Insurers Don't Control Pricing - BodyShop Business

Insurers Don’t Control Pricing

"That's almost like asking, "How much does a Chevrolet Tahoe cost?"

If you went to 10 dealerships, you’d get 10 different prices. Heck, you could probably get 10 different prices at the same dealership if you talked to 10 different salespeople.

But which one is the right price?

Bruce, licensure gives you the legal right to write estimates in New York, but being licensed doesn’t make a person a “definitive authority.” In your situation, you have two equally credentialed individuals giving two different prices. Since the credentialing agency – the New York State Department of Insurance – says they’re both equally qualified, how do you know who’s right?

(For what it’s worth, I’d be willing to say that they’re both wrong – the final INVOICE will most likely be different than both of the ESTIMATES.)

Keep in mind that the shop estimator’s job is to get a fair price for the work required, while ensuring that all of the damage gets addressed and that the techs get compensated fairly for their efforts.
On the other hand, most insurance appraisers feel it’s their job to save their company money (it’s really not, but that’s the way the majority of them feel).

I remember one appraiser I had to deal with. He would come in, look at the vehicle, take a copy of our sheet, go to his car and simply cut our sheet down to the bare bones. It only took a couple of times to realize what he was up to, so we simply stopped giving him our estimate. His times came out much higher when he had to write his own sheet.

I guess it was easier to just cut a little here and a little there than it was for him to write his own appraisal of the damage.

But back to your question – two equally credentialed individuals with somewhat opposing views. Believe it or not, it’s not a matter of who’s right. It’s more a matter of who can better present their position – who can argue their point more effectively.

Crawling
I think the problem is that not enough shops realize that insurance claims are essentially “offer and acceptance.” (It’s actually far more than that, but we need to crawl before we walk.)

The insurance company is offering $X to fix a dented quarter panel, but the shop is stating that it’ll cost $Z. At this point, the shop has three choices, and I’ll give you a hint – the first two aren’t the best choice.

1. Simply “kick it to the curb.” One problem with this is that if an unscrupulous appraiser sees this happening, it can develop into a pattern of abuse, where he’ll consistently underwrite to get the job out of your shop.

The underlying concern with this choice is that it makes the insurer right – the repair CAN be completed for the underpaid amount they wrote because there will always be some shop willing to do the repairs for the amount listed, possibly out of desperation or perhaps to gain favor with the carrier. This, in turn, further suppresses the industry. (A shop that constantly works for lowball insurance offers often ends up being a doormat, getting deeper and deeper into a pit of despair. And as they get deeper, they become more desperate and end up working for increasingly deficient amounts. Shops that participate in practices like this certainly aren’t part of the solution; they’re part of the problem.)

2. Keep the job, accepting whatever the insurer is offering. This, in my opinion, makes the shop slightly worse, business-wise, than the shop willing to take whatever bones the insurer throws them.

The reason I say this is because this shop has prepared an estimate and has a fair idea of what it’ll take to get properly compensated for repairing the vehicle. At this point, accepting the job on the insurer’s terms is business suicide – this shop actually knows how much it’s losing. Why would anyone do work knowing they were getting underpaid (unless it’s the “gaining favor” thing). But, again, that’s a great way to shorten the lifespan of a business.

Walking
3. The third and more preferable choice is to “negotiate” a better price.

For what it’s worth, I don’t like the word “negotiate.” This suggests that the shop was initially overcharging and has room to move on the price.

If your price is accurate – that is, if the times and procedures you’ve listed are reflective of the necessary work – how can you agree to less?

Negotiating down can often lead to inflated times, writing higher than necessary for no other reason than having the ability to concede. And if an appraiser learns that he can make you move on your times or prices, he’ll come to expect it all the time, and your credibility will suffer.

I believe it’s much better to simply call it like you see it – write it right from the outset. If you have an accurate figure at the beginning, it’s much easier to argue your position intelligently.

Some appraisers simply need to be educated. And while it’s not the shop’s job to train insurance personnel, it sure beats letting a moron come into your shop and beat you down.

Explain why you need the time – show the adjuster how you do this particular type of repair if possible (another car with a similar type of repair is a great demonstration model).

I should also mention that I’m adamantly against “concessions,” which are borne on the backs of the technicians. When the shop agrees to do a procedure for free, it’s not the estimator or manager who’s working for nothing; it’s the technician – the very lifeblood of the business.

Technicians are not pack mules; they shouldn’t be burdened by the shop’s poor decisions. If the shop makes concessions, the shop should “eat it” – flag the tech the time he deserves and take that money from the bottom line.

And it’s often the little things that become the sticky point. R&I moldings and trim, masking jambs, finesse sand and polish – all these things are items that an insurance appraiser claims he can’t pay for unless he sees it happen.

Fine. Take a walk back to the prep area, and show him how you’ve masked the jambs and that the moldings/trim have been removed. Go through the detail department and show the appraiser that you de-nib to remove debris and polish to match the paint texture.

And once you establish a measure of credibility with an appraiser, it’ll be much easier to get what you need in the future. Establish yourself and your facility as an honest place of business, and other appraisers will come to recognize that fact as well.

Trust and integrity are important in every aspect of life. If someone is found to be lacking in either, they’re usually shunned by others.

The same holds true for business. A business that cheats consumers – or insurance companies – develops a reputation as being a place that should be avoided and typically leads to the failure of the business. On the other hand, a respectable business is often known as “the place to go.”

Running
The biggest part of the problem here stems from the lack of knowledge – both on the shop’s part as well as the vehicle owner’s. More and more shop owners, however, are realizing that they’re not earning the return on their investments that they should, understanding that they’re in business and that to survive, they need to make money.

Shops also need to realize who’s ultimately responsible for the finished product and to understand the contract of insurance and how it relates to repairs, as well as what the contract actually promises the consumer. It also helps if the shop is well-established, and the management and owners are determined.

Generally, the insurer is obligated to pay the amount that’s “reasonable and necessary” to repair the damage. That’s not what insurers say though. They usually claim that they only owe for what’s “usual and customary.”

And there’s a BIG difference between the two.

The Contract of Insurance
Let’s examine what the contract of insurance actually provides. Since all states have slightly different language in the contract and in some cases the terminology varies from contract to contract within a state, it’s advisable to review actual contracts from your own state.

Usually the insurer has three very distinct choices when it comes to handling a claim. Most contracts say something like, “We may pay for the loss in money, or repair or replace the damaged or stolen property with property of like kind and quality.”

Take a close look at the actual wording of this. Each option is clearly separated by the word “OR.” It doesn’t say, “We may pay for the loss in money, and/or repair and/or replace the damaged or stolen property with property of like kind and quality.”

The word “or” clearly indicates a choice.

A menu that says “coffee or tea” means you have to pick one – you don’t get both. The same applies to the contract of insurance.

The insurer can write a check, OR they can roll up their sleeves and fix the damage, OR they can give the consumer another undamaged vehicle.

Which one have they chosen? Aside from a few programs such as Allstate/Sterling, I’ve never heard of an insurer taking care and custody and physically repairing a damaged automobile. With precious few exceptions, I haven’t seen them actually replace the damaged property either.

In nearly every claim I’ve ever dealt with, the insurer pays in money.

Keeping in mind that there’s no provision within the contract to co-mingle the options, there’s no reason (or “right”) or provision for the insurer to direct the repair, the methodology, the parts or their sources, or anything else if they’ve decided to pay. Once they make the choice to PAY, they’re stuck with it – unless the shop backs down.

Reasonable and Necessary
Is it “usual and customary” to charge for masking the jambs, R&Iing moldings and trim, or finesse sanding and polishing? Maybe not in your area – but I wouldn’t be concerned with that at all.

The proper question is, “Is it reasonable and necessary” to perform these tasks?

Well, if you don’t remove the trim, you risk the chance of peeling, if you don’t mask the jambs and recessed areas, you can almost guarantee that there will be dry, dull overspray in the jambs, and if you don’t sand out the debris and polish the finish to remove the sanding scratches and match the texture, the paint job won’t be right. So I’d have to say that these procedures are indeed necessary.

Is it reasonable to expect to get paid for the work performed? I’d say so – unless you’re running a charitable, non-profit organization.

If the most common rate shops will work for in your area is $32, is it “reasonable” to charge $36? I think so. It seems like free enterprise to me.

In fact, this very question went to court. A consumer in Massachusetts was charged $4 more per hour than the insurer was willing to pay. The insurer, Arabella Mutual, stood firm; they would only pay the “prevailing rate.” The court, however, found that a difference in market price was a normal aspect of any business and that the insurer couldn’t not pay simply because they might have been able to get the job done for less elsewhere. (For more details, see Diane Rice v. Arbella Mutual Insurance Company Docket # 03 CV 0216 Quincy District Court, Quincy Massachusetts.)

So Who’s Right?
You are – if you want to be (as long as the work is necessary, and you’re being reasonable).

YOU have the control.

NOBODY can dictate how you run your business.

Can you make this work for you?

I’m reminded of something Henry Ford once said: “Whether you think you can or think you can’t, either way, you’re right.”

Writer Patrick Yurek is the vice president of Collision Consulting LLC (www.CollisionConsulting.com). He has 22 years of industry experience and has held every conceivable position in a collision repair facility. Among his credits are several PPG certifications and GM technical certificates. He was also the president of the General Motors Service and Parts Managers Organization of Western New York. Yurek can be reached at [email protected] or [email protected] or at (704) 821-4190.

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