Do you inform
consumers about direct repair and what it means?

Like all controversial issues, there are two
sides – and a whole lot of gray area in between. At times, it’s
even hard to establish the so-called battle lines. Is it the insurance
company against the consumer or is it the insurance company against
the repair shop? Is it the claims adjuster against the shop owner
or is it the consumer against the shop owner?

Let’s not kid ourselves about what’s going
on. The insurance companies need to make profits to stay in business.
They try to keep rates low to attract customers, but they must
also keep stockholders happy. So adjusters try to represent both
consumers and the best interests of their companies.

Across the battle field, however, shop owners
also need to post profits at the end of the year.

And stuck in the middle of this war are consumers.
What do they want from insurance companies and collision repair
shops? The majority want their vehicles fixed as fast as possible
with the least amount of out-of-pocket expenses and a minimum
amount of hassle. That’s fair. That’s why they purchase vehicle
insurance and take their banged up vehicles to repair shops. However,
many don’t fully understand the ramifications of direct repair
and aftermarket parts or how they affect monthly premiums. Most
don’t know that modern collision repair means aftermarket parts.

Insurance companies, in return for what they
feel is a very reasonable rate, expect collision repair shops
to help keep repair costs in line by using aftermarket parts as
often as possible. It sounds good on paper, but this is where
the war truly begins. Increasingly, consumers are concerned about
the value of their vehicles once they leave the repair shop. They
may not want aftermarket parts put on their vehicles, but they
also don’t want to pay the extra cost. It seems that the “good”
intent of aftermarket parts has come back to haunt the entire
collision repair industry.

How do you uncomplicate this incredibly complicated
issue for your customers? Education is the key.

A True-Life Tale

To better understand the impact of consumer
education, let’s take a look at a true story.

In the last five years, shop owner Jon Smith*
has finally gotten control over his shop’s finances. He’s also
added a high-tech straightening system and kept himself and his
technicians up to date. He works long hours to make his shop successful
because he loves the collision repair business; he wants to make
money, but, ultimately, he wants satisfied customers who become
repeat customers and then rave to their families and friends about
his quality service and repairs.

Now, to the tough part. It’s 1 p.m. Friday
afternoon. One of Jon’s best techs walks in his office with a
look of disgust.

“What’s the matter?” Jon asks.

“The aftermarket headlamp assembly for
this #!&* car doesn’t fit,” the tech replies.

Jon throws down his note pad and pen, gets
up from his chair and heads out into the shop. Sure enough, the
aftermarket part doesn’t fit. To add to the problem, he’s promised
the car to the owner by close of business today.

What does he do? A quick call to the local
parts department reveals that they have the OEM parts he needs.
Jon hangs up and then dials the insurance adjuster’s phone number.
The adjuster approves the purchase of OEM parts, so Jon calls
the parts department once again, orders the parts, hops in his
car, drives to the parts department, picks up the parts and returns
to the shop.

But, by the time he gets back, it’s too late
to install the parts today. So Jon calls the customer, who agrees
to pick up the car Saturday.

Wait a minute. No screaming, no foul language,
no guilt trip? Wasn’t the vehicle owner even a little upset? Yes,
but not at Jon.

Keep in mind that the fiasco that just occurred
actually started Monday and has been building ever since. Why
did it start on Monday? Because the original estimate specified
the use of aftermarket sheet metal – the left and right front
fender, as well as the hood, to be specific.

On Tuesday, when the techs were ready to replace
the parts, they discovered they didn’t fit. Jon called the adjuster
who, in turn, came out to the shop, agreed that the parts didn’t
fit and told him to get OEM parts. Jon ordered OEM sheet metal;
the techs installed the parts and then refinished them.

On Friday morning, one of the techs tried
to install the aftermarket headlamp assembly only to find it didn’t
fit. Now, we’re back at the beginning of our story.

With all that in mind, let’s go back to our
hopping mad customer. Remember, however, that our customer isn’t
mad at Jon. Why? First, Jon, as a shop owner, took the time to
explain to the consumer that her insurance company would require
LKQ parts (aftermarket) if they were available. He also explained
that, typically, aftermarket parts are extremely difficult to
work with and that many LKQ parts aren’t the same quality as OEM
parts even though they’re supposed to be. He explained to her
that this is where work delays start: He orders the LKQ parts
he’s told to and tries to install them. If they don’t fit, he
calls the adjuster who comes back to the shop, realizes they don’t
work, tells him to order OEM parts … well, you get the picture.

Unlike many other stories of this kind, this
one does have a happy ending. This particular consumer got lucky
because, ultimately, the aftermarket parts didn’t fit and the
insurance company permitted the use of OEM parts. She was also
lucky because she was working with a shop owner who was willing
to play the game to satisfy the insurance company, knowing that
after his techs tried the aftermarket parts, this particular vehicle
would get OEM parts.

The Ethics of Education

Since, in our true story, the consumer was
referred to the shop by another satisfied customer, direct repair
wasn’t an issue. But it could have been.

The shop in our story is, in fact, a preferred
shop, but not for any of the “household” names in the
insurance business. It’s a preferred shop for an older, established
insurance company, but not one that’s known for its automobile
insurance. The reason this insurance company insures automobiles
is because it felt there was a market niche for customers who
wanted their cars fixed right, the first time, without aftermarket
parts.

By state law in Iowa, a repair shop must notify
(included in the estimate) the customer of the proposed use of
aftermarket parts prior to the repair of the vehicle. Each proposed
aftermarket part must be identified on the estimate. Also included
is a clause stating the aftermarket parts are not warrantied by
the vehicle manufacturer. Aftermarket parts also must have the
manufacturer’s logo or name visible upon inspection.

A question of ethics: What if a direct repair
shop, whose concern is volume business with a big insurance company,
puts this notice on the estimate and, if the customer asks no
questions, doesn’t offer an explanation?

The concept of direct repair is neither good
nor evil until such time that an insurance company asks for unethical
concessions or a shop fails to fully inform a potential customer
about the use of aftermarket parts because it fears losing business.

And what about those shops that use aftermarket
parts without question? If a mounting hole needs to be enlarged
to make the part fit, so what. If they try to adjust an aftermarket
headlamp and can’t, they simply do the best they can. These shops
perpetuate what’s wrong with the use of aftermarket parts and,
in some cases, direct repair programs.

Maybe the most critical question is what kind
of message does this send to technicians just entering the industry?
The industry isn’t attracting enough interested and qualified
technicians – that’s a fact. How do you preach quality repairs
on Monday when by Wednesday the quality thing goes out the window
because your newest technician has to put aftermarket parts on
a vehicle when you and he know it isn’t right?

So what do you suppose our particular shop
owner does when a disgruntled customer asks, “What other
insurance companies are out there that won’t dictate aftermarket
parts?” You guessed it. He offers a couple recommendations,
so he can’t be accused of unethical practices. He’s also very
careful about explaining that, in most cases, insurance premiums
will be slightly higher with these companies. Our shop owner simply
educates the consumer about other options and then let’s the customer
decide.

Because this shop owner refuses to use aftermarket
parts, unless they really are the same as their OEM counterparts,
he gets a lot of repeat customers. He’s also honest in his dealings
with both customers and insurance companies. He takes the time
to educate and empower his customers.

Before you mount your white charger and ride
off in search of an evil dragon to slay, make sure you understand
what this shop owner does. He’s very opinionated about the use
of aftermarket parts, but he doesn’t show it to the wrong people
or at inappropriate times. Self control is the watch word here.
Our shop owner informs the customer upfront but doesn’t beat the
issue to death. He’s willing to tolerate the extra work and hassle
involved with putting on aftermarket parts to see if they’ll fit.
He also takes the time to involve the insurance adjuster. He has
a battle plan, and he follows it.

Knowledge is Power

While it’s definitely in your best interest
to do all you can to educate consumers on the issues affecting
the industry and, ultimately, the repair of their cars, remember
you’re not alone. Industry associations, the media and other organizations
are also working to educate the public.

Let’s go back to the consumer in our story.
If you remember, she wasn’t mad at the shop owner when he called
to tell her the repairs had been delayed. One reason was because
the shop owner had taken the time to explain the aftermarket parts
issue.

Unbeknownst to him, this same consumer had
read a newspaper article, just days before her collision, about
a class action suit filed against her insurance company regarding
the use of aftermarket parts. In search of more information, she
went to the claims office with the article, but nobody there would
admit to anything. All they said was not to worry because we,
the insurance company, will guarantee all parts that are installed
on your car. The consumer, somewhat suspicious, accepted the answer
but told the claims office she was thinking about switching insurance
companies.

Educating consumers is a big task – one that
may seem overwhelming given the circumstances. But take a lesson
from the shop owner in our story. He did what he could to educate
the consumer and took an active role in changing the way the industry
is perceived. It may not sound like much, but in the hands of
a consumer, even a little bit of knowledge can be a powerful thing.

Fred Kjeld is an instructor at the Hawkeye
Institute of Technology and a contributing editor to BodyShop
Business.

*The name of the shop owner in this story
has been changed.