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Insurance Involvement

The collision-repair industry has seen many on-going changes. One aspect of change has been the growing involvement of insurance companies in the industry. We asked body shop owners and managers across the nation the following questions: “How
do you feel about the growing involvement of insurance companies”.
in the collision-repair business?" and "Has it affected
your labor rates? If so, how?"

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I have mixed feelings about it. The
possibility for abuse in some situations is a little frightening
to me. On the whole, in pure theory, the idea seems good, but
unfortunately there is sometimes a little bit of difference between
the true theory and actual practice. At this point, I wouldn’t
say it has affected our labor rates. I fear that it may though."

Mike Bojan
Owner
Bojan Auto Body
Northbrook, Ill.

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"It hasn’t affected [labor rates] too
much. In Hawaii, it’s totally different from the mainland. We
always have a higher labor rate. Everything has to be shipped
in. We don’t have too many things available here."
Debbie Omori
Owner
Bob’s Fender Shop Inc.
Hilo, Hawaii

"I think it is terrible. I think they
have too much control over our industry, and they act as if they’re
the customer rather than the person who owns the car. They use
such strong-arm tactics. They’re always threatening antitrust,
[and] the rates cannot go up to where they belong. Mechanics who
are not under the control of insurance companies have labor rates
about $20 an hour higher than ours."

Scooter Thronson

Owner

Thronson Body Shop, Inc.

Saraland, Ala.

"Very complex. A simple answer to that
question would not be possible. Any time you have any person or
corporate entity taking control like this, it’s only because of
the weakness of the ones they are controlling, and the whole ethical
question comes in: at what point, if any, a third party needs
to come in and regulate. It’s physically impossible to get paid
the prevailing rate and to do everything right unless you’re using
funny time to an incredible degree. The prevailing insurance-industry
practices force shops to either go out of business, to commit
fraud or to be so supremely intelligent about running their businesses,
so organized, so incredibly efficient that they don’t commit fraud,
don’t go out of business and accept that prevailing rate."
Len Schwartz

Owner

Specialty Auto CARSTAR

Wheeling, W.Va.


"I think it’s very dangerous. My position
is that the collision-shop people, myself included, are the professionals
in repairing cars. I don’t appreciate it when I have an insurance
company telling me how to repair a car. And that has to do with
both which parts go on the car and what kind of labor operations
are necessary to repair the car. I’m certain it has [affected
my rates]. Our labor rate is $36 out here. The body rate where
I worked was higher than the mechanical rate when I started in
this business more than 20 years ago. Today it’s lower. You don’t
buy a lot of high-tech equipment, you don’t send your people off
to schools and you don’t attend great big, expensive conventions
for money trickling in at $36 an hour – that is after you pay
your rent, lights, heat and other bills. The situation appears
to be getting worse. All they have to do is say no and not work
on the cars. If [the labor rate] is not suitable, just say no.
I’ve said no to two jobs this week because the insurance company
won’t pay to fix the car the way I think it should be done. It’s
up to the collision-shop owners to run their own businesses. They
don’t have to do the work for the rates the insurance companies
will pay. Let the scabbies do it. If they crowd all that work
into the scabbies, it won’t be long before the insurance companies
will be back wanting quality work done because they’ll have a
consumer uprising going on."
Bill Greene

Owner

Greene’s Body & Paint Service

Moscow, Idaho

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"I’ve been in the business for 30 years,
and I find it very scary. They direct us to buy parts at certain
places, which I find very difficult. Since we’re all computerized
– at least I would think that a good percentage [of shops] are
computerized – if we were allowed to do the estimate the way it’s
set up by the computer, we probably wouldn’t have a labor-rate
problem. The caps they put on material hurt us – they won’t give
us the full, flat-rate time to do work. The labor rate isn’t a
problem, but it’s the fairness of the context of the estimate
that they’ve changed due to computerization. There are a lot of
areas that I would rather address other than worrying about whether
they’re paying us a fair price or not. For instance, whether they’re
including enough things that we’re allowed to charge for."

Thomas Henry

Owner

Auto Collision Service

New Castle, Del.

"I’d like to see more involvement, but
not involvement as far as where they’re going to handle parts.
The involvement hasn’t affected [labor rates]. I think if they
get involved a little more and see what the actual costs are,
then it might be a plus for the autobody industry."
Dana Francois

Owner

Georges Auto Body

Portsmouth, N.H.

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"I’d really prefer insurance companies
and other people who don’t have anything to do directly with repair
to concern themselves more with their own situation rather than
getting too involved with someone else’s. It seems as though some
of the companies are preferring to get more into the operational
end of the repair business than just the insurance side of it.
If it has [affected rates], I can’t tell. We deal mostly with
fleet equipment, so we’re not quite as involved with insurance
companies."

Wayne Hilton

Owner

Taylor Body Works

Odessa, Texas

"My personal philosophy in running this
business is we’re going to continue to run our business for the
good of our company, and we really try to minimize the amount
of influence the insurance industry has on us. We work very hard
at marketing and advertising and our customer service, and that’s
the way we minimize their impact on us. We’re not all that interested
in having someone send us work on a program. We just try to minimize
their impact on our business by continuing to do our business
without gearing ourselves to their whims. Actually no, [insurance
company involvement hasn’t affected our labor rates]. My thought
is, ‘If we don’t fix them, who is?’ The market allows the number
of players. So as long as you’re within reason of the market,
you’ll still be there. So I don’t look to the insurance company
for direction as to how much I’m going to be allowed to charge."

Rod Cook

Owner

Alphine Autobody Inc.

Vancouver, Wash.

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"Take a look at what’s happened to the
medical profession. Further involvement will do the same to the
auto-repair industry. Because of their involvement in the industry,
we are unable to set a rate based on actual costs. We are measured
against a field of players that’s not level. A shop such as mine
that does 150 high-tech repairs a month is compared to a shop
that does two cars in the back alley. Therefore, the labor rate
set by the insurance industry is not based on any type of cost
analysis. [Labor rates] are based solely on a survey."

Mark Canby

Owner

Canby Motors Collision Repair

Baltimore, Md.

"It stinks. I think they’re getting too
involved. They’ve been a controlling point of our industry for
too many years, and too many shops are asleep and not realizing
what’s going on. Now it’s too late. [Insurance companies] influence
[the industry] by forcing aftermarket parts issues on us and our
customers by holding down a labor rate – which is ridiculous trying
to work on a car today for what they want to pay – and by cheating
the people out of time. The labor rates are getting to a point
where they’re unfair. There’s no standard-of-living increase for
any money being paid from an insurance company to a legitimate
repair facility."

Rich Goodwin Jr.

Manager

Automotive Repair Center

Brooklyn, N.Y


"I think the two parties need to work
together, but I think they’re a little demanding. And a lot of
times what they think is a fair settlement probably, in fact,
would be in the primeval times. The giant is getting bigger. With
their size and strength, they’re forcing us to hold below-necessary
rates. They kind of look at things one-sided. They are monsters."

Mike Reamey

Owner

Mike’s Glass & Body Shop

Chase City, Va.

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