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Choosing the best marketing strategy to attract more cars to your shop requires endless trial and error –not to mention that experimenting with different promotional schemes to increase sales volume can be costly. On top of that, it's often difficult to relate the impact of your advertising efforts and dollars to an actual increase in sales.

There is, however, one surefire way to increase your shop's sales: Become part of an insurance company's direct-referral or direct-repair program (DRP).

A DRP is a "plug and play" method of attracting customers –a body shop is merely "turned-on" to receive claim/repair assignments. As part of a DRP network, insurers perform the preliminary marketing work for the body shop.

Insurers sell their claims customers on the DRP option with a promise of quality repairs and customer services. When your body shop is part of a referral network, the insurance company performs advertising and promotion for you. They identify, qualify or prescreen, and pre-sell vehicle owners who need repair services and then direct those customers to your shop.

As a member of an insurance company's DRP network, you don't need expensive advertising that might be missing the mark. Instead, your shop is able to enjoy precision-guided customer tracking systems that score direct hits with promotional information at the exact time a customer is demanding autobody services.

Not including restoration work, autobody repair services are "event driven." A sudden or unexpected event like an auto accident or hailstorm drives the vehicle owner to seek out and purchase autobody repair services. Through the claims-reporting process, insurance companies are able to immediately identify customers in need of autobody repair services.

For body shops, often the hardest part of participating in a DRP is recognizing and treating the insurance company as a customer. As a DRP shop, your operation becomes a seller or supplier of DRP services to insurance companies.

As far as figuring out how to become a part of these referral networks, you have to understand that it's not just a sales pitch that gets you onto DRPs. Instead, it's making sure your shop is properly prepared to become a supplier of DRP services.

To position your body shop with an insurance company as a qualified network candidate and to then gain inclusion, you need to understand the insurer you're pitching and then use that knowledge to illustrate your shop's value to the insurer. You don't want to beg to be accepted as a DRP service provider. You want insurers to come to you. And the better your operation, the greater your negotiating power.

Before trying to sell your shop to an insurer, you should first have a good understanding of why most insurers are using DRPs. Know your prospect's motivations before pitching them so you know you can meet their needs. For example, what are this insurer's goals and objectives for the DRP? How does the program work? What sort of participation criteria do they have and can you meet it?

Understanding the answers to these questions will help you to decide if DRPs are right for your shop and to get onboard a DRP program, if that's what you choose to do.

Why Insurers Have DRPs
When it comes to a business' goals and objectives, insurance companies are no different than body shops or any other for-profit entity. The goal of business is to make money and maintain a competitive position. And because money is profits, more sales and lower costs drive profits. Higher sales volume results from delivering more and more services and products, increasing prices –or both.

Competitive positioning is being different and/or better than competitors. Distinctive or superior products or services, more efficient and effective operating systems, unique operating systems, and broader or better access to customers are some factors to consider when measuring competitive position. Insurance companies have DRP programs for one or more of these reasons. And the DRP settlement option enhances the claims-service product by guiding customers through the autobody repair process and assuring them that their car will be repaired in a quality manner.

According to John Kent, senior claims analyst for State Farm Insurance Company, policyholder retention ratios are higher for those claims customers who choose the Service First and Select Service programs as a claims settlement option, compared to policyholders who choose traditional methods to settle claims.

Kent says State Farm sees improved customer satisfaction as the primary company benefit to having programs like Service First and Select Service. State Farm's expectations of the two programs are improving customer satisfaction, claim-repair efficiency and claim-repair quality. When pressed, Kent admits that reducing claims administration costs is also a benefit.

Although Kent wouldn't admit that lowering repair costs was an objective of their two programs, I'll go out on limb here and say that gaining more control over repair costs is the No. 1 objective of DRP-type programs. Whether they admit it or not, insurance companies expect DRP shops to write lower average repair tickets than non-DRP settlement options (i.e. field adjusters). Insurers also expect their DRP programs to deliver higher customer satisfaction and lower costs. A secondary consideration is the insurance company's competitive position –they have to compete with other auto insurance carriers that have DRPs.

Will Your Shop Pass the Physical?
To participate in any insurer's DRP, your shop must meet the basic physical (building, equipment, etc.) and operational (service offering and business processes) requirements. Some requirements include detailed lists of equipment and detailed applications that include specifics about physical shop spaces, number of employees, training and certification, and the like. Any shop owner who expects his shop to be recommended by anyone as a preferred provider should make sure his facilities, staff and equipment meet high autobody industry standards.

I don't need to state the obvious or go into detail dictating how your shop should be constructed, equipped and operated to meet the highest repair industry and regulatory standards for excellence, safety, customer satisfaction and employee training. If your operation meets or exceeds our own self-derived industry standards (provided you don't have really low standards), I guarantee your shop will exceed any insurance company's repair network eligibility criteria.

As for today's computer demands, a powerful network server is a must. A top-of-the-line small-business computer server with pre-loaded operating and office software normally costs between $5k and $7k with financing and leasing options usually available. Your server must also have a tape drive backup and three or four hard drives for added redundancy in case of catastrophic system failure. And, of course, your IT needs to be Internet capable with a high-speed connection.

IT demands on body shops will continue to increase for the foreseeable future. Best-in-class shops need to integrate Internet communications with multiple estimating systems, management and bookkeeping programs, digital imaging and storage capability for large amounts of historical data.

Prepare for Shop Performance & Process Changes
While DRP requirements for what a shop should look like should be relatively easy to meet, the harder requirements are understanding if your shop will be able to effectively and economically deliver higher levels of performance (service or output) and add new operating processes and systems as a provider of DRP services.

To help you know what to expect, insurers usually focus their attention on the following basic shop performance measures:

• Assignment to estimate time: response time to new repair or "inspect only" assignments.

 

 

• Repair pricing: average size of estimate compared to rest of market; supplement frequency and average size of supplements; parts usage; and P-page usage and estimate line-item "add-ons."

 

 

• Accurate data entry: fill in all the blanks on EDI claim-repair assignments (electronic assignments transmitted to shop and subsequently uploaded to insurance company).

 

 

• Cycle time: in-shop to delivery times based on size of damage area or driveable or not-driveable.

 

 

• Frictionless relationship: with customers and insurance company personnel; conflict resolution; good communications; and understands customer needs.

For shops not having DRP experience, it's likely that a number of your processes will have to be changed or improved to successfully meet insurance company performance requirements. Because you may have to expend more resources (people, time and money) to implement process changes and improvements, it's important to understand the potential costs you may have to incur to participate.

Here's a list of some likely process areas where your improvement efforts should focus:

• Developing a formal accounts receivable process (watch the $$s).

 

 

• Responding to customer satisfaction surveys.

 

 

• Honing estimate and supplement writing processes to meet each insurance company's interpretation or philosophy toward damage description and damage line itemization and to meet each insurance company's non-damage-related data input requirements.

 

 

• Implementing processes to provide exhaustive searches for correct aftermarket or salvage parts.

 

 

• Developing a process for using new suppliers (who may not be local, reliable or convenient).

 

 

• Implementing processes for identifying, returning, crediting and repairing defective A/M or salvage parts.

 

 

• Developing more customer contact processes.

 

 

• Developing more insurance claims-adjuster-like processes.

 

 

• Having additional estimating systems and supporting operating software.

 

 

• Having a process to convert and import multiple estimating systems into your shop management system.

 

 

• Understanding digital imaging (usage, transmittal, storage).

 

 

• Understanding Internet-based assignments and R.O. transmittals.

 

 

• Developing a process to maintain claims-assignment records and logs.

 

 

• Developing a new R.O. file-construction process to facilitate insurance audits.

 

 

• Developing a process to facilitate insurance company re-inspections.

 

 

• Instituting new employee training (i.e. I-CAR Gold, ASE, estimating systems).

 

 

• Implementing a customer pickup and delivery process.

 

 

• Developing a rental car assistance process.

Selling Your Shop to Insurers
With a thorough understanding of what's in store as a DRP shop, you're then able to make a decision as to whether the costs of changing or improving your operation makes sense both philosophically and dollar wise. After analyzing costs, if you still think it makes sense to move forward, you have to establish timelines and goals and, most importantly, invest the time and money to execute the plan to get your shop ready to be a supplier of DRP services.

The hard part is getting your operation ready. Believe it or not, selling your shop to an insurance company is the easy part. Start by talking to and pitching the field adjusters and their immediate managers who you have regular contact with. For upper-level managers who don't normally go into the field, just ask the field adjusters who they are and how to contact them. If you don't have any regular contact with a DRP prospect insurance company, ask your body shop association members for names. Once you make that first contact, you then work that individual for more names and phone numbers. And don't become discouraged if your initial inquiries with front-line auto adjusters or auto claims managers are ill-received or you get a response like, "We're not currently looking for any new shops to put on."

Eventually, there will be an opening, especially if your shop meets or exceeds some of the requirements I've outlined. Persistence, repetition and patience will pay off if you have the right service offering.

I always suggest that shops simultaneously "pitch" the front-line auto guys and two to three levels of insurance claims management with nicely laid-out shop resumes and cover letters with formal follow-up calls and meetings. Resumes should be detailed with digital photos and placed in "report covers" like students use when submitting term papers.

Be prepared to continue your selling and relationship building for a year or more. In the grand scheme of things, we know that a year or two goes by quickly. We also know that if this article interests you, you've probably been looking to get on a DRP program for well over a year. Stay focused. I've seen many unlikely body shops become DRP shops by staying on course, making the necessary changes to their shop, nurturing local relationships and keeping their name in front of insurance claims management.

When I was an Allstate adjuster, a body shop that was out of my territory had a reputation for dishonesty and tough negotiations. Management and field staff joked about how this guy was always looking to be an Allstate DRP shop and that it would be a "cold day in hell" before his shop would be included in the repair network. After a year or so, my "territory" changed and this shop became part of my field route. Because this was a busy shop, I found myself there inspecting customer's cars 10 to 20 times a month.

During a monthly meeting, I brought up the question of making this shop a DRP because he did a lot of Allstate work and I never saw any fraud or dishonesty –just the usual hard-nosed negotiating for more labor and parts and estimate add-ons. According to my boss and fellow co-workers, the shop owner had allegedly gotten busted in the past for repairing parts that were paid to be replaced and for substituting aftermarket for OEM parts. Although none of them had any first-hand proof of the circumstances and facts, a black mark was always associated with this shop.

Shortly thereafter, with my recommendation, this shop was put on the DRP program and continues to be one of the best performers in the local repair network.

The Future of DRPs
In my opinion, DRPs are here to stay. The only thing that could possibly change this is an unforeseen regulatory action by government. And I bet my bottom dollar that we won't see widespread anti-DRP regulations because the services these programs deliver are demanded by vehicle owners.

So what will future DRPs look like? Well, we already have a glimpse of the possibilities by looking at current DRP arrangements insurers have with consolidators and multi-store body shop operations. A few examples are exclusive supplier agreements (only repairing one insurer's customer cars) like those between Allstate and Sterling, and programs like State Farm's Select Service with body shops that must provide vehicle owners with high service offerings (pickup and delivery, guaranteed delivery dates, rental cars, etc.).

There's also the Progressive insurance model that's dabbling with a kind of central inspection station where claims customers have their vehicle damages appraised: The vehicle is dropped-off, the customer is put into a rental car, and the damaged car is subsequently dispatched and transported to the next available DRP network repair shop. When repairs are completed, the car is shipped back to the insurance company's central station for customer delivery. The customer never interacts with the body shop.

Close to the Progressive model and what I think is the best example of what the future may hold for DRPs is a Japanese direct-repair model where a body shop operates as a repair factory. For example, a Japanese autobody shop performs repairs exclusively for a new car dealership. The body shop operates in an assembly-line fashion with timed repair stations that force targeted repair-production cycle times. The dealership resources manage typical front-end body shop processes, so the shop never has to deal with customers or insurance companies. The dealership delivers the customer's car to the shop for repairs and includes all parts and the repair order.

I think that some form of this model will eventually evolve as both body shops and insurers are increasingly pressured to reduce repair costs and lower cycle times. As vehicle owners continue to demand more and expensive customer services, body shop economics will only be able devote their limited resources toward enhancing the production end (repair) of the business. Other non-body shop entities (either insurers or third-party providers) will be able to perform the customer service end cheaper, faster and better than shops.

Ultimately, however, the economy, consumers and information technology will determine the "when" and "what" of future DRP models. Regardless of the timing and path taken, all future DRP models will result in closer business-to-business relationships with claims-service and referral sources, which could either be insurance companies or independent third-party administrators who are positioned somewhere in between insurers and body shops in the customer's claim-repair or service-supply chain.

As DRP programs continue to grow, consolidators, multi-store operations and mega-stores are also growing and threatening the existence of small, independent Mom-and-Pop operations. But take heart you who are vehement about staying independent –my neighborhood hardware store has doubled in size and sales as Home Depot and Lowes have saturated my market with new mega-stores. The proprietor of the hardware store, who I've known for years, told me that the popularity of Home Depot and Lowes seems to have somehow fueled his store growth. He says his smaller operation can deliver more personalized service and thus command higher prices.

Personally, I believe there's room in the marketplace for both independent and DRP shops Ð and that it's also possible to ride the middle road by having part of your customer base come from DRPs and another part from non-DRP sources.

Before deciding whether to expend the resources for your shop to participate in DRPs, carefully consider the points I've made here. Also consider this:

"Our customers are always right." "We aim to please."
As part of a DRP network, you'll have to apply these customer clichŽs to insurance companies. And for some of you, catering to insurance companies and their staffs as you do to vehicle owners may be too frightening of a thought. If that's the case, attaining and maintaining profitable DRP work will likely be more of a headache for you than it's worth.

Writer Jake Snyder is the principle of CR Management Systems, a consulting, training and business-development company. He's been in the industry for more than 15 years, has managed a collision repair facility, held various claims positions with Allstate Insurance Company, and performed consulting and product development for Body Shop Video's, Business Development Group. Snyder can be contacted at (732) 886-5340 or at jake.r.snyder@att.net.

The Politics of DRPS
Large national insurers and dominant regional insurers typically oversee and manage their DRP network shops through local claims offices and associated staff. Smaller insurers or those lacking significant policyholder density employ remote or indirect methods to maintain DRP shop networks. In the absence of local staff, smaller insurers will commonly outsource network oversight and shop re-inspections to independent adjusters.

Local politics always come into play in gaining acceptance to and maintaining a DRP relationship. So, as a general rule, regardless of insurance company size, if you wish your shop to be included in more DRP networks, I recommend staying friendly with all insurance types (staff or independent adjusters). Like anyone in sales will tell you, building and maintaining customer relationships is a key part of the selling game.

Becoming Auto-Claims Savvy
As a DRP shop, front-office personnel have to be auto-claims savvy to assist customers and deliver claims-settlement services normally delivered by insurance company staff. In addition to writing estimates and managing customers, front-office staff must also service and adjust auto physical damage claims. Don't take it for granted that your staff has a perfect handle on insurance claims terminologies or understanding auto coverages or even simple claims investigation skills needed for DRP repair assignments (i.e. knowing the difference between old and new damage, what damages are covered and not covered, when more than a single claim exists).

With zero training on auto policy coverages and insurance claims handling (unless your staff comes from an insurance claims background), your staff immediately will be expected by insurance companies to begin settling auto claims once you're "turned on" to the incoming flow of DRP assignments.

Prepare your staff to learn about auto claims. Review with your staff basic auto claims, especially with entry-level reception or customer greeter employees. This isn't as hard as it sounds, but make sure you don't take it for granted that everyone has the knowledge down pat. Proper handling of auto claims is serious business and must comply with your state's insurance laws. When I was managing a shop, I found it helpful to create resource sheets or binders with a basic glossary of terms and brief explanations of auto coverages. As a consultant, I've created little laminated cheat sheets for receptionist types to keep on their desks or posted on a nearby wall.

If you or your lead estimator is unsure about a claims process or coverage circumstance, you'll always be able to ask your insurance company DRP liaison or coordinator. The important thing is to document these processes and rules for future reference and training. (I always wondered why insurers don't provide basic auto policy and auto-claims handling training to their DRP shops.)