Data mining is a hot topic these days. More and more collision repairers are worrying that their data is being sold to outside entities without their consent, and is being used against them to determine market-controlling statistics that they feel are not valid.
The information providers (CCC, Mitchell, Audatex) argue that their license agreements spell everything out and guarantee confidentiality. But some leaders on the collision repair side argue that repairers don’t actually know what they’re consenting to when they sign those agreements. Plus, they say repairers are not given the option to opt-out completely or at least select what data gets shared and what doesn’t. They argue it’s “all or nothing, take it or leave it.”
One name that’s brought up a lot is CARFAX. What happens when a collision repair facility’s customer finds out their collision damage has been reported to CARFAX when they didn’t consent to it? They blame the body shop, and the shop may lose a loyal customer.
Cory Liss, owner of Liss CARSTAR Collision in Crown Point, Ind., who has been outspoken on the data mining issue on a national level, says one information provider’s data policy allows for the sharing of a shop’s data with “vehicle history report companies.” The policy reads: In addition to aggregate industry reporting, [information provider] may from time to time provide a limited amount of data related to the damage and repair costs or total loss status of specifically identified vehicles to law enforcement, fraud detection and prevention organizations, and vehicle history report companies; provided, however, that such data is never disclosed in connection with any information which could be used to identify the vehicle owner, a collision repair facility, or an insurance company.
“We all know that the customer will remember who repaired their vehicle,” says Liss.
Let’s take a look at CARFAX and how it works.
When collision repairers hear the term “information provider,” they typically think of one or all of the three leading estimating programs which give us data on parts, part numbers, graphics and labor times. What they don’t think of (or are unconcerned with) is CARFAX, the leading provider of automotive data geared toward the consumer.
CARFAX’s vehicle history reports (VHR) offer public access to mileage, titles, registration and, in many cases, dealer services such as oil changes, state inspection and warranty service. What they don’t cover is what most consumers assume is included in a VHR: collision damage history.
Knowledge is power, which is why building databases equals strength. Oftentimes, a bad CARFAX or a clean CARFAX can make the difference between a sale or not. Information will determine revenue for someone, be it negative or positive.
Damage blocks a lot of economic avenues a consumer could take. For example, any car with structural or frame damage (which, according to some legal sources, can cover a wide range of conditions) cannot be factory certified. While there are still some car dealers who sell vehicles with this damage and defend their actions by claiming they didn’t know the car had its quarter rear body panel replaced and its floor pulled, it could be construed as a positive for the shop that repaired the car. However, you just can’t un-virgin a car.
In vehicles that have a history of collision damage or any other deleterious event, such as a theft in which the vehicle is recovered intact by the authorities but with only minor damage, courts have agreed that the value is nonetheless affected. Because it has a salvage title, that status will impact a vehicle’s value by as much as 50 percent.
Consider that collision repairs are supposed to make a car appear as it did pre-accident. Most consumers can’t tell the difference between a car that was damaged and repaired, and one that was never in an accident. In fact, the worst kind of collision damage and/or repair work can be entirely overlooked by an untrained eye – the better the repair, the greater chance of deception. While the term deception may not sit well with most repairers, it is, after all, the ultimate goal of collision repair.
Consumer of Today
Consumers today are more concerned than ever with collision damage. I know this from firsthand experience with my post-repair inspection (PRI) business.
In today’s digital age, a consumer doesn’t need to be told there is a loss of value associated with the disclosure of collision damage history. It is intuitive for them to reach that conclusion through their own resources. And while not all body shop operators are on board with the concept of diminished value (due to an increase in the number of insurance relationships), the number of them in denial is decreasing.
The question one might ask is, where does the data come from? Most consumers wrongly assume that an insurance claim will automatically appear on a VHR. Insurers have always coveted this data and held it close to their vests because they would possibly be on the hook for the loss which results from its disclosure. All too often, I come across a car which has clear indications of collision damage and repair, yet had a clean CARFAX.
One source of data for price guides like Kelley Blue Book, NADA, Black Book and others is auto auctions. Using the wholesale numbers, their editors calculate the retail values very well and in various conditions.
One of the rules in one of the more well-known auto auctions is that you must disclose if more than two panels have been refinished, to say nothing of structural and/or frame damage. Also, there is no distinction made with respect to repaired or unrepaired structural damage, although the numbers of vehicles which have circumvented the rules at the sale are legion.
Larry Gamache, communications director for CARFAX, a wholly owned subsidiary of R.L. Polk & Co., said there are actually body shops that furnish his company with repair data.
“Any body shop can participate, and they can report the repairs they perform to CARFAX on damaged vehicles,” said Gamache.
When asked why a body shop would voluntarily share their customers’ vehicle data, Gamache responded, “One, they can document the repair, helping owners retain residual value of the vehicle, and two, they can market their business on the CARFAX Vehicle History Report (VHR), promoting the idea that quality repairs help increase the resale value of a vehicle and help keep the highway safer.”
While the idea that the appearance of a vehicle on a CARFAX report can increase the value of a car may be questionable, Gamache contends the shops that report to CARFAX employ certified techs. What kind of certification he didn’t specify.
“Those vehicles will be worth more in the marketplace than those with undocumented repairs,” he said. “A car with unrepaired damage reported on a CARFAX report is going to be worth less than a car that has documented repairs, especially by a qualified auto body [shop].”
CARFAX guarantees that they include information on a VHR with their buyback guarantee up to 110 percent of Kelley Blue Book value. But a closer look at the fine print on the report revealed a condition of the buyback guarantee: None of these major title problems were reported by a state Department of Motor Vehicles (DMV). If you find that any of these title problems were reported by a DMV and not included in this report, CARFAX will buy this vehicle back.
It was not that long ago when CARFAX was targeted by attorneys for withholding collision damage data. In 2004, a class action was filed against them for concealing their knowledge about collision damage. But in 2007, a settlement was reached which would have given class members $20 each and attorneys $566 million. An Ohio appeals court overturned that settlement on the basis that consumers got the short end of the deal.
Clarence Ditlow, the well-known consumer advocate and former head of the Center for Auto Safety in Washington D.C., said that kind of lopsided settlement was bad for consumers and unjustly enriched the law profession.
Conversely, the judge who handed down the verdict said virtually the opposite and found it to be “equitable.” Judge Logan said he found no evidence of collusion between the plaintiff’s lawyers and CARFAX and that the coupons being offered to consumers were “not the typical promotional gimmicks frowned upon by courts.”
Instead, the coupons amounted to more than a refund of the original CARFAX purchase price, Logan said. On the other hand, a CARFAX VHR is reliable in terms of title branding, lemon law history, registrations and the number of registered owners, and auction sales, including dealerships.
Get a Clue
If one wanted to access the real data history of a car, one would go to the C.L.U.E. Report, which is an acronym for Comprehensive Loss Underwriting Exchange, where all loss data is harvested and shared with insurers. The C.L.U.E. Report is a product of a real granddaddy in the data collection realm, Lexis Nexis.
There was a time when LexisNexis, C.L.U.E.’s parent company, only tracked this data for government and select businesses, i.e. insurance companies, and the database was only accessible by government, select businesses and insurance companies. Now, anyone can track the VIN to their auto in the C.L.U.E. Report.
Most repairers feel that shops are generally against their partners feeding their customers’ vehicle data to a consumer database and using their own shop data to control markets. But Cory Liss feels there is not much choice in the matter right now, and that, in his opinion, is a problem.
“None of the providers will move to a format that allows me to monitor what information is shared,” said Liss. “Right now, it’s a free-for-all and pretty scary.”
“My biggest problem is that they do not give us an option, it is ‘take it or leave it,’” Liss continued. “Even worse, the legal documents I have to sign make me the one responsible for sharing everything. When did an information provider decide they have the right to dictate my business and with whom I deal? They’re an information provider only and should not be telling me to take it or leave it if I want to deal with an insurer.
“All of these companies compile and share many areas of our data yet will not provide it to us in most cases but sure seem willing to use it to help insurers. Information Provider A promotes helping insurers to lower their cost of claims by analyzing data. Information Provider B sends me a report comparing me to the industry. The problem is that it includes the whole metro Chicago area, which is useless as you’re comparing apples to oranges. And they claim it is my market area and will help me.”
Responding to Liss’s concerns, Jim Dickens, senior vice president of the Automotive Services Group at CCC, said, “We appreciate it when customers take time to offer feedback, and we do use customer input for product and policy enhancements and future product development. We will look into the Chicago metro area to see how we have that segmented and review if there are opportunities to make improvements.
“As a matter of clarity, I’d also like to offer some information into how CCC creates its benchmark reports. CCC offers repair customers access to industry benchmark reports that work to provide individual shops with a snapshot view of how repairers in their local market are performing across popular KPIs. CCC provides this information using data from its vast data warehouse and provides all information contained in those reports in aggregate so a single shop cannot be identified. I encourage readers to review our data policy for more information. We worked very carefully in creating a policy that serves the interests of the entire industry, while ensuring that we protect individual shop and carrier information. Collision repairers can see the complete CCC data policy by visiting our website at www.cccis.com.”
Still, Liss does not see the value of the data aggregation and believes it is being used against shop owners
“Information providers will compile and share pretty much every number of our business in aggregate form,” he says. “What right do they have to do that? It is no one’s business but my own and it will be used against us. One information provider says they will not share the six items listed in their data policy, which somewhat says they will not share shop profit numbers, etc. The problem is that it is very vague and, given a few numbers, any statistician can figure out the rest. This is absolutely unacceptable.
“In general, it appears as though every information provider we deal with caters to the insurer as they seem to provide them with everything and us with nothing. I can’t prove it, but it is hard to get the information they have from anywhere else.”
Greg Horn, vice president of industry relations for Mitchell International, emphasized that both collision repair facilities and insurers should understand the things by which performance is being measured.
“Both shops and insurers should understand the metrics they’re using to evaluate performance, as well as what makes up a statistically significant sample size of data,” said Horn. “A shop should understand how to query their data and make sure the same data set they’re pulling is being used by the carriers doing the measurement.”
What can our readers take away from this story? Information is the most powerful force in the world, one which often needs to be protected and hidden, while at other times shared with the industry. Information controls value, and when one considers how many millions of cars are on the road, and the great number being damaged (while falling in recent years), that creates opportunities for businesses to trade in that data.
Repairers Talk Data Mining at Collision Industry Conference
There has been a lot of talk about “data mining” in the collision repair industry over the last several years, and that talk continued at the Collision Industry Conference (CIC) held April 25 in Oklahoma City, Okla.
The CIC’s Data Privacy Committee held a panel discussion on the topic moderated by Denise Caspersen, collision division manager for the Automotive Service Association. Repairers on the panel included:
• Brett Bailey – A & B CARSTAR, Kansas City, Mo.
• Aaron Clark – Collision Solutions, Indianapolis, Ind.
• Gary Wano – G.W. and Son Auto Body, Oklahoma City, Okla.
• Ron Reichen – Precision Body and Paint, Beaverton, Ore.
• Dusty Womble – Roger Beasely Collision Center, Austin, Texas
• Cory Liss – Liss CARSTAR Collision, Crown Point, Ind.
In collision repair terms, data mining is what information providers (CCC Information Services, Mitchell, Audatex) and other entities outside of a collision shop do with the shop’s business and customer data to track performance and ascertain industry trends. Those trends are then reported in, for example, CCC’s quarterly “Crash Course” publication and Mitchell’s “Industry Trends Report.”
“The value of data mining is finding non-intuitive correlations and industry trends that provide new business insight,” said Jim Dickens, senior vice president of CCC’s Automotive Services Group. “For example, repair vs. replace ratios’ influence on cycle time. Does it correlate, and how?”
That data is transferred to those information providers when an estimate is uploaded to their system, and the data is then stored on the “cloud” or the web. The agreements shops sign with these information providers allows for the data mining, although some would contend that the shops don’t really understand what they’re getting into. And some repairers believe the data is being used in ways not intended when they first signed the agreements.
Gary Wano, who, among others, was wearing a pin handed out by the Society of Collision Repair Specialists (SCRS) that read, “Do not mine my data! I opt out,” said that opting out should be a possibility if a repairer doesn’t want to share their data.
“That might mean we won’t be measured by that data if we’re not part of it, and that could put us behind the curve with insurer relations if they require you to be monitored,” admitted Wano.
Clark said that more and more trading partners are requesting data from collision repair facilities, and each one has their own unique and separate licensing agreement.
“But generally we have no choice but to participate,” he said. “We give them carte blanche to do whatever they want.”
Clark also brought up the question of who owns the data, especially in a DRP environment. “What part of the information do I own? What part does the insurer own? Does the information provider have a right to it? It concerns me if my agreement says I have to accept and they can then modify it.”
Bailey questioned the validity of the numbers that are being used to determine market competitiveness among shops in a given region.
“How many estimates are out there that are not being accounted for?” said Bailey. “I question whether the numbers are factual considering the lack of information that is not being thrown in there.”
Womble agreed with Bailey, adding that the data can be manipulated to get the desired result.
“So the numbers are invalid because they’re based on a limited number of shops in a particular marketplace,” said Womble. “And most of those shops are under a contractual obligation to produce the numbers in a particular way. This is not what’s really going on in the marketplace despite what they say.”
Liss echoed Clark’s comments about not having a choice. “It’s a take-it-or-leave-it approach, and I don’t like that. I should be able to pick and choose what information I send.”
Being able to pick and choose what data is sent would require something called a Business Message Specification (BMS) extract, but Aaron Schulenburg, executive director of SCRS, said that information providers have told him that “the cost is too much because of the architecture that currently exists.”
At the SCRS open board meeting the day before the panel discussion, Schulenburg gave an example of data aggregation gone wrong. In early January, a repairer contacted him to say that the wrong history was attached to the wrong VIN number on a CARFAX report one of his customers obtained.
Jeanne Silver, co-owner of CARSTAR Mundelein in Mundelein, Ill., addressed the concern that body shop owners have over customers’ private data: “How liable are we? At what point does the consumer say, ‘You had a tool to protect me and you didn’t use it.’”
Charlie Barone has over 36 years of experience in collision repair. He’s an ASE Master Certified technician and a licensed damage appraiser, and has been writing since 1993. He can be reached at [email protected].