I agree that the OEM standards are de facto “unofficial.” I also agree that the standards should not remain solely as a creature of the OEMs. Indeed, the OEM standards will never be enforceable, while their only authority is technical and solely that of the OEMs.
I do not agree, however, with Mr. Biggs’ proposal to transplant the OEM standards into a “council” that will somehow reside in I-CAR and be represented by repairers but not insurers necessarily.
Collision repair methods standards must be established and administered by an entity separate from the self-interests of any single industry participant. That entity must draw its authority primarily from the interests of the consumer. Failure to do this will invite media sensation-seeking, the attention of the plaintiffs’ bar and externally imposed federal regulatory efforts.
Dismissing any necessary role for insurers ignores pragmatic reality. Any initiative where participation and commitment of the insurers is optional will artificially perpetuate the adversarial culture that both sides can no longer afford. Besides, successful standards initiatives such as SAE or Underwriters Lab (or our own Collision Industry Electronic Commerce Association [CIECA]) carry a lesson: Where multiple constituencies were affected by a body of proposed standards, authority for enforcement had to come from something beyond the mere expression of the standard by its authors. Adoption of standards comes only two ways: (1) by the voluntary collective will of those affected, or (2) by imposed statute, which is considerably less fun.
In a decade of CIECA work, we learned that standards need two distinct kinds of authority in order to escape being merely suggestions: One is the obvious technical authority that proceeds from the scientific precision with which the standard is prepared and expressed. But there’s an essential second and different kind of authority: political. It’s the force driving the acceptance of the standard by all whom it will affect, i.e. the “consent of the governed.” Do you remember the successful adoption of metric measurements throughout the U.S., replacing inches, feet and pounds? Neither do I.
Risk of Failure
The idea of this “council” as a creature of I-CAR is fraught with the risk of failure. For one, simply embedding a repair standards operating ethic in any other existing industry entity is futile. Mr. Biggs bases his recommendation for this on the principle that what “…follows the path of least resistance thus is the most likely to succeed.” Have you found that to be a reliable predictor of good outcomes in your business?
No matter how temptingly some bits superficially align, mission transplants generally fail. The track record is terrible for organizations undertaking new ventures that insufficiently match their own DNA. It’s no more a “natural” initiative for I-CAR than if I-CAR decided, since it’s already in the education business, to open a law school. I-CAR is an educator of technical skills. It has immediate and ambitious objectives to accomplish for its market, and its future in that role is bright. But it has neither the temperament nor the natural charter to launch a hastily designed political governing body. I hope its leadership views this digression as unwise and resists it.
Mr. Biggs considers the industry model of standards that was adopted in the United Kingdom as disastrous, and characterizes those shops as victims. No one I know who has studied what happened there would agree.
The UK experience holds strong clues for a new coherence in our industry. The adoption of standards there was driven more by the insurers than by the shops. It got the insurers out of a bizarre, decades-long role of a dozen financial institutions telling shops how to fix a car a dozen different ways. It allowed them to focus instead on choosing repairers based on productivity and service in the execution of a mutually agreed-upon, proper repair. It instantly allowed the shops ready, willing and able to fix cars properly to independently prove their entitlement to claims on sheer professional merit.
The fact is that the marginalization felt by some UK repairers disadvantaged by PAS125 was voluntary. They were simply those who chose not to meet the now codified and universally accepted repair qualifications, which include virtually all of the same previously unenforced OEM standards.
A popular view is that the issue of repair standards will force change in the U.S. industry. But it’s actually the other way around: it’s change that will force the standards.
Collision has been artificially insulated from certain consumer behaviors and economics commonplace almost everywhere else in the business world. In virtually all other consumer transactions, the product’s physical quality is immediately apparent. In collision, there has always been a partial blindspot. The consumer knows and expresses how she was personally treated, whether her vehicle was ready when promised, and her approval of what she could see and feel of the finished car. Her statistical likelihood of continuing with her insurer is largely driven by those CSI answers. But the question of the structural integrity of the repair has never been part of her consciousness. In the calculations of all three participants – the customer, the repairer and the insurer – the condition of the repairer’s customer restrooms carries more weight than, say, the condition of the welding equipment. Before, that didn’t have to matter. But it’s now about to matter.
Many in the industry are fighting a battle that has already been won, and in so doing are deferring the peace dividend. If you wait for a public acknowledgement, you’ll wait forever, but the days of insurers substituting their own methods for the OEM standards are numbered. That’s not because repairers forced it. It’s simply no longer a prudent practice for a risk-averse financial institution in a consumer culture with 35 to 50 percent of its claims processed through DRPs.
The insurer understands perfectly well that today’s policyholders ride around in 100 different and complex machines whose structural integrity is a function of the passengers’ safety. Loss adjustment economics virtually requires insurers to “advise, suggest or recommend” where the policyholder takes her car. But insurers might want to start preparing for the question, “Are you suggesting a shop that will restore the safety of my car?” The consumer will ask this because she will know a repairer who will do just that, and he’s not keeping it a secret. How can the answer ever be “yes” if the DRP relationship requires compliance with things other than the manufacturer’s methods? The institution exists to optimize risk.
The shops face equally profound and disruptive change. This debate Scott Biggs and I are having is about methods standards and where they reside. But that issue is meaningless to the quality of the repair without the correct applied resources of machinery and training.
Many shops worry that certain equipment, processes and skills they currently don’t have will become minimal requirements for staying in business. Those fears are well-founded and should drive a determination to stay in or get out. When the music stops, fewer than 10,000 shops will fix all claims.
The days of every technician doing it in his own wonderfully innovative and unique way are also numbered. Shops are going to have to fix the car not only in accordance with methods externally determined and imposed, but also using similarly defined equipment and skills.
Contingent technician compensation is on an irreversible track toward becoming obsolete if shops want to remain competitive. Can you think of another industry where employees are rewarded by adding cost? The shops are going to have to compete on productivity, i.e. value to the buyer, just like their fellow small business owners across the street.
In a few years, the governing document between the insurer and repairer will have no hours, no caps and no “rates.” It won’t have 80 prices but just one. It will be an inch-thick technical declaration of the repair process and a specification of the finished state of the vehicle’s form, fit and function.
Fixing It Right
The complexity of vehicle design, the focus on safety, the explosion of information and social media, and the psychology of the informed, assertive and litigious consumer will all combine for imminent change. When vehicle owners insist on the car being fixed right – and they will – insurers will insist on it being fixed right. That will be a sobering day because not everyone – on either side – will be able to make the transition.
To remain in control of their future, both shops and insurers have to change many profound and long-cherished behaviors and beliefs. We’ll need to manage that earthquake with great care and good faith.
Read the other side of the argument: Point-CounterPoint: Who Should Establish and Oversee Collision Repair Standards?
Dale Delmege served as senior VP, sales, marketing and R&D, and executive VP, operations, at Mitchell International. Prior to its sale, he was also a principal in AutocheX. He was CIC Chairman from 2000-2001, founder, director and past chairman of CIECA, founder and past director of the National Auto Body Council, and an elected member of the Hall of Eagles. In 2001, he was appointed Lifetime Member of the
Society of Collision Repair Specialists.