ZKF assails rebate race

Bad Vilbel, Germany. Members of the German Association for Motor Trades and Repairs (ZKF) want insurers to stop seeking big discounts for the cost of crash repairs.

The interest group, which represents 3,500 German body and vehicle repair firms, is assailing the vehicle insurers' growing tendency to wield its market power in accident-claims settlements.

The insurance industry spends about 16 billion euros per year, or $19.66 billion at current exchange rates, on accident claims. To cut costs, insurance firms are demanding big reductions in material prices and hourly rates, said ZKF President Friederich Nagel.

Nagel is calling for insurers to "reduce their wildly excessive demands for discounts to a justifiable level."

Insurers suspect the greatest savings potential is in hourly rates. According to a ZKF study, they range between 65 euros and 85 euros an hour, or about $80 to $104 an hour.

"Discounts on hourly rates are defensible up to 5 percent, provided that there is an appropriate amount of additional business," said Nagel.

Costs relating to replacement parts and materials are also being targeted for cuts. The average margin in these areas is 12 percent, according to ZKF figures.

"List prices or the manufacturers' nonbinding suggested pricing are the yardstick for these calculations and have to be accepted," Nagel said.

In addition, insurers are also demanding discounts on the total cost of the repair job, even when it is already based on reduced hourly costs.

Nagel said, "Additional discounts on the repair bill will lead to companies falling into the unprofitability and endanger their survival."