, with many entities trying to profit from the same small insured sector. To their credit, insurers have morphed, offering Life Insurance and many other products that were previously not considered their domain. In so doing they have created alternative income streams that allow substantial cross subsidisation. This is something the repair industry has been slow at doing unfortunately.”
“Our focus in 2019 will be to create an optimal trading environment while remaining collaborative with business partners and pursuing the goal of sustainability. Like the short-term insurers, motor body repairers will need to take back their eroded profit margins from the affected areas of the business and become substantially more innovative within their businesses to ensure improved profit margins,” concludes Green.