If you’ve never heard the word steering in
relation to the collision repair industry, you need to get out
more.

"Come on," some of you are saying.
"Everyone knows what steering is."

Not everyone.

An Illinois shop owner recently explained
a situation at his shop – which we’ll call ABC Collision: An insurance
adjuster told a customer if he wanted his car repaired at ABC
Collision, the insurer couldn’t guarantee the repairs. The adjuster
also said that since ABC Collision was more expensive than the
insurer’s DRP shop, the customer would have to pay the difference
out of his own pocket.

Now picture the Wild West. Next picture some
cattle – some misguided cattle – that were headed to the wrong
ranch. Now picture a cowboy atop an impressive horse, galloping
in to save the day. The cowboy effortlessly whirls a rope above
his head, hoots a few times and lassos the lost cattle, re-directing
them to the right ranch.

Here today, then steered away.

Sure enough, the customer took his car to
the DRP shop.

"What can I do about this sort of thing?"
the shop owner asked.

"It sounds to me like that customer was
steered from your shop," I said.

"Steered?" he replied. "I’ve
never heard of that."

Yes, you read correctly. He’d never heard
of it.

What’s interesting is this shop owner lives
and works near Chicago – not in a remote, rural area where he’s
isolated from the world – yet he had no clue about steering. Which
means he had no clue what to do about it.

What does this say about the industry in general?

It says that those in the industry need to
get more involved, read more, talk more, listen more. And while
this shop owner is probably in the minority – most know what steering
is (86.8 percent of those surveyed in our Industry Profile said
they’ve lost business due to insurer steering) – many don’t know
what to do about it.

Does your state have a law regarding steering?
If so, what does it say and how can you use it to help you and
your customers? If your state doesn’t have a law, what can you
do?

The first thing you need to do is learn to
recognize how steering happens. Dale Emerson, assistant deputy
director for the Illinois Department of Insurance, defines steering
as "indicating there’s no other way to get the vehicle repaired
other than through a preferred shop."

This definition may sound broad – and it is
– but that’s because steering can happen a number of different
ways. For example, an adjuster telling a consumer the repairs
wouldn’t be guaranteed if the vehicle was taken to another shop
is a form of steering. "The insurance company is obligated
under the insurance policy to guarantee the repairs, regardless
of where the vehicle is repaired," says Jay Nelson, owner
of Dillon Collision Center in Dillon, Mont., and vice president
of the Montana Collision Repair Specialists.

What happens, says Nelson, is that some insurance
companies offer a separate, written guarantee if a vehicle is
taken to a DRP shop. So vehicle owners taking their cars to a
non-DRP shop won’t get the written guarantee, but their repairs
will still be guaranteed by the insurer. Unfortunately, when insurers
tell consumers their repairs won’t be guaranteed if they go to
a non-DRP shop, most consumers aren’t educated enough to know
the truth. "It’s a very powerful statement," says Nelson.
"Insurance companies use people’s ignorance."

While there are numerous ways to steer, John
Loftus, executive director of the Society of Collision Repair
Specialists (SCRS), says insurers typically use three tactics:
"They’ll say, ‘You can take your car wherever you want, but
we won’t get there for a while.’ Or they’ll say, ‘You’ll have
to pay the difference.’ And sometimes they’ll try, ‘We won’t guarantee
the repairs if you take your car there.’ "

But, says Loftus, none of these are valid.
As mentioned, the vehicle owner has a contract with the insurer,
who legally has to fix the vehicle – so this "we can’t guarantee
repairs" thing or this "we won’t get there for a really
long time" are subtle steering tactics. As for the consumer
having to pay the difference, the insurer, again, legally has
to pay to repair all the damage caused by the collision. So, if
an insurance adjuster knows some items weren’t included on the
cheaper estimate and tells the consumer he’ll have to pay the
difference out of his own pocket to have his vehicle repaired
at the more expensive shop, the adjuster is purposly misleading
the consumer – slyly steering him in another direction.

On the other hand, when customers turn in
more than one estimate, they basically give up their right to
choose a repair facility because they’ve just given the insurance
company the legal right to pay the lowest estimate – provided
it includes all the necessary operations to restore the vehicle
to pre-accident condition. So, in this case, the consumer would
have to pay the difference out of pocket if he wants his car repaired
at the more expensive shop.

No doubt about it, the steering issue gets
complicated. And, as Nelson says, some insurers use consumer ignorance
to manipulate a situation. They also use shop owner ignorance.
For this reason, you need to be educated before trying to educate
your customers. Take Mike Melfi, owner of C-M Motors in Chicago,
who recently encountered a situation similar to that of the Illinois
shop owner mentioned earlier. The difference was, Melfi recognized
it as steering and didn’t sit idly by:

Melfi received a call from a customer who
had wrecked his 1996 Range Rover. The vehicle had been towed from
the accident scene by an undesirable entity, and the advance charges
for the vehicle were $610. Reluctantly, Melfi paid the money to
secure the vehicle and bring it to his shop. Because the customer
was out of the country when he made the call, Melfi couldn’t secure
a signature on the repair order. When the vehicle arrived, a teardown
was necessary to calculate the damages. Parts were ordered. Parts
arrived.

It was then that Melfi received another call
from the customer, who said he no longer wanted Melfi’s shop to
repair the vehicle. Why? "He’d been advised by the insurance-company
inside adjuster that our shop was ‘incompetent’ and that the company
wouldn’t ‘guarantee’ our repairs," says Melfi.

Although Melfi explained to the customer why
none of this was true, the customer still wanted his vehicle repaired
at one of the insurer’s preferred shops. When Melfi called the
inside adjuster and questioned him regarding the situation, the
adjuster denied that he’d steered the customer. To avoid complicating
the situation, Melfi agreed to release the vehicle, pending payment
of charges and expenses, the normal daily storage rate in the
area, a nominal handling fee and the teardown time the customer
had authorized. "Since the customer indicated that he only
authorized teardown and not the actual repairs – which I could
have easily argued over had I wanted to – we agreed to absorb
the 20 percent return charges the dealer had imposed on us to
return the parts," says Melfi. "I felt we were being
more than reasonable."

The inside adjuster then told the customer
he’d have to pay the charges out of his own pocket. The customer,
however, didn’t feel he was responsible for the charges. Days
turned into weeks and weeks into months. "Phone conversations
with the insurer resulted in nothing," says Melfi. Even the
adjuster’s supervisor was called but, again, nothing positive
resulted from the conversation.

Then the customer changed his mind again:
He now wanted Melfi to repair the vehicle. The problem was, Melfi
no longer wanted to. "Would you want to after the owner had
been advised that your shop was incompetent?" asks Melfi.
"After you had already returned parts and absorbed a 20 percent
return fee? … And, given the strong steering tactics used by
the insurer, would you want to subject yourself to even dealing
with them in this instance?"

Melfi later heard from an executive at the
insurance company home office, who said Melfi could repair the
vehicle if he chose to. Melfi told him "no thanks."
He also told the executive he would apply for a mechanic’s lien
if the vehicle wasn’t removed and the charges paid. Both were
done the same day.

Nearly six months after the fiasco began,
the vehicle still hasn’t been returned to the owner. Melfi knows
this because his agent is also the agent for this particular customer.
The agent even hinted to Melfi that he expected this customer
to purchase his insurance elsewhere come renewal time. Says Melfi:
"So the question I have is this: Who won in this scenario?
Did the customer? No. Did the insurance agent? Hardly. Did I?
No. In effect, did the insurer win? I don’t think so.

"This is one occasion where I have a
message for the insurer. … How many customers can you afford
to lose?"

At this point, some of you might be asking
what was accomplished here. After all, no one won. True. In fact,
some might argue that Melfi only further provoked the situation,
making life harder on the vehicle owner. That, too, may be true.
The vehicle owner probably had no idea what was going on. He just
wanted his car back. He didn’t care who fixed it. He was manipulated
and taken advantage of – but not by Melfi. If Melfi hadn’t fought
for his rights, he wouldn’t have gotten paid for work performed
and expenses accrued. He may not have won, but he didn’t lose.
Did the vehicle owner suffer in the process? Absolutely.

That’s another part of the problem. It’s not
vehicle owners faults they don’t know they’re being steered. And
they absolutely shouldn’t have to suffer as a result of an insurer’s
actions.

To help eliminate consumer suffering, steering
legislation and consumer education have become industry priorities
in recent years. For example, legislation recently passed in Montana
protecting competition and the rights of consumers. How did this
come about? Repairers worked together to get the job done; they
also worked with their state insurance commissioner.

While the Montana law is fairly specific compared
to most state steering laws, Nelson hoped the law could be even
more specific by addressing "competitive bidding" –
and he wrote a letter to the state insurance commissioner to explain
his position. An excerpt from the letter reads: "I’m sure
you’ve heard how some direct repair programs steer work to certain
shops. In my area, there are no DRPs, but there is another way
work is directed. This is by a system the insurance industry refers
to as ‘competitive bidding.’ I believe this system doesn’t allow
free-market competition, and this is why: Some shops consistently
write estimates that reflect the insurance companies obligation
to return the vehicle to its pre-accident condition. Other shops
choose to use this process to obtain work by providing the customer
with an estimate for the cheapest possible repair, often using
procedures and parts that aren’t recommended by the original equipment
manufacturers – thereby voiding the manufacturer’s warranty and
devaluing the vehicle.

"A claim handled under the competitive
bidding systems works like this: The insurance company instructs
the customer to obtain two estimates. Upon receiving the estimates,
the insurance company informs the customer that they’ll pay only
the amount of the lowest estimate. As I understand it, it’s the
policy of the Montana State Insurance Commissioner that the insurance
company is obligated to pay the amount of the lowest complete
estimate. However, the insurance company rarely distinguishes
which estimate is complete and, as far as I know, never which
estimate will return the vehicle to its pre-accident condition.
They simply pay the lowest. It’s also the policy of the insurance
commissioner that the customer can select the repair shop of his
choice. But again, the insurance company rarely informs the customer
of this unless the customer tells the insurance company he’d like
to have the shop that wrote the higher estimate repair his vehicle.
In that case, the insurance company informs the customer he’ll
have to pay the difference …

"The insurance company revokes the right
of customers to choose the shop that will repair their vehicles
because most consumers can hardly afford their deductible, let
alone several hundred … dollars over and above their deductibles,
to have their vehicles repaired correctly. By taking quality out
of the free-market equation of quality and price, free-market
competition no longer exists. This system of competitive bidding
is managed competition at its worst, and it hurts my business
on a daily basis. Please help me and our industry by passing this
bill with the amendments proposed by MCRS."

Unfortunately, nothing on competitive bidding
made it into the Montana law. "[Our steering law] isn’t going
to solve all our problems," says Nelson, "but everything
we do helps a little bit.

"Our law has loopholes like every law
does, but it still helps us to empower consumers. I can show a
customer the law, and it gives me credibility. It helps to back
up that what I’m saying is true."

Passing laws, however, is meaningless if no
one knows about them – so Montana repairers took it a step further:
They went on a crusade to educate consumers. In a recent television
public-service announcement, Montana’s State Auditor Mark O’Keefe
(who regulates the Montana insurance industry) walks through a
repair facility and discusses the rights of consumers to choose
a body shop. He also explains to consumers that shops included
on lists given to them by insurers are recommendations – that
consumers aren’t required to use a shop from the list.

It’s through high-profile efforts like this
– along with shop owners taking the time to educate each and every
customer (or potential customer) – that steering can be dealt
with effectively.

But Montana is the exception here. The Automotive
Service Association (ASA) recently found that while 22 states
have good anti-steering laws (enforcement wasn’t taken into consideration),
six states have fair/weak legislation, and 22 states have no anti-steering
legislation. And, if you’re a repairer in New Jersey, you’re now
faced with a recently passed law that actually helps to steer
consumers. New Jersey’s Automobile Insurance Cost Reduction Act,
meant to help lower the costs of insurance, contains a section
that reads: "If an insurer has a financial arrangement with
an autobody repair shop or other repair facility or a network
of facilities for the purpose of repairing vehicles covered under
physical damage, collision or comprehensive coverages, the insurer
shall not deny a person the right to select an autobody repair
shop or other repair facility of his choice for repair of a covered
vehicle, provided that such autobody repair shop or other repair
facility elected by the person accepts the same terms and conditions
as the shop, facility or network with which the insurer has an
arrangement and agrees to repair the covered vehicle at the same
price."

Says Nelson regarding the law: "It’s
steering based on price. Labor rates will be set based on DRP-shop
labor rates. But these DRP shops are basing their labor rates
on being given a large volume of work, so non-DRP shops are going
to have to match the discount even though they aren’t getting
the volume.

"This law has scared a lot of people.
If it can happen there [in New Jersey], it can happen anywhere."

So what can repairers do? Be aware of what’s
going on and be prepared – if necessary – to bombard your governor
with well-written, professional letters explaining your position.
And educate consumers! "With the kind of money insurance
companies have, they can get a law passed, regardless of what
we do. That’s why we have to empower the consumer," says
Nelson.

Remember the Illinois shop owner mentioned
earlier – the one who encountered steering but didn’t know it?
His state has a law regarding steering, but since he didn’t know
about it – or even what steering was – the law did him no good.
Had he been better informed, he could have addressed the vehicle
owner’s concerns, advised him of his rights and possibly gained
a customer. Instead, the vehicle owner went to a preferred shop,
the insurer saved some money and the shop owner got the shaft.
(And, if the customer’s vehicle wasn’t repaired correctly, he,
too, got the shaft.)

Besides knowing about a law, people (shop
owners and consumers) also need to understand the law – and know
their rights. For example, regardless of whether or not your state
has an anti-steering law, consumers still don’t have to obtain
more than one estimate. Most consumers don’t know this. So teach
them. Help to educate them.

"We spend 20 to 40 minutes on every estimate
we write," says Nelson. "It’s costly, but it’s worth
it because it takes that long to explain the repair process to
the consumer. We know that if we don’t take the time, we won’t
see that person again."

Once informed of their rights, however, a
lot of consumers will still cave in to insurers. To offset this,
some shop owners, such as Nelson, have begun giving forms to consumers,
which can then be given to insurers. While the forms vary, they
basically state that: 1. The consumer is aware of his right to
turn in one estimate. 2. He’s chosen this particular shop to repair
his vehicle. 3. A copy of the listed repairs is enclosed. 4. This
contact is the official notification to give the insurance company
the opportunity to inspect the vehicle. 5. If inspection isn’t
made within five days, repairs will begin.

"You have to be careful when you use
a form like this," Nelson says, "because it tends to
make insurance companies mad. But it seems to be easier for the
customer to hand the insurance representative this signed, typed
statement, which places the ball in the insurer’s court, rather
than having a verbal confrontation."

Nelson says he picks and chooses when to use
the form. For example, if he’s had a lot of trouble with a particular
adjuster in the past or the consumer is a repeat customer who
definitely wants Nelson’s shop to repair the car, Nelson uses
the form.

No doubt, it takes a lot of work and a lot
of time to educate consumers. But, it’s necessary. If you don’t
influence them, someone else will. "It’s easy to encourage
consumers to take their vehicles somewhere else," says Loftus.
"Insurers do it with question marks and innuendoes to scare
the little people."

But people are only scared of the unknown.
If consumers are educated to understand their rights, they won’t
be as easily intimidated, confused or manipulated. Cattle can
be rounded up and steered because they don’t know any better.
Same thing with people. Steering can only work on those who don’t
know what steering is. Get involved. Learn what your state’s law
is. If your state doesn’t have a law, work on getting one passed.
Once you’re informed, concentrate on teaching consumers their
rights – and quit worrying about "teaching insurers a lesson."

Informed consumers will take care of that
for you.

Writer Georgina Kajganic is editor of BodyShop
Business.

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