The insurer is taking the New South Wales Motor Traders Association (MTA) and the Country North Vehicle Repairers Association (CNVRA) to the Federal Court, claiming both the MTA and CNVRA have launched a "public misinformation campaign" against the insurer.

NRMA Insurance launched an Internet-based smash repair tender system for cars earlier this year, which led the MTA to state the system would force repairers to underquote on smash repairs to compete, and force trades people to use inferior parts to keep costs down.

NRMA Insurance head of claims and assessing, David Brown, said the court will be asked to order both organizations to stop make 'misleading' statements and retract earlier statements the insurer states are false.

The new Internet-based tender system works by displaying photos on an Internet site of vehicle damage and assessment on which smash repairers then submit quotes. The insurer then chooses the company to do the work. Customers who want the right to choose their own repairer must pay a surcharge above the standard premium, which allows only NRMA Insurance to determine the repairer.

Some smash repairers consider this system will lead to unsafe work practices and dissolve their customer base and some have refused to join, or rejoin the system.