By Ron Arnold, founder 11eight

The Australian smash repair sector has undergone a radical transformation over the past three decades. What was once an oversupplied, fragmented industry sustained by older business models has become leaner, more professional – but also more fragile.

We now face the real possibility of repair undersupply. Data cited by the Insurance Council of Australia, based on insurers’ waiting time information, indicates the average time to get a car repaired increased from 38.57 days in 2019 to 61.25 days in 2024. While global parts shortages have played a role, it’s clear that structural capacity constraints in the domestic repair industry are now a critical factor.

This shift – from oversupply to undersupply – is not accidental. It has been shaped, in large part, by the insurance industry itself.

The legacy of oversupply

In 1992, Australia had about 6700 smash repair businesses. By 2004, that number had dropped to 5000, and today industry estimates suggest it may be in the low- to mid-3000s.

For many years, the sector operated with chronic oversupply. Declining accident rates, safer vehicles and improved road infrastructure reduced demand for smash repairs, but the number of repairers remained high. Many shops remained viable not through scale, throughput or disciplined cost-to-serve models, but by capturing accident work through tow truck ownership, inducements or local arrangements.

The traditional repair model relied less on proactive marketing or customer service and more on controlling the point of accident capture. Typically, where the car was quoted, it was repaired. That structure limited competitive tension in repair pricing. Many shops performed fewer than 10 jobs per week. Nonetheless, a large number of small operators remained afloat in a market where insurer oversight was limited and relatively passive, allowing repair costs to exceed what would likely be delivered under more actively managed and competitive conditions.

At the time, many insurers were government-owned entities or mutuals. They were not heavily focused on controlling claims costs. Motor insurance was often considered an accommodation product. With investment income covering underwriting losses, there was less incentive to challenge repair practices or reshape supply economics.

Industry transformation: from mutuals to market discipline

The 1990s and early 2000s brought fundamental change. Privatisation, demutualisation and corporatisation reshaped the insurance landscape. GIO, SGIC and SGIO were sold. NRMA Insurance demutualised and later became part of IAG. Suncorp was privatised. Mutuals were replaced by listed entities with commercial imperatives.

Motor insurance shifted from the periphery to the core of strategic focus. Underwriting rigour, operational efficiency and claims cost control became paramount. Commercial discipline – and shareholder accountability – transformed how insurers operated.

AAMI was an early mover in this shift and identified the repair cost opportunity some years earlier. With its two-quote model, AAMI brought new levels of discipline to claims management, embedding pricing rigour, standardised processes and greater consistency across the repair experience. It developed an efficient operating model that scaled nationally and delivered better outcomes in cost and customer service. It underpinned strong growth.

Others followed suit. Preferred repairer networks were introduced. Repair quality benchmarks were enforced. Lifetime guarantees became common. Technology was used to monitor, assess and streamline repairs.

By the mid-2000s, AAMI had further evolved the model, focusing on partnerships with repairers that guaranteed volume in return for better repair cost, quality and timeliness outcomes. Insurers were no longer passive funders. They became active managers of the repair ecosystem.

The efficiency gains – and their cost

This transformation delivered clear benefits. Cost control tightened and recorded repair quality remained high. Customer expectations were met more consistently. Inefficient or low-capability repairers exited the industry.

However, this came with structural consequences. The consolidation of work into fewer, high-performing shops increased efficiency but also reduced market capacity. As barriers to entry rose and investment requirements grew, it became harder for new entrants to replace those exiting.

The industry also aged. The average age of shop owners increased. Many small operators faced zoning pressures or high compliance costs, or were unable to attract successors. Uncertainty about insurer alignment and access to workflow discouraged reinvestment.

The result: a sector that once had ample capacity has become tighter and less flexible.

Undersupply: a new phase of fragility

Today, the industry is at a turning point. There are growing signs that what was once a chronic oversupply issue has become a structural undersupply problem.

Workforce shortages are acute. Recent Motor Trades Association of Australia/Deloitte research finds that only 26% of panelbeater vacancies, 29% of vehicle painter vacancies and 38% of motor mechanic vacancies are being filled, with nearly half of motor trade vacancies being met through business-sponsored visas. Apprenticeship numbers are falling short of replacement needs, and experienced technicians are retiring. The talent pipeline is constrained and capacity is not keeping up.

Meanwhile, repair complexity has increased significantly. Advanced driver assistance systems, new materials and evolving safety standards require costly investment in equipment and training. Occupational health and safety and environmental compliance add to the burden. For many, reinvestment is simply not viable.

The impacts are already visible. The average repair time has increased by about 58% since 2019, and many customers are struggling to get bookings – especially in regional areas or during high-claim periods. Cost pressures are rising across the board.

Despite the best intentions of insurer-driven transformation, the current system risks no longer being optimised for cost and timely outcomes. Undersupply is now driving up costs, delaying repairs and reducing customer satisfaction.

Insurers are still the system architects

One thing remains true: insurers fund most smash repairs in Australia. They remain the dominant economic force in the sector. As such, insurers have played – and continue to play – the central role in shaping how the market functions.

Panel arrangements, claims models, pricing systems and volume commitments all influence who survives and who invests. In seeking efficiency, insurers also shape risk, particularly the risk of capacity shortfall.

That makes this not just a repair sector issue but an insurance industry issue.

The path forward: balancing efficiency with capacity

Insurers and entrepreneurial partner-oriented repairers have driven enormous progress in raising standards, improving cost control and professionalising the repair sector. But the system now risks being too lean.

The future requires a new phase of collaboration and foresight. That includes:

• Broader, more resilient repair networks, with the capacity to absorb spikes.
• Greater investment in workforce development, including apprenticeships and upskilling.
• Repair models that reward capability and sustainability, not just price.
• Reassessing panel arrangements to ensure geographic coverage and surge flexibility.

The insurance industry must take action to support a sustainable, future-ready repair ecosystem. The next stage of leadership will not be defined by efficiency alone, but by balance: cost and capacity, quality and coverage, speed and resilience.

A robust, scalable smash repair network is no longer just an operational need. It is a strategic asset for the entire insurance value chain. The upside is enormous. With motor claims costs accounting for about 70c-80c in every premium dollar, the insurer that works it out will have an enormous advantage in the market.