nd in a timely manner, you’ll be well on your way to a winning situation for all parties involved — the customer, the insurer and you.
"The key to a successful DRP is to keep an open mind so both the insurer’s needs and your own needs can be met," says Larry Siembab, owner of Collision World CARSTAR in Berlin, Conn. “Above all else, however, the program should serve the consumer. After all, the consumer is the driving force for both insurers and collision repairers.”
“A DRP is a true relationship wiith the insurance carrier,” says Ed Gapsch, owner of Gapsch’s CARSTAR Collision Center in St. Louis, Mo. “If you esablish guidelines you can work with and then follow those guidelines, it can be very profitable for you and beneficial for your customers.”
What You Need to Know
One area collision repairers and insurance carriers often fail to clearly understand is how program activity will be measured. If both parties aren’t on the same page when it comes to the methods of measurement, misunderstandings of performance can — and most likely will — occur. You and the carrier need to agree on what’s to be measured and how this information will be reported. You must fully understand your capabilities and available resources in order to track the information accurately. If you can’t track it, you can’t report it.
"Be prepared," says Siembab. "You’ve got to know what additional paperwork the DRP is going to mean for your front office. If the front office isn’t in order, you’ll soon find yourself overwhelmed with administrative tasks."
It’s also very important that a shop owner look closely at the impact a program will have on current staff, including and beyond the front office:
• Based on available data, can your shop expect a substantial increase in volume? What does this mean for your staff?
• Will your shop write the estimates, or will you work from a carrier’s or independent adjuster’s estimate? If you’re to write all estimates, you may find the need to increase your number of qualified, trained estimators (either through cross-training or recruiting). Your staff will need thorough training on the procedures of the program.
• Will you need to allocate more training time?
One benefit insurance carriers have come to expect from a DRP is an expedited turnaround time. If you promised speedy turnaround, do you have the technical staff to handle the load without sacrificing quality?
Before making any radical adjustments to your staff, however, remember that just because you’re on an insurer’s DRP doesn’t mean the insureds will come to you. Try to get as much hard data from the carrier as possible, such as the average volume increase other shops have experienced.
Even with hard numbers and a strong commitment, be cautious. Many factors can affect your results:
• Are the insurance carrier’s customer-service representatives communicating the information appropriately to the insureds?
• How many area shops participate in the same program?
• Is claims activity up or down in your area?
• What about your shop — does it have a good reputation in the community?
In DRPs, the customer still makes the final decision, and many factors can influence his or her choice.
"Whatever you do, don’t rely too heavily on just one carrier," cautions Siembab. "My shop currently participates in 11 different DRPs for about 50 to 60 percent of our business. That way, even if one of the programs goes away or doesn’t perform as anticipated, we’re still OK."
Is This DRP for Y-O-U?
"To determine if a specific DRP is right for you," says Siembab, "you have to match philosophies and practices. A good DRP can be great for you and your customers. Don’t be afraid to be choosy. Remember, it’s not just the direct repairs you want. You also want all of the repeat and personal referrals the initial repair can bring you."
Along with compatible philosophies and practices, you need to determine if the program uses "prevailing rates" in your area. "Some rate considerations can not only put your shop at ethical risk, they can also cause confusion and conflict for your technicians," says Gapsch.
Unfortunately, we still hear stories from within our industry about repairers who are quick to offer a discount in order to capture work. But once they’ve secured the work, their final tickets may reflect questionable costs. Whether or not you offer a discount, concentrating on service, quality and turnaround time will always prove beneficial.
Also make sure a process exists for clarifying issues and resolving problems between the insurance carrier, the customer and you. The insurance carrier should have a written manual with procedures, contact names, phone numbers and guidelines of the program. Contact names for problem-resolution should be noted. In addition, to help reduce confusion and conflicting communications, establish a lead contact person. All communications should go through this person, ensuring that someone knows all of the information and can help guide a comprehensive solution.
By focusing on returning the vehicle to pre-accident condition, you can create a win/win/win situation: The carrier pays for no more than they insured. The customer has his car properly repaired and returned with a minimal amount of inconvenience. And you, the shop owner, realize a profitable repair opportunity.
Not every DRP will offer you this opportunity, but if you look closely enough, know what you’re looking for and aren’t afraid to be picky, the opportunities are out there.
Writer Julie Lougee is national insurance coordinator for CARSTAR Franchise Systems, Inc. DRP Evaluation Form reprinted courtesy of the Automotive Service Association (ASA).
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Direct-Repair Program Evaluation Form
This evaluation form, prepared by the Automotive Service Association (ASA), is designed to assist you in a thorough review of direct-repair programs (DRPs) before you enter into an agreement. The association neither approves nor disapproves of the concept of DRPs. In evaluating such programs, each business owner must consider the risks, benefits and/or losses to his/her business. You should consult your attorney for specific legal advice. Comments or suggestions about this checklist should be submitted to the Automotive Service Association’s national office at (800) 272-7467. Should you decide to become involved in a DRP, it’s up to you to evaluate and select the program of your choice. As a business owner, you should understand that in any DRP, the insurance company is buying your reputation. The following questions represent some of the components that could be included in such programs. Carefully evaluate each question to determine what works best for you as an independent business owner. 1. Has mutual trust been established between the parties? 2. Is this a binding contract? 3. Is this an informal agreement? 4. Is this a quality-driven program? 5. Will the program decrease friction costs? 6. Will the program expedite repairs and increase productivity? 7. Will the program improve customer service? 8. Is there a process that will be used to resolve problems between you, the customer and the insurance company? 9. Will the program substantially increase your volume of work? 10. Are you guaranteed an expanded customer base? (Will the insurer agree to reveal the potential volume available within the market area?) 11. Will you have control over estimate writing and the repair process? 12. Will the insurance company ask to review your financial data? 13. Will the insurer allow you to select vendors of your choice? 14. Will you be required to allow other vendors the use of your business to perform their services? 15. Are there guaranteed significant cash-flow benefits (i..e. timely payment guarantees)? 16. Will participation in the program reduce administrative expenses? 17. Will clerical people need to be added to your staff to handle additional paperwork? 18. Will this program have an impact on your area’s prevailing rate? 19. Does the agreement allow for the ability to compute cost of living allowances and inflation increases? 20. Does the DRP require a minimum number of years in business? 21. Is the shop going to be measured on cycle time? 22. Is there a formula developed by the insurer for cycle time? 23. Is the shop penalized if cycle time is delayed? 24. Does the program support inter-industry efforts to upgrade training and equipment? 25. Does the insurance company have reputable shops in your area listed in the program? 26. Does the program designate repair equipment requirements? 27. Does the program require a computerized-estimate program? 28. Does the program require photo imaging? 29. Does the program require all applicable local, state and federal licenses, permits and regulations, such as sales tax number, federal I.D. number, fire, electrical code, and EPA and OSHA compliance? 30. Will the program permit you to charge for your cost of compliance with environmental regulations and laws? 31. Does the program require proof of garagekeepers’ liability insurance and workers’ compensation? 32. Does the program require product liability insurance? 33. Are you expected to provide a written warranty? 34. Will you have control over the time constraints and coverage in your warranty? 35. Does the insurance company expect you to discount work that you’re currently doing for them (i.e. existing business)? 36. Does the insurance company expect a discount on parts, labor, glass, towing, storage or the costs for sublet? 37. Are all discounts based on volume? 38. Will you be required to give a discount on rental cars or provide loaner cars? 39. Will you be required to offer free towing? 40. Will you be required to offer free storage? 41. Does the insurer expect the repair facility to use aftermarket parts? 42. Does the program follow state laws in reference to depreciation and use of off-shore sheet metal, etc.? 43. Does the insurance company expect priority repairs? 44. Does the insurer provide you with a written manual including explanations of all policies, procedures, phone numbers and guidelines? 45. Does the program require you to evaluate or settle total losses? 46. When you have a problem with one of their insureds or claimants, will the insurance company send a reinspector to help with negotiations? 47. Are you guaranteed payment to be issued directly to you? 48. Does the program have consistent claims handling procedures or do they change with each claims handler? 49. Do you have one person in charge of your program? 50. Does the insurer share with you its CSI and severity reports? 51. Will the insurance company monitor the repair facility? 52. Will removal of shops from the DRP require documentation? 53. Is there a repeal or review process? 54. Is there a chain of command for the repeal process? If you consider entering into a formal or informal agreement with an insurer to become a direct-repair or insurer-designated repair shop, you should also consider the following: • Your private operating records are for your use alone. Revealing this data to any interested insurer or competitor, who may have access to other shops’ data, can lead to uniform pricing, which may make you a co-conspirator and possibly violate federal antitrust laws. Unlike insurers, you don’t have an exemption from federal antitrust laws. • Your contract of repair is between you and your customer — the vehicle owner. The insurer is not a party to this contract. Some insurers contract with their insureds to guarantee certain repairs, but this is outside the contract of repair you enter into with your customer. • Insurers have no legal right to tell you what price you must charge your customer, the vehicle owner. Insurers can tell insureds how much they will pay on a claim, but they should do so in their insurance contracts. If insurers want to control their claims payments, they can do so by clearly spelling it out in their contracts with their insureds, not by fixing prices you charge your customers. • A DRP can only succeed if it’s a win/win/win deal for all parties involved: you, your customer and the insurer. Most programs are administered by local areas and subject to change by region. It’s up to you to individually negotiate what’s best for your business. • If you have an "understanding," "agreement" or "contract" with an insurer with regard to the quality of repair, you must protect your business from subsequent legal claims. You must carefully document that you restored the vehicle to its pre-crash condition using acceptable industry practices (including but not limited to parts and repair procedures). If you agree to the use of substandard parts or require betterment or other procedures that involve short changing or defrauding insureds, then you may be legally liable. |
