Is the Insurance Company Also the Shop's Customer? - BodyShop Business

Is the Insurance Company Also the Shop’s Customer?

 


Rick Little, Owner
Rick’s Auto Sales & Service Inc.
Coshocton, Ohio

Viewing insurance companies as your customer is an unhealthy and dangerous thing to do and will only lead to giving them complete control of the industry. We need only to look at the healthcare industry to see how subtly and completely this is happening. The insurance company dictates who your doctor will be, what hospital you can visit, where you can get your prescription drugs and how much they’ll pay for all of the above.

In our industry, the insurance company pays the bill, but ultimately, the consumer pays the bill through premiums. This thing has gotten turned around to where insurance companies have assumed a lot of authority they don’t have. Their job is to pay the claim, period. They’ve taken the attitude that they can dictate how the repairs are made, what parts are used and where the job’s going to be performed.

The only time insurance companies become the customer is when they have a DRP contract with the repair shop. If you’re on a DRP, you’re basically answering to the insurance company, and the vehicle owner becomes secondary. If you want to keep that DRP contract and that company is making demands (things you wouldn’t normally do), you’re going to have to do those things in order to keep that contract.

I’m on one DRP, but do I view that insurer as my customer? No. To begin with, I recognize that all DRP relationships are not the same. I’ve had one particular DRP for 17 years. At the beginning and throughout the ensuing period, they’ve made no extraordinary demands. They pay current rates and pay for procedures that have become viewed as standard throughout the industry. They ask only that we search more diligently for used and reconditioned parts and ‘push’ A/M parts whenever possible, but never force them on the customer. (We get graded on this on a regular basis.) But they give customers the option of OEM parts if they insist. With this criteria in mind, I can still place the customer first without compromising the level of service or my own ethics. I don’t believe in trying to serve two masters.

Four years ago, I gave up a 13-year DRP relationship with a major company because that insurer had become too demanding in the concessions it wanted and in ‘forcing’ the use of A/M parts. I knew that if I agreed to their demands (paint caps, blend within repaired panel, no charge for buffing, reduced hourly rates, etc.), they would use this as leverage against other shops in my area and try to force them to work under the same criteria. Of course, when I refused, that DRP contract was immediately given to one of my competitors, and now I’m forced to deal with this insurer based on the concessions and agreements made by my competitor.

This industry has played a large part in getting us where we are today. Greed and insecurity have been major factors influencing shop owners to accept DRP agreements. The lure of a steady flow of work is sometimes greater than the aspect of lower profits and relinquishing control of their own business. … Why do so many shops view the insurance company as a customer? Because these shops have the mistaken idea that the money is coming from the insurer.

Even though I view insurance companies as only third-party payers, there can be times when they have a legitimate request or criteria guidelines that may warrant consideration. I believe in trying to be cooperative when I can and not treat every situation as a confrontational issue.
Is it possible to create a win for the vehicle owner, the insurer and the collision repairer? Yes. By writing a fair and honest estimate, doing the best job possible within those parameters and getting paid for all necessary procedures to return the vehicle to pre-loss condition. Everyone wins.

If you’ve been viewing insurance companies as your customer, instead try viewing them as the ‘middleman’ — a middleman who’s there to make a profit by handling the insured’s money for him.

Comments? E-mail them to BSB Editor Georgina K. Carson at [email protected].



John Sweigart, Principal
The Body Shop
Pittsburgh, Pa.

 

There in this question does it imply that the insurer should come first over vehicle owners? The inherent flaw in jumping to that conclusion is the assumption that the two oppose each other. You must meet the needs of both equally. You can’t shortchange either.

If your belief is insurance companies are simply third-party payers, then they’re not your customer. But if you view insurers as a source of revenue, then you must serve their needs as well.
Insurers protect the cost side of the repair for their insured’s and their own profitability. The vehicle owner expects quality, fast repairs and great service. If you can’t make money providing all of that, then you need to rethink your business model or just don’t do insurance work.

It doesn’t matter who’s paying the bill or how much they’re paying. You must deliver quality or your customer base will disappear.

I think most would agree that the goal of any business is to make money. But you must understand who the customer. That’s square one. Who has the money (because that’s what I want), what is it that they’d like for that money and how do I do that so I make a profit?

When an insurer says something like, ‘We don’t pay for sand and buff or cover car for overspray,’ they’re not saying don’t do it. If you want to deliver a quality product, you do it; you just don’t get paid for it. Think of it this way. If you’re at a restaurant and order bacon and eggs, you’re probably not willing to pay for salt and pepper, but as a diner, you better get it or you won’t go back there. If you own the restaurant, you figure out how to do that.

I agree that you can’t make any money, or very little, meeting [DRP] requirements — if you operate your body shop in the traditional model. That’s my whole point. Profitability has greatly declined in our industry. Much of this is driven by insurers gradually moving into the role of customer through DRPs.

You have two choices. You can either focus on moving the insurer out of this position, or you can reexamine the cost structure of your business, which is a direct result of your operating model (how you perform the tasks required to deliver repaired wrecks). To make more money, you can either charge more or cost less.

How can a shop do what’s best for the customer (a high-quality repair) and do what the insurer wants (a cheap repair)? Just do it. But aren’t you really asking, ‘How can you make money doing it?’ Producing high quality at a low price requires reducing your costs.

Certainly, the customer will always dictate the price. This is a customer economy. And the customer will always want more. The key is figuring out how you’re going to compete.

When a shop views an insurer as a customer and contracts with that insurer — agreeing to certain concessions to get the referrals — does this drive down rates for the entire market area? Sure, to the extent that those cheaper shops can meet the volume needs of the insurer. Don’t forget, insurers need us just as much as we need them. These wrecks have to be fixed somewhere.

It’s our individual choice to decide who the customer is. Those who choose the vehicle owner alone will have a different business model than those who choose both owner and insurer. Those who see value in the insurer relationship will be working to deliver high quality and service at a lower price. Either way, we all should be spending our time working to rethink our business model to meet the customer’s needs. It is possible to create a win for the vehicle owner, the insurer and the collision repairer.

You decide what’s right for you — either the insurer can help you grow or not. But any successful business starts by identifying who the customer is and what he needs. It’s the oldest adage in business, ‘Find a need and fill it.’ If you haven’t done that yet, you better.

Comments? E-mail them to BSB Editor Georgina K. Carson at
[email protected].

You May Also Like

Facebook Interest Groups: Down the Rabbit Hole We Go

I joined a Honda Civic 11th Gen Facebook group and quickly realized I was out of my element.

Shortly after I bought my Honda Civic Sport a year ago, I joined a “Honda Civic 11th Gen” Facebook group, which is “for those who own or are interested in the Honda Civic Sport 11th gen.” And I kind of regret my decision because I feel a little out of place.

Collision Repairers: Take the Oath … Continued

Taking back the industry begins with collision repairers starting to work together for the benefit of both themselves and their customers.

AI and Auto Body

Artificial intelligence is making an impact in the auto body industry, streamlining the estimating process and improving the customer experience.

Building Charitable Giving into Your Auto Body Shop’s Business Plan

Planning, thoughtful implementation and thorough tracking of results will deliver a successful philanthropic program that also delivers a return on investment.

Exit Strategies: Personal Vision & Financial Planning

The most critical first step in an exit or transition plan is to develop a financial plan and personal vision of what your life will look like post-business.

Other Posts

Collision Repairers: Will You Take the Oath?

Today’s collision repairers are challenged with a new set of concerns, one being the need to follow OEM repair procedures.

Three Generations Keep Trains Running on Time at CARSTAR Jacobus

CARSTAR Jacobus Founder Jerry Jacobus and son Dave share a passion for collision repair and also model railroading.

Auto Body Repair: The Right Way, the Wrong Way and Another Way

In a perfect world, every repairer would make the right decisions in every repair, but we don’t live in a perfect world.

The Digital Blitz

We talk so much about how much collision repair is changing, but so is the world of media!