Reindeer Games - BodyShop Business

Reindeer Games

Many shop owners eagerly anticipate the results of State Farm’s annual labor rate survey like kids on Christmas morning.

What did the fat man – or, in this case, the insurer with the fat wallet – bring them?

After all, they’ve been good little shop owners all year long, so maybe State Farm will gift them with a labor rate increase.
(In case you missed it.)

Because so many shop owners mistakenly rely on State Farm’s “prevailing rate” survey to price their shop’s work, you can imagine the concern expressed by many shop owners when a rumor circulated that State Farm was discontinuing its survey.

How would shops ever get to increase their labor rates if State Farm stopped doing the survey? Who would tell them what they’re supposed to charge? One fellow at a collision industry state association actually went so far as to declare the survey’s demise “tragic.”
What’s truly tragic here is that so many shop owners wholeheartedly buy into the fallacy that third-party payers (i.e. insurers) set rates.

Luckily (or unluckily, depending on how you look at it), it was just a rumor. State Farm has no plans to discontinue its survey.

But so what if it did? You don’t have to be the brightest bulb on the tree to wonder about the legitimacy of a survey conducted by an insurance company. You want to talk about rumors? There are all sorts of them when it comes to how State Farm conducts its survey:
Rumor: Returned surveys that don’t agree with basic concessions or surveys not within a labor rate range are thrown out.

Rumor: Bottom-feeder shops submit surveys with rates well below prevailing rates in the hopes of getting work. (Says one Pennsylvania repairer: “That worked for State Farm. In fact, in one local market – up in the New England states – they actually lowered the rate $2 an hour after taking the survey.”)

Rumor: If you don’t conform to State Farm’s standards or fixed rates, your survey response is dropped into a second tier of shops that don’t get averaged into the whole.

So are any of these rumors true? Who the heck knows because …
Fact: State Farm owns and controls the data and isn’t open to audit of any kind. Says industry veteran Charlie Barone: “It’s essentially the Dow Jones of the claims industry. The surveys could all come back with a door rate of $90 per hour, but State Farm would have no duty to disclose the results.”

So that’s problem No. 1: the issue of authenticity. Then there’s problem No. 2: the issue of indifference on the part of the repair industry. Hypothetically, let’s assume that State Farm is trying to conduct a fair, accurate survey. Thing is, if you – as a shop owner – don’t respond, the survey becomes less accurate.

Says a Connecticut shop manager: “Many shops are too stupid or too lazy to fill out the survey, so they only hurt themselves. State Farm weighs each survey by the number of repair bays a shop has. The big DRP shops that tend to have lower labor rates skew the results when the small shops with the higher rates don’t participate in the survey.”

The biggest problem here, however, is the issue of shops allowing insurers to set rates to begin with. Many such shops panicked when they heard State Farm might discontinue its survey because without it (especially in areas where State Farm is a major player) these shops would be flying as blind as Santa without Rudolph. If there were no survey, other insurers couldn’t have that State Farm benchmark used against them, and they’d have an easier time “controlling” rates.

But the fact you must remember – and the gift that keeps on giving – is this: Insurers “control” rates only as much as shop owners allow.
“It doesn’t matter a lick what State Farm says the prevailing rate is if shops aren’t willing to succumb,” says a Pennsylvania repairer.

“The repair industry has blindly accepted the idea that dealing with insurers is an obligation, rather than a courtesy for our customers,” says an Illinois shop owner. “We’ve given up power to outside entities.”

What we have here, it would seem, is an unfortunate case of the tail wagging the reindeer.

“Shop owners who know their true cost of doing business and set their own labor rates wouldn’t be affected by State Farm abandoning their survey,” says another repairer. “Unfortunately, if it did happen, the industry as a whole would be hurt because so many shop owners believe insurers set rates.”

Georgina K. Carson, Editor
[email protected]

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