At Their Mercy: Progressive Has Been Opening a Lot of New “Concierge Centers” - BodyShop Business

At Their Mercy: Progressive Has Been Opening a Lot of New “Concierge Centers”

You may have noticed that Progressive has been opening a lot of new “Concierge Centers” lately, where customers deliver their damaged vehicles and, within 15 minutes, are out the door and assured that a claims rep will handle the repair process from start to finish. The insurer has opened 11 of these centers since April and plans on opening 30 by the end of the year — at a cost of $5 to $7 million each. That’s a total investment of $150 to $210 million in 2006 alone, not including what they’ve plowed into the 26 other centers they’ve opened since 2000.

With that kind of investment, consumers are obviously embracing the program, which, in turn, is saving Progressive a bundle. (Progressive, however, doesn’t acknowledge that the program is a money saver/maker, saying simply that it’s a “pure customer service play.”) But an executive at an industry consolidator theorizes that Progressive could actually be saving $33 million per year. Assuming that each of the 30 centers opening this year handles 500 cars per month, that’s 15,000 claims per month. At $1,850 per claim, that’s $333 million in claims for ’06. If they’re saving 10%, they’ll recoup their investment in five years or less.

It makes sense that consumers would love the program. They simply drop off their keys and pick up the vehicle when it’s ready. But what they don’t know could hurt them. By completely removing themselves from the repair process, vehicle owners are completely relying on Progressive to deliver cars back to them with the highest quality repair. (And that debate is for another time, another place.)

As for what this program means to collision repairers, it’s yet another way for insurers to exert control over the repair process. And by Progressive taking the customer out of the picture, shops have almost zero opportunity to foster customer loyalty. If Progressive drops these shops tomorrow, they’d be out of luck. No program. No customer base.

If Progressive is only a small part of a shop’s business, this isn’t such a big deal.

Unfortunately, many are actually putting nearly all their eggs in the Progressive Concierge basket, which not only makes them vulnerable if Progressive pulls the plug, but puts them in a very weak bargaining position. Even if they don’t seem to realize it.

Al Borowski, owner of Borowski Autobody in Bedford, Ohio, gets 80% of his work from Progressive. “If you saw Progressive’s dedication, you’d know there’s nothing to fear about being thrown [off the program] if your numbers are good.”

“I would be in a terrible bind if [Progressive] left tomorrow,” says Jack Palleta, owner of Extream Auto Body & Detail in Brookpark, Ohio, who says 90% of his work comes from Progressive. “But I’ve worked my entire life to get on this program, and I’m planning on staying on it.”

As for the lack of customer contact, Palleta says there is still some. “Sometimes the customer who’s overwhelmingly interested in what’s going on will come down to check on the progress,” he says.

The key word there is “overwhelmingly.” How many customers are overwhelmingly interested in the repair of their vehicle? And if a vehicle owner is willing to use a program like Concierge, he’s probably even less interested than the average customer.

So why join the program? Some shop owners argue that it works because it allows them to focus on what they do best (fix cars) and not have to deal with all those pesky vehicle owners. Why deal with your customers if you don’t have to, right?

Another controversial aspect of the program is the liability factor. Some shop owners — some of whom are on the program — contend that Progressive is assuming liability for the repairs. But that might not be the case. According to Erica Eversman, chief counsel for Vehicle Information Systems in Bath, Ohio, Progressive’s written agreements with its shops contain indemnification clauses that would, in theory, shield it from liability in the case of a poor-quality repair. Indemnification clauses or not, Eversman says Progressive is treading on dangerous ground by making decisions on where and how their customers’ vehicles are repaired.

“If Progressive is having claimants sign power of attorney forms to allow them to make decisions on where and how their vehicle is going to be repaired, they’re acting as an agent for them and thus have a fiduciary obligation to them,” she says. “That’s not a position you want to be in because you’re supposed to act in the claimant’s best interest. And what’s in the claimant’s best interest is the perfect repair, which is not what Progressive will provide.”

Liability debate aside, the Concierge model will likely continue to eat away at shop profits, especially those of the shops that become reliant on Progressive for the lion’s share of their work. Shops in that position have no negotiating power; it will be Progressive’s way or the highway. And if that dreaded day does come when Progressive removes them from the program, they’ll be out of luck. Because they were never able to shake their customers’ hand, earn their trust or give their kid a sucker, chances are those customers won’t be back. A business card left in a car isn’t the same as person-to-person contact. As far as I’m concerned, this program actually puts body shops even more at the mercy of insurers than those with a standard DRP relationship.

Jason Stahl, managing editor

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