Motor Industry News
By Roy Cokayne
Protest marches to Santam Offices by the motor body repairers called off at 11th hour. This amid grievances relating to conflict of interest in insurer’s appointment of supplier as procurement consultant and competition issues.
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A planned protest by motor body repair (MBR) industry members at three of Santam’s offices on Thursday was postponed at the 11th hour following the intervention of the Black Business Council (BBC).
MBR members planned to hand over a memorandum of grievances to Santam during the protest.
These grievances relate to the “entirely improper appointment” of Filum Ho as a senior procurement consultant while he is also one of Santam’s biggest suppliers.
Some MBR associations claim Ho’s appointment represents a conflict of interest and is anti-competitive and will have a detrimental impact on sustainability of autobody repairers in the industry.
MBRs are also dissatisfied with Ho’s GT Motive accident damage quantification system.
Santam countered these allegations by claiming the planned protest action was supported by only a small minority of MBR associations, who were opposed to deeper transformation and enhanced procurement practices.
Ho said he has always been an advocate for fair competition in the market and was vice chairperson of Right To Repair South Africa (R2RSA) for a number of years and helped to get legislation passed that would result in more competition in the vehicle repair industry.
R2RSA is a Section-21, not-for-profit organisation that has been advocating for freedom of repair choice for vehicle owners.
Ho said the narrative is that he and his two companies have “captured” Santam and he is getting frustrated with the messaging he is getting.
He said there are real conflicts of interests along the entire supply chain in the MBR industry and highlighted that the Competition Commission has launched a full investigation into the market conduct of Audatex.
Ho added that there are instances of insurance companies owning service providers that provide services to other insurers and referred to a recent media report to a anti-competition complaint against Straight Through Assessing.
Ho said he only owns 6.04% of Autoboys through a family trust and 14% of Apollo Studios, which is hardly a majority.
He said Santam has total annual revenue of R11 billion a year and the total revenue the businesses he owns gets from Santam at R60 million a year is a small portion of Santam’s total revenue. To put this into context, one large panelbeater gets the same amount of business if not more, per annum, from Santam or any other large insurer.
“The most ridiculous thing in my whole life is to have one person hired and to get this kind of noise. It’s a joke actually. They have completely mischaracterised me to drive a narrative that supports the status quo at Santam which is an very uneven distribution biased to mostly white owned mega shops,” he said.
Collision Repair Association of South Africa operations director Steve Kessel told Moneyweb late on Wednesday that a decision was taken to postpone the protest action after the BBC appealed to MBR associations to call off the protest to allow it to attempt to resolve the dispute amicably through negotiation.
Kessel said MBRs will put a timeline on the BBC of two weeks to negotiate with Santam and, if they are unsuccessful, “then we will have to reengineer”.
Kessel said on Thursday they had received unconfirmed reports from reliable industry sources that Ho had resigned from his position at Santam.
Resignation
Santam on Thursday confirmed that some MBR associations cancelled planned protest marches to Santam offices in Sandton, Cape Town and Durban and also that Ho has tendered his resignation, which was accepted by Santam.
“Mr Ho advised the company that he did not wish to become a distraction to Santam’s overhaul of how it handles motor repair claims and relationships with MBRs,” it said.
“The company’s objectives include improving service levels in motor repair, enhancing fairness in the allocation of work and empowering small businesses in democratising the value chain,” it added.
“A key outcome will be greater affordability and access to motor insurance for vehicle owners and greater competition in the sector.”
Santam said this plan had by the end of 2023 already resulted in 57% of its MBR suppliers being black-owned businesses, with 51% and greater black ownership.
It said these businesses were allocated 58% of the expenditure on motor body repairs and, as part of Santam’s ongoing plan to democratise the value chain, the company hopes to build on these achievements.
Santam claimed some MBR associations have written formally to the company to express their support for its moves to facilitate greater levels of fairness and transparency in its procurement processes for small businesses.
It stressed that it will continue to implement changes that are necessary to enhance transformation and further democratise the motor body repair sector.
‘Undeniable’ conflict
Kessel said MBRs will continue to protest over Santam’s use of Ho’s systems even if reports of his resignation are accurate.
He said there was an “undeniable conflict of interest” in appointing Ho and that both Santam and Ho will face competition law and other legal challenges.
Kessel said it is disturbing and incomprehensible that Santam could allow one individual to have so much influence and control over their procurement.
He claimed that apart from appointing Ho as a senior procurement consultant, Santam has agreed to make use of all of his companies’ services, which include his:
- Damage quantification system (GT Motive);
- Alternative parts sourcing system (Partsmart);
- Parts payment and settlement discount platform (Partsmart);
- Alternative parts supply (Autoboys);
- Original equipment manufacturer parts supply (Autoboys);
- Automotive glass supply (Autoboys);
- Automotive paint supply (Autoboys); and
- Visual damage detection system (Carscan).
“It appears completely irrational and unreasonable that the country’s largest short term Insurance company would allow a single individual to dictate its procurement policy in circumstances where, apart from concerns about the quality of his procurement systems, there is such an obvious and material conflict of interest,” said Kessel.
“More importantly, how did Santam’s executives, board and risk committee approve such a nonsensical decision which carries so much dependency risk?”
Kessel said Santam’s decisions will also result in significant financial harm to MBRs that service Santam and insurers’ brokers and policyholders.
Shortcomings of systems
He referred to the manifest deficiencies and failings of Ho’s systems, stressing that one of the problems with the GT Motive system is that at any point in time, about 40% of cars on a body repairers’ shop floor are not included in the system as a selectable item.
Kessel said this prevents MBRs from doing proper accident damage quantification, and what the industry refers to as a “quantum quote”, because the system does not have the correct part number or part pricing for that car.
He questioned who will pay the administration costs to determine the value quantification and how long this will drag out until the work on the client’s car commences.
Kessel added that from the way Ho’s parts programme is implemented, it looks like it will be the only definitive option to get parts on a Santam authorised car.
“That is collusion and needs to be looked at [by the competition authorities] as well,” he said.
Ho said he only owns 6.04% of Autoboys through a family trust and 14% of Apollo Studios, which is hardly a majority.
He said Santam has total annual revenue of R11 billion a year and the total revenue the businesses he owns gets from Santam at R60 million a year is a small portion of Santam’s total revenue.
To put this into context, one large panelbeater gets the same amount of business if not more, per annum, from Santam or any other large insurer, he said.
“The most ridiculous thing in my whole life is to have one person hired and to get this kind of noise. It’s a joke actually. They have completely mischaracterised me to drive a narrative that supports the status quo at Santam which is an very uneven distribution biased to mostly white owned mega shops,” he said.
Ho also took issue with claims that the GT Motive, for which Apollo has the Southern African licence, only has 40% coverage of vehicles in the market.
He said the coverage of GT Motive was around 95% and no system has 100% coverage.
“GT Motive is owned by Allianz, which is the biggest insurer in the world.
“It is not going to be inferior. It is used in multiple countries around the world as the system of choice. GT Motive has also been in the SA market for 5 years and although Apollo only acquired the license last year, it was already being used by the industry” he said.
Ho claimed the narrative about him and his companies is being driven by small groups that want to keep work distribution concentrated and costs unfairly high to the insurer and ultimately the policyholders. It’s also extremely outrageous that these non-transformed groups are using black associations in a manner that further prejudices small, black owned workshops. I’m not sure if these associations are complicit or simply mis-informed.
Sambra
South African Motor Body Repairers’ Association (Sambra) chair Dev Moodley confirmed Sambra has been in regular constructive consultation with Santam over the last two months to resolve the potential conflict of the proposed appointment of Ho as its procurement consultant, and the subsequent potential negative impact it may have on the entire MBR sector.
Moodley added that Sambra, an association of the Retail Motor Industry Organisation (RMI) and the largest association in the MBR sector, met Santam again on Wednesday.
He said based on the submissions and dialogue held, Santam had agreed to review its current decisions regarding Ho’s appointment and the procurement of GT Motive as assessment platform.
He said Santam had further agreed to continue engagement with Sambra on alternative solutions that will benefit the entire insurance and repair value chain.
“We are cognisant of, and highly respectful of Santam’s autonomy to engage any consultant in undertaking their business,” he said.
“We nevertheless feel a decision as far reaching as this requires broader and more meaningful industry engagement for the benefit of all concerned.”
Moodley confirmed that Sambra had recommended alternative solutions, which Santam has undertaken to explore and evaluate before making a final decision.
“We feel confident that we will ultimately find an outcome that is beneficial for all,” he said.
Moodley added that based on the positive engagement with Santam, Sambra remains committed to working with Santam to find the best quoting/assessment platform in the interest of the insurer, the repair sector as well as the consumer.
He said Sambra did not encourage its members to participate in the planned protest action on Thursday.
“That said, we cannot interfere with their Constitutional right to free economic activity, provided they act responsibly and within the confines of the law.”
Article Credit to Moneyweb.
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