Carrying giant banners and signs that read "No Free Choice" and "Poor Quality Repairs," the crowd of mostly smash repair workers expressed their rage to passing motorists and pedestrians over the system, which is expected to drive some members of the industry out of business. A small police presence was on hand to monitor the group, which numbered about 300 people at 11am.
Under the new system, the insurer will seek quotes from major metropolitan smash repairers in NSW by posting photos of vehicle damage on a Web site.
Protestors handed out leaflets detailing the reasons behind their actions to passers-by.
"NRMA Insurance and their parent company Insurance Australia Group (IAG) are forcing smash repairers to provide quotes for damaged vehicles from images on the Web. They won't listen to our concerns!," the leaflets said.
The repairers claim the quality of smash repairs is set to drop as a result of the new system, as it is "impossible" to assess the full damage sustained to a vehicle when examining a digital image on the Internet.
However, NRMA Insurance defended the system, saying industry leaders were already moving in that direction.
But NRMA acknowledged that some smash repairers might have to close if they cannot compete with the new technology.
"We're interested in a vibrant industry, but we can't maintain a livelihood for all of them because there's just too many," said NRMA Insurance chief executive Rick Jackson.
The Motor Traders' Association (MTA) claimed the system would force repairers to underquote in order to compete and would probably send some repairers out of business.
Jackson said the state's car repair industry was overcrowded and the best smash repairers were already using new technologies to try to get ahead.
"The industry is under huge competitive pressure," he said.
"You've got some repairers who are adopting new technologies, using computerisation and bigger shops who are just able to do the work to a higher standard at a better price than a small repairer who's struggling with technology.
"In a competitive market, over time you find more and more work is being won by the better repairers. And you don't hear from those because they've been getting on with it."
He said the Web-based tender system had been in place in Western Australia, South Australia and Queensland for nearly three years, although NRMA Insurance has far fewer customers in those states than in NSW.
"It works brilliantly. Customers love it. We've actually got repairers that love it," Jackson said.