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Fourteen shops in market dropped Select Service nearly a month ago to protest State Farm mandate.
More than a year ago, 18 shops in the Birmingham, Ala., market dropped off State Farm’s Select Service program in order to avoid being forced to use PartsTrader. Nearly one month ago, 14 shops in Ft. Wayne, Ind., comprising 64 percent of the total Select Service shops in that market similarly dropped the program to demonstrate their opposition to being forced to use a particular parts procurement program.
According to Mike Hartman, president of the Indiana Autobody Association (IABA), State Farm is looking to open up a drive-in claims center at one of the shops that stayed on Select Service to make up for the loss of Select Service shops. The insurer had a drive-in claims center at another shop, but, according to Hartman, that shop dropped off the program and expressed its desire not to have a claims center for State Farm either. There is also a large MSO in town, Collision Revision, that stayed on the program and is still processing claims for State Farm.
“One guy who has been in business for more than 50 years said he had to stay on because [State Farm] was 30 percent of his business,” said Hartman. “But other shops that have been in business as long as him opted to get out from under Select Service.”
Hartman believes State Farm only unleashed PartsTrader to Ft. Wayne and not the outlying rural areas because those areas tend to be more tightknit and the shops would more than likely band together.
“In bigger cities, it’s more dog-eat-dog cutthroat because one shop wants to outdo the other,” he said. “If one caves in, the other caves in and it snowballs – kind of like what happened in Indianapolis.”
This big-city dynamic makes it all the more surprising that the Ft. Wayne shops have been able to show solidarity.
“Guys who have been part of organizations in this industry for 30 years have said this is the first time they’ve seen the Ft. Wayne market stay together and back each other up,” Hartman says.
The decision to either stay on Select Service or drop off seems to have had drastic consequences business-wise. Hartman claims the owner of one small shop who stayed on the program said his workload for State Farm has doubled, while another shop that dropped the program has gone from 25 State Farm repair orders per month to five in a month’s time.
Hartman says there are three or four steering suits currently being eyed by shops that elected not to participate in Select Service anymore. They’re currently documenting the individual cases, including one involving a customer who was simply told by State Farm that the shop of her choice was no longer on its program.
“They said it would be close to three weeks before they could get out and write the estimate, but if she went to a Select Service shop, they could get on it immediately,” Hartman says. “Other shops said that State Farm is telling their customers they are no longer on the program and can’t explain why other than [the shop] didn’t meet their criteria.”
The IABA has voted to file an injunction against State Farm, but is waiting to see how Florida and Mississippi’s efforts pan out.
“We’re confident it will pass in Indiana, but Mississippi and Florida started it, and it’s easier to get things passed once one has already been passed and the judge has something to look back on,” says Hartman.
Hartman says that IABA member shops’ main objection to PartsTrader is similar to other shops: they don’t like the idea of being forced to use it.
“And it’s not just State Farm, but any insurer getting their hands too far into their business,” Hartman says.
According to Hartman, suppliers have been equally opposed to PartsTrader. The overall sentiment is that the suppliers don’t like having to go through a bid process, and almost all feel they would have to add extra manpower to accommodate the additional State Farm orders.
“The suppliers said there is not enough fat on this parts stuff anymore to have to add on more administrative people to take care of it, and then go out and bid against it and possibly have to offer a little bit of a discount,” says Hartman.
One Honda dealer with a body shop particularly did not like the scenario of the shop not being able to order parts from their own parts department 200 feet away if the shop stayed on the program but the supplier didn’t.
“And why would they want to buy parts from Penske in Indianapolis, their competition? Another thing is getting your parts in a timely manner. If you have to get parts out of Indianapolis or Dayton, we know that will affect cycle time, which will ultimately affect your scorecard,” says Hartman.
For now, Hartman says it’s a waiting game to see what happens with Florida and Mississippi’s legal effort. He feels confident his group will stay together.
"One of our members said with his State Farm business down a little, he hopes his brothers at the table won’t cave in and sign up. And every single one said no, we’re in this for the long haul and have to take a stand."