Justin Rupp, Body shop manager
Don Jacobs Jeep Eagle, Inc.
Vehicle owners matter. Not databases.
Why don’t most repairers realize that databases are to be used as a guide in estimating repair costs — not a last word on pricing? It’s a combination of things. The insurance industry, with few exceptions, doesn’t actually repair vehicles, and therefore, has no other means of estimating damage. While many of their staffs may have owned or worked in the shop environment, they aren’t currently handling vehicle repairs. They’re on the outside looking in, and the estimating system gives them insight, experienced or not. Add to that the sheer volume of claims an adjuster handles, and it makes sense to have a system for efficiency and liability (documentation) purposes.
While it is necessary for [repairers] to have the ability to understand where the opinions of potential third-party payers are coming from, our industry has taken the course of not just understanding, but going along with the entire methodology. Instead of earning more profit on the actual repair, we’ve accepted the notion that expediting the estimate writing, repair order handling and billing aspects (claims) saves us administrative overhead or office hours.
Couple this with the fact that an estimating system itemizes and, therefore, justifies our flawed flat-rate pricing methodology to customers, as well as supposedly covers some of our liability issues, and a formula for complacency is derived.
It only seems to make sense to use the systems. Over time, however, convenience-induced laziness provides that it’s easier to rely on the guide first and question it later. Only after gross profits have been diminished (later) does relying on the guide reveal its consequences, and by then, it’s too late. Here’s where we are to date!
Our industry has forgotten that insurance companies don’t actually fix vehicles, and since insurance companies have to rely on the guides in order to generate estimates, they certainly shouldn’t be in a position to appraise damage in finality. Unfortunately, who’s directly paying the bill incorrectly translates to “power.” We often forget that policyholders indirectly pay the bills, and that the customer standing in front of us has been cutting semi-annual checks for the last 15 years in order for the repair to be paid for.
Our business is strange in that it allows an entity that doesn’t actually conduct the repairs and, in actuality, doesn’t pay for them, to appraise and somehow control the manner in which the repair process is carried out. The fact that the guide becomes the “last word” is frightening since guides don’t fix vehicles either.
Ultimately, the information providers fulfill dual roles, which couldn’t be more contradictory: authority and patsy. At the onset, the system times are viewed as relevant to the repair, even though they’re based on undamaged cars. Then, when the times are found to be inaccurate, which spurs debate between the shop and insurer, the insurer uses the system as a patsy.
How many times have you heard an adjuster back up his argument with, “The guide states this is how long ‘X’ operation takes, so that’s what we’re authorized to pay”? … The adjuster may as well be saying, “That’s the way it is because someone else said so.” He’s telling the truth, for his part. But reliably accepting that answer over and over again is as bad as saying it. The only way to overcome it is to continually question the answer.
And what about the real customer’s input?
Our industry’s acceptance of database times gives the information providers and insurers leverage as long as shops continue to accept what they’re told without trying to reason the reality repair by repair.
I don’t, however, agree that insurers “set prices.” If they set prices, there’d be no supplements for reasonable and necessary charges and hidden damage. Shops set their prices with their door rates and their ability to accurately assess damage and perform repairs in a quality and timely manner. The final bill is what it says: final bill. If the customer, not the insurance company, is satisfied with the repairs and agrees to the final bill, that’s what the insurer is held to. No “estimate” applies to this document, no matter who it’s written by.
Simply accepting what the guides say gives the databases, and thereby, third-party payers, power. Shops need to charge what’s reasonable and necessary, regardless of what a database says. And what’s reasonable and necessary will be revealed over the course of the repair.
There are operations, manual entries, etc., that are paid regularly by insurance companies that aren’t listed in the guides. If insurers are willing to pay these operations, then why wouldn’t they pay others that are changes to system times? The fact is that they will — and do — as long as these needs are effectively communicated and justified.
[How did this industry get to the point where some repairers are asking if it’s OK to charge for something they’re selling?] I think the answer lies in the old adage “usual and customary.” No repair is the same, so “usual and customary charges” do not apply. What needs to be billed is what was reasonable and necessary to complete the repair. Simply discussing the necessary charges with an adjuster can produce more positive results than you realize. Communication with the customer and his insurer is critical.
What the competition does, and what they accept, really doesn’t affect the way business is done. Salesmanship is the key. Communication skills are critical. I can’t stress enough how important it is to be able to communicate and stand by a particular position based on fact and reason. The only power over you that the insurance representative has is his ability to harness your irrationality and frustration with the situation.
What’s interesting is that a lot of shops won’t do rust work. The databases don’t cover rust work, and yet, many shops refuse it. Some state the lack of ability to guarantee the work as being the reason for this. But I wonder if these same shops turn away rust work because they’d be working outside of their comfort zone — i.e. no database times.
Quite simply, repairers should use the estimating systems for their intended purpose — as a guide only. Write a sheet using the estimating system and then adjust the times according to the damage. Part of what is supposed to be interesting about this business is that no two damaged vehicles are alike.
The estimating systems treat every damaged vehicle the same, and what’s worse, it treats them as if they aren’t actually damaged vehicles. If the insurer has the ability to adjust the labor times down subjectively, then the repairer has the ability to adjust the labor times up subjectively.
Engle’s Frame & Body Service
Database times determine what we’re paid, except for straightening time.
If [database providers] say their data is to be used as a guide, it must be written in invisible ink because most appraisers say that they have no authority to modify a book time, even when you point out that times are for new parts on undamaged vehicles.
Another thing is, in most states, the appraiser act says the appraiser is to use his judgment and not to be influenced by any party, not the insurance company, the motorist or the repair facility. I think those laws were written way back when all appraisers were independent appraisers.
Years ago when you talked to an independent appraiser, he was the last word. But now the insurance company employee appraiser always says, “I can’t change that. You have to call my boss.” The databases do indeed have clout, and the insurance industry does indeed have clout — because insurers say that’s all they’ll pay [even if there’s no legal authority governing body shops that says you must price jobs within the confines of estimating guides].
Insurance appraisers say, “This is what it should cost,” and so the shop can only charge more if the customer is willing to pay extra for good work. It’s cut and dry — that’s all they’re going to pay so those times really do matter. I can’t use my knowledge and expertise and adjust the estimate because they won’t pay for it. Ultimately it ends up that we tell the customer it’s going to take more time than they’ve allowed, and some customers are willing to pay extra for a good job — others will say no.
The only thing you can do is contact the data providers, but it usually takes them a week to give you a review. Quite often the provider that the insurance company is using, whichever one it is, will review something (and they do seem to listen to input from the field) and say, “We’ve reviewed this and we’re changing the time for this operation. It will show up in our release in two months.”
You can do that, and when you get something in writing from the data provider and show that to the insurance appraiser, then they’ll give you some more time.
Whether you call it a guide or whether you call it a bible, you have to live with them and you have to accept them unless you have a customer who’s willing to pay extra. That happens about 30 percent of the time.
You have a minority of customers who say, “Fix my car, I’ll handle the insurance company. I want it fixed properly. I’ll pay the bill.” The majority of people say, “You’ll fix it for what the insurance company is allowing, won’t you?” And that means you’ll be fixing based on the database times of his insurance company, no discussion.
That gives insurers power. I do have the power to explain to customers that the database times are inaccurate and that I need to add charges. And you can get some people to pay extra for a good job, but that’s the minority. I’ve lost jobs because I told the customer it was going to be more than what the insurance company allowed.
These guides determine what the shop may invoice. If the majority of the database provider’s income comes from the insurance industry as opposed to the repair industry, obviously it’s true, in any business, that you favor your best customers. In fact, years ago Mitchell admitted to me that they modified their program for Nationwide. I think the issue was if you replaced a hood, you didn’t automatically get underside painting unless you specifically asked for it. Many body shop guys clean their hands off, go outside, look at the car, look at the bottom line — $2,073 — and say to the vehicle owner, “I’ll fix it for that price.” Then they find out later there’s no hood underside painting, so they just eat it because they told him they’d fix it for that price.
I said to Mitchell, “How can that be? When a hood’s replaced, you have to paint the underside. It should be automatic.” They did back off for certain little things like that. They said it’s wrong to customize their programs for a specific insurance company and said they’d stop doing it.
It’s good business to pay attention to your biggest customers. If the entire repair industry could negotiate a contract with one of these companies and become its biggest customer, then things could be different, but it’s a fragmented industry with no strong trade association, so that will never happen until there is.
I think I’m a victim of insurance companies. Years ago body shop rates were higher than [or more in line with] mechanical shop rates because of the larger investment required to turn a dollar. Now it’s flip-flopped, and the only reason can be that body shop rates are controlled by the insurance industry and mechanical rates are not.
In our area, it’s $44 vs. $72 an hour for the same type of work without even arguing that a little more skill and artistry is actually required for body shop work compared to mechanical work.
Shop owners haven’t given power over to adjusters; it’s the power the customer gives them. The customer gives an adjuster the power to pull the job. He cannot move a car without the customer’s permission. I imagine everybody will back down on some little things. If a shop cuts its price to prevent his pulling the job, that’s a business decision. We’ve told insurance companies that we won’t have a car towed here that’s at another shop that we know is reputable. We won’t play that game.
I don’t think most shop owners are eager to fix everything that comes their way. There are good jobs and bad jobs, good customers and bad customers. Database times become less of an issue if you’re more selective in the jobs you take because with the better jobs, you’re more likely to have customers who are willing to pay extra if necessary.
Years ago, it was understood that a good man could do good work in half the allotted time — and now it’s expected. [So not only have the] times been reduced, but more is expected of a technician today because the car he’s working on has far more precision in its assembly at the factory. He needs more time to do that than he needed in 1976. A good man doing good work today may have a hard time doing it in the times allotted.
Databases matter because most work is paid for by insurance companies and most of the customers who are paying with insurance checks expect you to repair for the insurance company amount. You have no choice but to accept times from whatever database the insurance company uses.