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State Farm Consultant George Avery made a few collision repairers nervous at the Paint, Body & Equipment Specialists Spring Conference when he said that State Farm was still overcapacity despite slashing the shops in its Select Service program from 20,000 to about 11,000.
The logical question, then, which was asked by a repairer in the audience, was whether State Farm was considering cutting more shops.
“No, I don’t see any event that will cause a sudden overnight discontinue of shops. There will be no ‘Select Service Version II,’” Avery replied. “The reason is because if I really did get the high performers [after reducing the shops in its network], I want to work with them.”
“Our goal is to not knee-jerk with repairers,” Avery added. “Because if you do, you might start getting people jumping around, and we don’t think that’s healthy. Let’s fantasize for a second that I truly got the top performers. Why would I do anything to chase them away? So wouldn’t I work with them a little if their numbers weren’t good?”
In reference to the shops that were released from the program or can’t seem to get back on, Avery had this to say: “You can use a sports analogy. If a coach says, ‘I just don’t need a pitcher or I just don’t need you on the team anymore,’ it doesn’t mean there’s something wrong with you, it’s just not what I need. Those are tough conversations to have."
“You might hear about a shop that goes off the program for performance reasons, but we’re not going to replace them,” Avery concluded.
Avery went on to once again explain the reasoning behind State Farm launching the Select Service program and cutting its network shops by almost half.
“In most businesses, the biggest purchaser of anything typically gets a bigger discount,” he said. “We were outpacing the industry, competition was fierce and we’re a mutual insurance company, so we had to do something.”
Avery said State Farm decided it was not going to ask for a discount but rather pursue a “most-favored-nation” clause, which he explained: “If you decide not to give a discount, that’s perfectly fine with me. But if you give one of my competitors a discount, I want the same one. All we wanted to do was level the playing field.”
The next thing State Farm looked at was capacity. The insurer had too many shops to manage, so it decided to reduce them based on local management’s decisions.
“We ended up parting ways with repairers who had done a great job for us, but we have a ton of data and we knew who the top performers were,” Avery said. “Some of you would argue that we selected the wrong ones, but local management made the decisions, so I can’t answer for that.”
When State Farm moved from relationship-based programs to performance-based programs, Avery said repairers asked for more data, which spawned performance reviews. He admitted that because this is a new concept, State Farm isn’t very good at it, but that’s why the insurer’s work and development team is going out to every zone to train management on how to communicate with repairers about “numbers.” In addition, State Farm has an advisory council of repairers it meets with several times a year to receive input on how things are going.
Avery made a final comment about the future of the collision repair industry: "Some people think the tail will wag the dog some day. Some people think there will be a reduction of repair facilities and those left standing will call the shots. Others feel if the world ends tomorrow, there will be two things left: cockroaches and guys walking around going, can I fix your car?"