With all the latest buzz about State Farm’s parts procurement program, the Society of Collision Repair Specialists (SCRS) interviewed Bob McCoy of the Motor Trade Association (MTA) of New Zealand to find out more about PartsTrader, the New Zealand firm that created the parts-ordering/bidding software that State Farm has been using in its pilot testing of the program.
McCoy is the collision repairer manager for MTA and was formerly the national assessor manager for Farmers’ Mutual Group, where he developed their in-house motor vehicle assessing capabilities.
One of the 10 questions SCRS Executive Director Aaron Schulenburg asked McCoy was, “We were advised that, in some cases, the shop’s profit on parts has been reduced by almost 50 percent of what it once was. From your vantage point, has the system impacted the profit margins for the shops using the program?”
Answered McCoy: “Definitely. Prior to its inception, collision repairers had the ability to source parts from their local suppliers, then pass the retail cost onto the insurer. Now the parts are supplied at cost, then a mark-up is applied depending on whether the part is OEM or secondhand. This varies between insurance companies but is around the 10- to 20-percent range. The only people to see the supplier’s quotes are the repairer and insurance [appraiser]. Most repairers have also had to employ administration staff or take themselves off the shop floor to carry out the administration role, which has impacted their profit levels.”
Schulenburg also asked, “What happens if an independent repair facility not on the insurance companies’ networks chooses not to use the system?”
McCoy: “For the insurance company that developed PartsTrader, it is a requirement. However, the other carriers have a more flexible approach, and if the repairer is able to find the parts at a cheaper price outside of the tendering process, then they have the ability to do that subject to the insurer’s permission. If a repairer is not an ‘Approved Repairer’ and does not hold a contract to use PartsTrader, the [appraiser] has the capability to download a quote in PartsTrader, purchase the required parts and then arrange for these to be delivered to the panel shop."
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