~ NRMA ...._,

INSURANCE

SUBMISSION TO THE INDEPENDANT PRICING AND REGULATORY TRIBUNAL: REVIEW OF MAXIMUM TOWING FEES (LIGHT AND HEAVY VEHICLES)

PART 1

2 JULY 2014

NRMA Insurance is pleased to provide a submission to IPART's review of maximum towing fees (light and

heavy vehicles).

While the review includes the maximum fees and charging arrangements which apply to all accident towing services provided in NSW, including initial towing from the scene of an accident as well as certain related services, the review also provides scope to highlight opportunities to better protect NSW motorists.

We are particularly encouraged by a review remit which includes review of the overall regulation of the tow truck industry but importantly includes opportunities improve the efficiency and viability of the industry, while maintaining adequate consumer protection mechanisms.

The majority of relationships between insurers and the towing industry are positive, respectful and professional and are focussed on the need to look after an individual unfortunate enough to be in a collision.

Our submission however seeks to highlight and provide solutions to address arrangements or perceived 'loop holes' that are unsustainable and work only to exploit the misfortune of customers' for financial gain.

No more so is this evident than in the gap between current regulatory and legislative framework once a vehicle is towed from an accident scene and taken to a smash repairer. We have experienced situations where an entity can hold a car 'hostage' for one hundred and eighty one (181) days*, then seek to charge a fee using current law as justification.

The actions of some tow truck operators and affiliated holding yard operators damages their industry's reputation, severely inconveniencing customers and often leaving them out-of-pocket by taking cars "hostage" to extract exorbitant and unjustified towing, storage and administration fees from insurance companies.

Many of these businesses we identify have not invested in their businesses nor re-engineered their operations to survive and prosper in a market of considerable change and declining numbers of car accidents. This suggests that the types and volume of desperate practices we bring to the attention of this review are likely to get worse before they get better.

Closing these loop holes, as has been done in similar markets such as Victoria, not only better protects NSW motorists but helps to keep insurance premiums affordable given the fact NRMA Insurance is regularly involved in legal action as a result of the scams we highlight and the costs of this may potentially be passed onto all policyholders (customers) in the form of higher premiums.

This paper expands on matters that ultimately impact on all NSW motorists, be it in the price they pay for their insurance or the experience they have following an accident. This includes matters of privacy, current pricing and fee structures, licensing, regulations within the towing industry.

In the absence of other measures to protect consumers we support ongoing regulation for the Towing Industry (including fees) as well as supporting the extension of these existing regulations to related industries such as repairers and holding yard operators.

*See confidentia l a ppendix

OUR INTEREST IN THE REVIEW

As the leading general insurer in New South Wales with nearly 90 years experience, NRMA Insurance is part of the largest division of Insurance Australia Group (IAG).

Within that division of IAG, the NRMA Insurance brand operates in New South Wales (NSW), Australian Capital Territory (ACT), Queensland and Tasmania. SGIO is the primary brand of that division in Western Australia, and SGIC in South Australia. IAG also has an alliance with RACV for RACV-branded motor policies in Victoria.

When our customers make an insurance claim we rely on a supply network of small businesses across Australia who share our values to help them get back on their feet. When it comes to a car accident this begins with tow truck operators.

The majority of these operators are small businesses that we depend on and a sustainable towing industry is integral in helping to keep the promises we make to our customers.

For the current financial year 2013-14 NRMA Insurance customers have been involved in approximately 150,000 tows.

CURRENT PRICING & FEE STRUCTURE

!PART has sought feedback on the current level of fees for heavy vehicle, light vehicle, light vehicle accident towing , salvage and storage fees.

NRMA Insurance believes the current maximum towing fees for light and heavy vehicles are generally appropriate, as are the prescribed storage fees.

Similarly, NRMA Insurance supports the approach and methodology outlined by !PART in developing a towing fee structure and fee levels that support a profitable and sustainable towing industry.

LICENCING

The Tow Truck Industry Act (1998) (The Act') and the Tow Truck Industry Regulation 2008 (NSW) (The

Regulation') ("The Legislative Regime")1 provides a set of parameters required for an organisation or

individual to both obtain and retain a tow licence and provide towing related services. The introduction of this

legislation was a major step forward in eliminating some of the practices that have tarnished the industry's

reputation . However, despite these positive steps the need remains for a strict licensing regime and we have

highlighted further issues the policing and the enforcement element of the existing regime needs to address.

REGULATION OF TOWING INDUSTRY

We note the !PART Issues paper's focus on the need to regulate towing fees and charges based on providing a

greater degree of consumer protection. Throughout the paper, !PART refers to the need for regulation to

address the high risk of detriment to the consumer at the time of and after the accident. "The risk of detriment

relates to both the likelihood and potential magnitude of detriment (in this case, excessive fees for accident

towing services). As noted above, after an accident, drivers are vulnerable, as they are often in shock or

distressed. They are also likely to have limited access to information to make informed decisions because they

have not conducted prior research into accident towing fees and regulations. We consider that this means the

likelihood of detriment is high". 2

NRMA Insurance agrees that, in the absence of a comprehensive framework, consumers who require towing

services as a result of a motor vehicle accident are particularly vulnerable to being taken advantage of by way of

1 S15-s22A TOW TRUCK INDUSTRY ACT 1998 2 Page 28 Chapter 4.1.1- IPART Review of maximum towing fees (light and heavy vehicles)

exorbitant towing fees and charges. In fact it is often only the beginning of what can only be described as a

's~am '. We submit the impact to the consumer extends further than just the potential prejudice of excessive

fees, but rather the consumer may also be impacted by way of detainment of their vehicle for an excessive

period and breach of the consumer's privacy. The protection of the consumer's privacy although not widely

discussed or prominent throughout the discussion paper also presents a high risk of detriment to the consumer.

The notion of privacy will be further discussed later into our submission.

Regulation of Maximum Towing Fees

We note that IPART has specifically sought comment on the need for regulation of maximum fees across light

and heavy vehicle towing and subsequent towing, and how the market would respond if price regulation was

relaxed or removed from these services.

NRMA Insurance is of the strong view that in the absence of comprehensive existing regulations across the

various classes of towing, we would see an increase in exploitative industry behaviour and treatment of

consumers. Put simply it would be a 'free for all'. One way this would occur is by way of demands for exorbitant

and unreasonably high and excessive fees.

In the absence of regulation by way of maximum towing charges consumers would have to rely on existing

'generic' laws to uphold or enforce their rights. In reality these remedies are not practical for consumers who

have suffered detriment or loss from excessive towing fees for a number of reasons.

For example, legislative remedies and consumer law provisions available to consumers to enforce their legal

rights require a long time period to bring about an outcome or resolution. This often makes them impractical in

consumer disputes involving towing and associated services like storage, where consumer's vehicles are often

withheld pursuant to an alleged ' lien'3 until such time as the charges being sought are paid in full.

Similarly, these laws are often complex in nature and consumers may have difficulty understanding them and

the steps and process that must be undertaken in order to rely and seek recourse under them.

Within this context regulation that sets out reasonable maximum towing and related fees that may be charged is

the optimum means to protect consumers. As such, NRMA Insurance does not support any proposal to water

down or remove any existing regulation of the towing industry in NSW.

Expanding the Regulatory Framework

We note IPART has been asked to provide further recommendations for potential regulatory reforms that could

provide savings to the community and to business. Regulatory expansions are important as they extend to

cover towing related services and other associated operators involved in the towing process.

As outlined in our introduction, the existing towing legislation as it applies to licensed tow operators is generally

effective. However it is our experience that current legislation in NSW is inadequate in providing consumer

protection from unacceptable or unlawful behaviour in relation to towing related services that are incurred

following the initial tow of a vehicle. These services are provided by operators who are not licensed tow

operators.

3 A lien is a form of security interest or detainment exercised over an item or property (in this case a vehicle) for the purpose of securing payment of a debt or performance of an obligation.

This includes storage charges typically provided by repairers or holding yard operators as opposed to licensed

tow operators, or by tow truck license holders who also operate smash repairer services. Currently tow truck

licence holders and drivers are required to obtain an 'Authority to Tow' from the owner of the vehicle or the

insurer. (See annexure "A") this authority requests private information from the insured which currently is being

handed over to repairers and/or other associated operators.

Comparing current NSW and VIC tow truck industry legislation

By way of comparison, The Accident Towing Services Act 2007 ("The Victorian Act"), The NSW Act and The

NSW Regulation all contain provisions relating to requirements for tow trucks, industry accreditation, driver

accreditation and other general towing and related operations.

All three pieces of legislation have provided provisions relating to the towing practices ensuring the industry is

regulated and has adequate measures to ensure an efficient industry. However, the Victorian Act extends

further to provide provisions relating to the storage and repair of the motor vehicle and providing further

protection to the consumer.

Section 1 (a)(v) of the Victorian Act defining the propose provides; providing for matters related to the storage

and repair of motor vehicles. The NSW Act and Regulation does not extend as far and is limited to tow truck

drivers and tow truck licence holders. In addition, the Victorian Act4 provides a periodic review of charges and

rates within the legislation that is not offered by the NSW Act.

Further section 212A-212G of the Victorian Act provide provisions relating to the general review of charges

which the NSW Act and regulation does not.

The following sections within the Victorian Act also provide further protection for the consumer and we strongly

recommend they be adopted in either the NSW AcUNSW Regulation.

1. Section 147 of the Victorian Act provides protection for the consumer by including provisions in relation

to touting and/or soliciting repair work on a motor vehicle. Neither the NSW Act nor the NSW Regulation

provide inclusions relating to touting or soliciting repair work which protects the interest of the

consumer.

2. The Victorian Act provides Sections 153 to 163 which relates to the obligation to repairers and

obligations on repairers in relation to accident towing services in a controlled area.

3. Section 212A (3) of the Victorian Act provides for a periodic review of charges and states; the

Commission must conduct and complete a review and make a recommendation to the Minister under

this section-

( a) not later than 30 June 2014; and

(b) before the expiry of each subsequent period of 4 years commencing from the date that the last

review commenced.

ISSUES - LIMITATIONS OF THE CURRENT LEGISLATION

In NSW the towing industry and towing fees and charges are currently regulated by The Legislative Regime.

The Act and Regulation work together to regulate the conduct and operation of the tow industry, together with

providing guidelines on pricing, storage and other tow related charges.

4 s 212A(3)

The Act as defined in section 6 applies to persons who carry out tow truck operations. As such it has been

interpreted by industry participants that The Act and The Regulation has no application to other motor vehicle

service providers such as smash repairers.

Assuming the overriding purpose of the Legislative Regime is to protect the individual after having a motor

vehicle accident5, by virtue of the Act being limited to tow truck operators means it fails in adequately achieving

that purpose. The Act in its present form does not provide any protection to consumers once a vehicle has been

towed to its required destination or is otherwise no longer in the care and/or control of the tow truck operator.

This is most often seen when the vehicle is delivered by a tow truck operator to a repairer.

There is no existing legislation or regulation in NSW that governs repairers conduct in relation to storage, mark

up and/or other administrative related fees and charges. As a consequence of the existing gap or void in the

Legislative Regime, repairers and other service providers in receipt of vehicles from tow truck operators, will

often demand exorbitant fees well above the maximum charges outlined in The Act. These fees take the form or

marks ups, storage, quoting and other 'administrative' charges. These operators will often then hold consumers

'to ransom' by refusing to release their vehicles until the fees demanded are paid.

The most common form of the said fees is translated in the form of mark ups on towing charges of up to 10 -

20% together with storage fees. These charges would ordinarily be regulated under the Act'. However the

repair industry with the support of the NSW Motor Traders Association (MTA), have adopted a position whereby

they encourage the behaviour of charging a mark-up on towing fees together with storage and other related fees

and charges. This position is based on the Act and Regulation not extending to the repairer industry. Please see

attached at item "B" copy of communication from the NSW Motor Traders Association outlining their position

and understanding of the Legislative Regime.

NRMA Insurance has experienced numerous instances where repairers have demanded exorbitant fees well

above the prescribed rates provided for by the Act. Further, on account of those fees the repairer then purports

to exercise a lien over the vehicle until the sought out fees are paid. The practical impact is the vehicle

belonging to the individual is held at ransom by the repairer (as is commonly the case) until such time as the

fees are paid.

In attempt to illustrate the impact of this behaviour we have included a table of examples as a confidential

appendix. We have also highlighted important matters of privacy, namely the sharing of personal information

between a repairer and tow truck operator without any disclosure or consent from the individual.

5 Page 7 and item 4.1 of the issues paper. 6 See s54 of the Tow Truck Industry Act 1998.

ANNEXURE: ITEM "A"

B Towing authorisation form I

RTA

~ Towing Authorisation Number:

1--------------t DatefTime:

T A20-1 xxxxxxx

Tow Truck Registmtion

TOW TRUCK OPERATOR I DRIVER DETAILS Licensee Nome: Coobct Phone No:

Address:

Tow Truck Driver Name (print): Tow Truck Driver's 1--0ri- .v- e_rs_ C-ertill- .- c-a-te_N_o_: ____________ _, Signature:

2 VEHICLE I OWNER I DRIVER DETAILS Drivers Name: / Phone No:

Drivers Address:

Vehicle owners Name: I Phone No:

Vehicle Owners Address:

Registratioo No: I Make/Model of Vehicle: I Colour:

3 TOWING DETAILS Towed f rom:

Towed To:

Second Tow Destination (only appliC'1ble if desired destination i!lll't accessible at time of first tow):

I (lowed vehicle owner I driver) have been provided with a copy of my rights in respect lo this towing work, and an esti111.1le of the charges for lowing, storage and salvage. I acknowledge that this is the location I want the vehicle towed to and authorise the towing of this vehicle. I olso acknowledge tho! I am required to report this occident to the Police immediately.

owner I Driver Signature: D:itelTime: (-ontl

4 POLICE I AUTHORISED OFFICER AUTHORISATION

POLICE TO PAY 0 I Re:iron tor owner to P3Y tow;

OWNER TO PAY 0 This :iuthorisatioo has been completed :ind :iuthorised by.

POiice I Authorised 01li cer Name I Number (print): LAC:

C:ip;lcity: I LAC Phone No: I Sign:iture:

RETAIN WITH BOOK RTA · TOW TRUCK LICENSING & COMPLIANCE PhoM: (02) 8830 &200 Fax: (02) 8830 &2M E""1Uil: towtrucks@rbnsw.gov ty Mtil: Locl<od b.>a ~0!54. P~mun:ilb NSW 2124

ANNEXURE: ITEM 11811

Mr. Robert Whelan Chief Executive Officer Insurance Council of Austra lia PO Box Rl 832, Royal Exchange Sydney NSW 1225

Dear Mr. Whelan,

Thursday 20111 September, 2012

Re: Storage Fees and Charges for the Motor Vehicle Repair Industry

On behalf of its members, MT A NSW is raising the issue of a fair and reasonable recovery for business costs associated with storage fees and charges that repairers currently absorb on behalf of their Insurance customers. Currently, there is a misleading perception amongst the repair industry that they are not entitled to any form of recovery for this type of legitimate business expense.

MT A is advising our members that storage fees and charges are, and have been a long standing recognised business practices for parking arrangements based upon the services provided for.

An example of this is overnight parking rates, for instance, Sydney airport where the cmTent reasonable and legitimate fee for all day and overnight parking is $55.00 per day.

MTA NSW also brings to the attention ofICA and its members, that legitimate and reasonable costs for storage is supported by the Motor Vehicle Insurance and Repair Industry Code of Conduct.

The MVIRI Code of Conduct states the following:

4. Insurer and Repairer Relations

4.2 (e) not remove a motor vehicle from a Repairer's premises without notifying the Repairer in advance and compensating the Repairer for any legitimate or reasonable towing or storage costs associated with the vehicle and in compliance with relevant legislation.

MTA NSW is advising the Insurance Council of Australia that its members will be recovering a fair and reasonable amount for these outstanding costs, as provided for above. We also note that there are numerous examples of market rate comparisons that each business may use to dete1mine their own reasonable charges.

MT A NSW will continue to work towards the sustainability of the motor body repair industry for all stakeholders and for the betterment of the general public ofNSW.

Kind Regards,

Chief Executive Officer Motor Traders' Association ofNSW

Motor Traders' Association - Voice of the Motor Industry

Mr. Robert Whelan Chief Executive Officer Insurance Council of Australia PO Box Rl832, Royal Exchange Sydney NSW 1225

Dear Mr. Whelan, Monday 22nd November, 2010

Re: Towing Fees and Charges for the Motor Vehicle Repair Industry

MT A NSW, on behalf of its members, is raising the issue of a fair and reasonable recovery for business costs associated with towing fees and charges that repairers on behalf of their Insurance customers are obliged to pay. Currently, there is a misleading perception amongst the repair industry that they are not entitled to any fonn of recovery for the outlay of expenses for towing fees and charges that only apply to a towing operator.

MT A is advising our members that the towing fees and charges that are applicable only apply to a licensed tow truck operator (refer to the below legislation):

APPROVED SUMMARY of the TOW TRUCK INDUSTRY ACT 1998 & TOW TRUCK INDUSTRY REGULATION 2008: Operators Licence Conditions Section 20 Licence conditions

(a) the licensee must not charge a fee for the towing, salvage or storage of motor vehicles that exceeds any applicable maximum fees determined by the RTA.

MT A NSW is advising the Insurance Council of Australia that its members will be recovering a fair and reasonable amount for these outstanding costs. This is based upon current Industry recovery costs for sublet items and recognises that these recovery costs are currently between 10% and 20% of the cost of the service or goods excluding GST.

The MVIRI Code of Conduct also states the following: 4. Insurer and Repairer Relations (4.2 Insurers) In their dealings with Repairers in relation to repair work, Insurers will: (a) provide Repairers with relevant details relating to the claim that the Repairer requires in order to prepare an estimate or undertake the repair including details of sublet repairs and payments by custo111ers including any excess and contributions; (e) not remove a motor vehicle from a Repairer's premises without notifying the Repairer in advance and compensating the Repairer/or any legiti111ate or reasonable towing or storage costs associated with the vehicle and in compliance with relevant legislation.

MT A NSW will continue to work towards the sustainability of the motor body repair industry for all stakeholders and for the betterment of the general public ofNSW.

Regards,

James McCall Chief Executive Officer Motor Traders' Association ofNSW

Motor Traders ' Association - Voice of the Motor Industry

43 - 5 1 Bnslmno Street Darlinghursl Locked Bag 50 1?. Dnrlinghursl NSW 2010

P: 02 9213 42'..?2 F: 02 9212 6889 Website: W\Ww',rntans .. v.com .nu

ABN: 63 000 008 088

.•

-~~· ~l}> I Fair ~ Trading

New laws commence for smash repair industry

23 March 2007

NSW Fair Trading Minister, Diane Beamer, today announced that laws aimed at making the smash repair industry clearer and fairer for repairers, insurers and consumers will come into effect at the end of this month.

Ms Beamer said that a Mandatory Code of Conduct, based on a national Voluntary Code, becomes law in NSW from 30 March .

"The Fair Trading (General) Amendment (Motor Vehicle and Insurance Repair Industries) Regulation 2006 enacts t his new Mandatory Code which will provide for fair, timely and transparent conduct between insurers and repairers," Ms Beamer said.

"The Code will provide a new direction in the way business is done and disputes are settled between smash repairers and insurers.

"Consumers wi ll benefit from better disclosure, improved service from insurers and repairers and repairs that are done in the most cost effective but safe way."

The mandatory Code came about as a result of the potentia lly industry crippling dispute between the Motor Traders Association and IAG- NRMA Insurance in 2006 regarding the tendering of smash repair business by t he insurer.

Ms Beamer said making the Code mandatory for all insurers and repairers provides clear rules for fair and transparent business arrangements between them, ultimately ensuring a better deal for consumers."

The Code provides for:

• up front disclosure on whether insurance pol icies provide choice of repairer.

• a transparent and independent external dispute resolution mechanism;

• the requirement for full disclosure in preferred smash repairer arrangements;

• retention of preferred smash repair status upon the sale of a business;

• the requirement for fu ll disclosure in quoting for work and payment;

• standards for the allocation of responsibility for repair warranties ; and

"While we expect all parties to adhere to the Code, strong penalties have also been introduced should non-compliance be encountered," Ms Beamer said.

"The penalties including court injunctions, orders to disclose information, trading prohibition orders, civil action for damages and court orders to compensate for damage.

"These penalties will on ly be considered as a last resort when both parties have exhausted all the dispute settling provisions or if one party refuses to participate," Ms Beamer said.

http://www. fai rtradi ng. nsw.gov .au/ About_us/N ews_and_ events/Media_releases/2007 _med ia_r

eleases/20070323newlawscommenceforsmashrepairindustry.html