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Steered Clear

Steering comes in many forms – some illegal and some legal.

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As Doug Johnson drove home from the golf course, he didn’t let the rain or poor visibility deter him from chatting on his cell phone. But Johnson’s conversation abruptly came to an end when he smashed his car into Randy Carwin’s pickup truck, which was parked at a curb in front of Carwin’s shop, Mirror Image Auto Body in Sterling, Colo.”My wife and I were working in the back of our shop,” says Carwin. “My buddy owns a car dealership across the street and was working in his showroom when the wreck happened. He called me, and that’s when my wife and I went outside.”

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Carwin and his wife watched as Johnson emerged from his car. “He got out OK,” says Carwin. “But the airbags had gone off in his face, and I could see he was upset and shaken.”

While the police filled out their reports, Johnson mentioned to Carwin that he wasn’t sure where he was going to take his car to be repaired. But he knew where he didn’t want to take it: a local body shop called Joe’s. Johnson said he’d “heard bad things about that place.”

Carwin, too, had heard bad things about Joe’s. He’d also seen firsthand a few things that made him uncomfortable about Joe’s. For instance, when Carwin wrote an estimate for a potential customer, his estimate was much higher than the one written at Joe’s. Carwin recalls that Joe “forgot” a few damaged items, like a hood.

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In consumer fraud circles, it’s referred to as bait and switch. In the body shop business, it’s known as lowball and supplement.

“I can understand supplements, but they should be for the little stuff you may have missed or damage you don’t see until the car is torn down,” says Carwin. “But when you miss something like a hood, something else is going on there.”

Carwin understood Johnson’s concern and told him that he could leave his car in Mirror Images’ parking lot for the time being.

Ten minutes after Johnson left, an employee from Joe’s arrived to pick up Johnson’s car.

Says Carwin: “I told the guy, ‘I don’t think so. Doug said it wasn’t going to your place. I’m not releasing it to you until I get authorization from him.’ “

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Ten minutes later, the owner of Joe’s called Carwin, saying that he’d spoken to Johnson’s wife and that she’d given authorization for Joe’s to take the car. The owner of Joe’s even had the – let’s use the word “audacity” – to suggest that Carwin send his wrecked pickup truck to Joe’s, too. Says Carwin: “I told him I thought I could handle it myself.”

The next time Carwin spoke with Johnson, he found out that Johnson had indeed given in and agreed to let Joe’s fix his car.

How could someone so adamant about not letting that shop repair his vehicle change his mind, you ask?

Johnson thought he had no choice.

The following is the letter that was given to him from Farmers, his insurance company:

“In a case of an accident. You may choose a company that has set up procedures to work with Farmers’ Claim Office directly – this will speed up the process – or you may choose a company of your own choice, in which case the claims office will contact you directly and you become the middle man in the process, which will slow down the process. This is your choice!!”

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The letter goes on to list the two shops that work directly with Farmers. Joe’s, of course, is one of them. Johnson also said that his insurance agent told him that he had to take his car to Joe’s for an estimate because it would speed up the process and avoid problems.

Does this story sound familiar? It has many variations, but the ending is usually the same and it’s not a happy one for many shops: The car ends up where the insurer wants it to be fixed.

So, do you just throw up your hands and accept your cruel fate? After all, you can’t do anything to change it, right?

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Wrong.

Steering comes in many forms – some illegal (“You have to take your car to this shop”) and some legal (“If you choose your own shop, it’ll take longer to get your car repaired”). All forms, however, are effective.

Regardless of the form it takes, there are things shops can do to fight steering.

According to Dennis Howard, founder of the Insurance Consumer Advocate Network (I-Can), the following are just a few things you can do to prevent potential customers from being steered away from your shop:

  • If the car is being left at your shop, have the owner sign a limited authorization to tear down the vehicle to determine the true extent of damage and to compile an accurate repair appraisal.
  • If the customer expresses a desire to have you do the repairs, whether it be a stored car or a drive-in estimate, have the owner sign a separate form confirming his intent to have your shop perform the repairs should the vehicle be determined to be economically repairable.
  • Advise the vehicle owner that he may be encouraged by the insurance company to have his car taken to a direct-repair (preferred shop) facility. Explain why insurance companies enter into DRP relationships with preferred shops. If you have access to a DRP contract relating to either of the insurance companies involved, provide the customer with a copy of the contract with relative clauses highlighted.
  • Be truthful with the vehicle owner – let him know that it may take somewhat longer for the repairs to be completed at your shop than at the insurer’s DRP shop. But, don’t stop there. If you’re competing against unethical DRP shops like Carwin is, let the vehicle owner know why it’ll likely take longer for repairs to be completed at your shop: It takes a little longer to do the job right. You won’t take shortcuts that compromise factory warranties or passenger safety. Also let the consumer know that insurance companies will occasionally require more documentation from non-preferred shops than from their DRP shops. And this requires more time and administrative effort on the part of the shop.
  • Briefly explain aftermarket parts issues and how proper repairs can maintain factory warranties and minimize post-repair diminished value.
  • Reassure the vehicle owner that you’ll interface with the insurance company on his behalf. No extraordinary time commitment on his part will be necessary.
  • Keep your ASE certifications and I-CAR training classes completed on display for customers to see.
  • Display before, during and after photos of prior jobs.
  • Display “Thank You” letters received from prior customers.
  • Display news articles relating to insurance industry practices and their consequences.
  • If the vehicle owner is interested in learning more about the inner workings of how insurance companies approach claims, show them your scrapbook of news articles and press releases you’ve been accumulating. Refer them to Internet sources of information such as insure.com and ICan2000.com.
  • Immediately fax signed forms to the insurance company(s) involved, advising them of the current status of the subject vehicle and when and where it can be inspected. When possible, fax additional copies to the respective insurance agents. Request the insurance company and/or agent refrain from attempting to “steer” the vehicle owner elsewhere.
  • Begin the diagnostic tear down immediately and compile a complete detailed repair appraisal as soon as possible.
  • Provide the vehicle owner with a detailed copy of the repair appraisal, fax it to him if possible and then fax a courtesy copy to the insurance company(s).
  • If your inspection reveals previous unrepaired or improperly repaired damage, notify the owner immediately. If the owner is unaware of any prior involvement, run a CarFAX VIN search to see if you can help trace prior accident records. The current owner may have a resource available to him to address this prior damage. Unlike some DRP shops that are required by contract to keep the vehicle owner “blind” to such issues, you’re doing everything you can to make sure this car leaves your shop properly and fully repaired while hiding nothing from the owner.
  • Keep the owner informed regularly as to the repair progress.
  • Make sure your customer gets full value for his insurance premium dollar.


A Q&A with Dennis Howard
BSB:
While these are all good, common sense ideas, how are they going to stop insurance companies from steering consumers to their preferred shops?

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Howard: “In and of themselves, they won’t. There’s no one silver bullet that will stop the steering. There are entities out there working on that silver bullet, but it’s not perfected yet. Until such time as it is perfected, each pro-consumer shop must deal with its own problems on a local level.”

BSB: What silver bullets are you referring to?

Howard: “There are two actually. One is potentially explosive. The other is being used as we speak. The potentially explosive one is the 1963 Consent Decree, which is a Federal Consent Order that actually makes steering illegal. There’s an effort out there – www.ConsentDecree.com – working very hard to get the federal government to enforce that order. As anyone who has ever tried to motivate the federal bureaucracy knows, this effort is fighting an uphill battle. I’d encourage readers to go to the site to learn more about this effort.

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“The second involves the use of civil courts around the country. Steering is actually a form of tortious interference. Shops owners who’ve been damaged by an insurance company’s illegal steering efforts can pursue civil recourse to recover their financial damage and become protected from such future illegal activity.”

BSB: Short of an act of Congress or civil litigation, is there anything else a shop can do?

Howard: “Of course. There are a number of subtle things a shop can do that, when combined, can be quite effective. But first, shops need to understand the mindset of the insurance company personnel and the impact they (and their industry) have on consumers.

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“First, shops need to recognize that adjusters are inherently lazy. If adjusters were willing to do actual work, they’d roll their sleeves up and get a legitimate job. I can make that statement because I’ve been an adjuster for more than 30 years.

“Second, shops also need to recognize that most adjusters are basically good people. Another reason why some choose to become adjusters is because of their desire to serve. There’s a certain ego gratification to be able to interject yourself into a chaotic situation – the aftermath of a loss – and solve the problems of those involved.

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“Third, these inherently good – and lazy – people have to perform their duties within the guidelines set down by their insurance company employer. Novice adjusters have typically been brainwashed by their employer into believing what they’re doing is the right thing. More senior adjusters, who may recognize what they’re doing as being less than kosher, find themselves trapped into doing it because of their own economic situation. They can’t go anywhere else and still meet their family obligations.

“Fourth, insurance is a multi-trillion-dollar industry. They spend hundreds of millions of dollars each year in advertising designed to illicit ‘warm and fuzzy’ feelings in the hearts of consumers. And they all but control the legislative and executive branches of federal and state governments.”

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BSB: That doesn’t sound hopeful Dennis. What then?

Howard: “Once pro-consumer shops understand all of the above four points, a good local and national course of action can be formulated:

“No. 1.: Identify and provide financial support to those entities that are laboring on behalf of consumers, as well as those who serve consumers. Determine what you can afford to do, and then just do it.

“No. 2: Set aside a budget for advertising and promotion. Whether large or small, there’s always something that can be done.

“No. 3: Offer to provide free cursory vehicle safety inspections for consumers.

“No. 4: Provide free infant car seat inspections – and make sure they’re installed properly.

“No. 5: Distribute discount coupons for auto detailing and include the free services above.

“No. 6: Make your expertise available to local radio talk shows.

“No. 7: Write pro-consumer articles for your local newspaper.

“No. 8: Make it known that you’re a part of a national pro-consumer effort.

“No. 9: Put your name on bus or cab boards.

“No. 10: Develop and promote your own Web site.

“No. 11: Take part in an ‘Adopt a Highway’ program. Use the DOT sign you’ll get to promote your business name, your Web site or a National Web site where you can be found.

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“No. 12: Contact good personal injury attorneys – and offer to provide rental cars for your mutual clients and take a settlement lien for any un-reimbursed portion of the rental car costs.

“No. 13: Do not adopt a militant attitude when dealing with adjusters. Maintain your ‘cool’ and make it easy for them to do the right thing – or make them assume the liability for not doing the right thing.

“No. 14: By having faxed them the Notice of Intent signed by the customer, you can prove what the insurance company knew and when they knew it (admissible tortious interference documentation).

“No. 15: Create a special form for supplements. Request the adjuster write ‘Yes’ or ‘No’ next to each line item of the supplement. This makes the adjuster’s job easier and puts them on record of denying any specific procedure – a liability issue

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(admissible).

“No. 16: Let the adjuster know you’re working hard to restore passenger safety and minimize diminished value.”

BSB: But all these suggestions won’t work for everyone.

Howard: “Of course not. Every shop has its own unique local considerations. But any number of these will work. Intelligent shop owners will grab hold of those suggestions that work for them, put them together and run with them. In some areas, it may even be prudent to develop a business relationship with the local claims personnel of a quality insurance company. I’m told they do exist. There’s nothing wrong with such a relationship when the shop maintains control of the relationship.

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“A word of caution here: Never, never, NEVER (operative word here is ‘Never’) become dependent upon the insurance industry for the survival of your business and never compromise the quality of work that you return to your customers.

“Another word of caution: Have your attorney read any ‘contract’ that you may be asked to sign with any insurance company. The wording of some of these contracts has become incredibly predatory and contain a poison pill (down-line liability) that can be fatal to your business.”

BSB: Can you expand on your “militant attitude” comment?

Howard: “Despite occasional overwhelming evidence to the contrary, adjusters (as a group) aren’t stupid people. Usually lazy, sometimes good-hearted, but rarely stupid. Speaking as a former staff adjuster myself, I never got upset when a shop owner would holler, scream and threaten. When he lost control, I knew I was in control. What always made me nervous was when I knew a shop really didn’t care if they ever got any work out of me. They had their own system in place for bringing work in their door. They charged what they charged, and if I didn’t pay it, there was hell to pay. The shop owner would maintain his composure and just grin while the vehicle owner, his attorney and/or the Department of Insurance would hassle me. It would get to the point where it was just too much trouble not to pay.

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“Additionally, when I knew a shop was documenting my conduct and decisions, I became very careful about what I’d say, do or decide.”

BSB: What’s the best thing a shop can do when a customer seems to be caught in the middle?

Howard: “A shop cannot make decisions for the customer. The best thing a shop can do is provide information to the customer to help the customer make his own decision. While providing job photos, certificates, customer letters and scrapbooks of on-point articles are important, they’re still coming from the shop and could be viewed as being biased. Probably the most powerful thing a shop could do would be to refer the customer to an unbiased third source of information. Send the customer to the Internet to learn for himself. Give him some Web addresses he can start with. The Consumer Assistance section of www.ProDiscussions.com is a great place to start. Let the customer know you’re on his side.

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“Probably the next best thing a shop could do, assuming the job is lost to a DRP shop, is to offer to reinspect the repairs at no charge in the company of the customer. After all, there’s a larger issue at work here. Your loss of a job notwithstanding, the greater consideration should be customer safety. If you detect fraud or compromised safety issues, bring them to the customer’s attention and explain his options to him. He’ll thank you, and you’ll probably get referrals from him. You may even get to correct the defects in the existing repairs.”

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BSB: There’s no quick fix, is there?

Howard: “No. The auto insurance industry has been working on perfecting their Preferred Shop (HMO) system since the early 1970s. But there is ample evidence that its days are dwindling. Case in point, ask some Allstate PRO Shop owners how they feel about the Sterling buy-out. Ask some Nationwide Blue Ribbon shop owners how they feel about the poison pill contained in their DRP contracts. There’s a definite move toward consolidators in the auto insurance industry. Individual preferred shops, dependent on their partner referrals, are not facing a bright future.

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“Shops need to ask themselves three questions: Where will we be five years from now if we keep doing what we’ve been doing? Where could we be five years from now if we make some changes? Does anything we’ve read here make sense?

“Given the volatile state of the collision repair industry, I believe these questions need to be asked and their answers carefully considered.”

BSB: Do you really think there are significant changes coming for the collision industry?

Howard: “This isn’t the same industry it was a year ago at this time. It’s not even the same world it was three months ago. While state and federal politicians are focused on national security issues, the insurance industry will find it easier to get favorable legislation enacted.

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“I still have personal friendships within the insurance industry that go back 30-plus years. We stay in touch. We talk. I hear things. And what I’m hearing isn’t good for consumers or small independent shops. But that’s for another story at another time.”

BSB: What could shop owner Randy Carwin have done to prevent losing that job to Joe’s?

Howard: “In my opinion, not that much. Randy was unprepared to impact that outcome. The entire insurance industry has been perfecting its steering approach since the early 1970s. All Randy knew was that it was wrong and probably figured that ‘something’ needs to be done. With any luck, this article will give Randy ‘something’ to think about.”

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Writer Emily Canning is an intern with BodyShop Business.

Additional reporting by BSB editor Georgina K. Carson and I-Can founder Dennis Howard.

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