I’ve never considered myself to be a nerd, but I’ve always had this borderline obsession with the words and phrases we use each day and the proper uses and meanings behind them. It’s always driven me nuts when people can’t distinguish between “their,” “there” and “they’re” and use the three interchangeably. It drove me nuts when my senior manager at an insurance company thought that the fiscal in “fiscal year” was spelled “physical.” While the rest of the business world was having “fiscal” years, he was having “physical” years!
Yes, my friends, I spent 11 years in the employment of an insurer. But I wouldn’t have the unique perspective I do today if I hadn’t worked on both sides of the fence.
I still retained, however, my little obsession and irritation with the improper use and abuse of words and phrases in our industry, and that’s what prompted me to write this article. Now, I can use my fascination with words and phrases to shine the light of truth on them.
Definitions are from the Merriam-Webster OnLine dictionary, in no particular order.
Stan•dard \stan•derd\ n: Something established by authority, custom or general consent.
As in “industry standard.” Something established by authority, custom or general consent. But who’s authority are we referring to? Do you know of any entity with authority to establish our standards?
No insurance company has that authority. The Department of Insurance (DOI) doesn’t have that authority. The DOI, believe it or not, has absolutely zero authority over repairers. And no, it’s not I-CAR, although that organization offers great training tool and is the closest thing we have to an authoritative voice for repair procedures. Motor, Mitchell and Audatex set a standard of sorts, but their standards refer to “new and undamaged panels.” We’re in the wreck business, we don’t fix undamaged panels. Besides, ever try to discuss the estimate guide standards with an insurance appraiser? “Industry standard” is often shoved down our throats in the “nobody charges for that” or “industry standards say you must blend within the panel” arguments and denials.
Let’s get this straight once and for all: The only entity with the authority to establish a repair standard is the repair shop itself. The repairer has to establish the repair standard because it’s the repairer on the line each time he repairs a car. Have you established or generally consented that blending within the panel for half of base time will be your custom? Have you established or generally consented that you’ll perform your post-repair cleanups free of charge? Have you established or generally consented that you won’t charge for the repair supplies you use? Of course you haven’t – to consent to anything like that from our end would have us flirting with anti-trust.
An “industry standard” established by authority, custom or general consent doesn’t exist. You can’t look it up on line or buy a copy of it. You can’t find it at the DOI. There’s no such thing. Get it through your skull that “industry standard” is a fictitious catch phrase used against us, an excuse to tell the consumer things such as, “Oh, that shop charges more than ‘industry standard’.” It’s a fraud against us and the consumer and we allow it because we’re all too independent-minded and suspicious to work together within the confines of the law to establish “true standards.” If we could work together, we could say with authority that “there is no such standard” when that’s the truth. As it is now, we enable the lie.
In•dem•ni•fy \in•dem•ne•fi\ n: To make compensation to for incurred hurt, loss or damage.
Folks, this is the true reason for the existence of insurance companies – “to make compensation to for incurred hurt, loss or damage.” They exist for no other reason and have absolutely no other purpose. They don’t protect the consumer, they have no right to regulate the industry and they have no right to control repair costs. In claims training, I was taught that a property and casualty insurance company’s core purpose is to indemnify the policyholder against that which the policyholder has lost or is legally obligated to pay in the event of a loss – nothing more.
It’s really that simple. An obvious question then is, what is the policyholder legally obligated to pay? How many times have you been told something like, “If the customer wants you to fix her car, she is going to have to pay your labor rate.” She’s going to have to pay your labor rate? Did the owner sign your repair authorization? Yes. Is the owner legally obligated to pay you? Yes. What’s a P&C insurance company obligated to do? To indemnify the policyholder against that which the policyholder is legally obligated to pay. Get the point? Unless there’s specific exclusionary language in the policy of insurance or statute in your area to the contrary, labor rates, materials or any other charges that the policyholder is legally obligated to pay are also binding upon the insurer.
What if we’re talking about a claimant vehicle and there’s no policy of insurance between the vehicle owner and the carrier? Then the “at-fault party” is legally obligated to pay for the repairs – for the true measure of the damages. What’s the true measure of the damages? In most cases, it’s found to be the final cost of repairs. Not an estimate presented by a third-party payer who hasn’t repaired the vehicle – the final cost of repairs, period.
If the “at-fault party” is legally obligated to pay the final cost of repairs, what’s the insurance company obligated to do? To indemnify the policyholder against that which they’re legally obligated to pay – which is your final bill. Of course, this all assumes that your charges are “reasonable” and can be demonstrated as such. After all, this isn’t carte blanche. You can’t be stupid about it.
Rea•son•able ez•ne•bel\ adj: Not extreme or excessive.
Labor rates and repair costs don’t all have to be the same to be “reasonable.” “Reasonable” doesn’t mean “that’s all we pay.” “Reasonable” doesn’t mean “equal.” “Reasonable” doesn’t mean that the majority rules.
Who determines what’s “reasonable?” The market does. So, who’s the market? The vehicle owner is the market. If you’ve structured your rates, operations and charges such that you’re competitively priced and able to earn the vehicle owner’s business, logic would follow that your charges are “reasonable.” If your charges are “unreasonable,” chances are that your shop won’t be around long and your charges will become “irrelevant.”
“Reasonable” also isn’t “locked in.” “Reasonable” may be more accurately described as having a range and not a pinpoint. It may be “reasonable” for a guy running a tiny shop with minimal equipment to accept a bottom labor rate, and it may be “reasonable” for a mega facility to shovel mass volumes of DRP work through at a deep discount. That doesn’t mean that it’s “unreasonable” for me to do neither of those. It isn’t “unreasonable” for me to have a car built out of aluminum, magnesium and boron valued north of $100,000 loaded onto a dedicated fixture system (also worth north of $100,000) in a room dedicated to aluminum repairs being worked on with tools dedicated to aluminum repairs and have to charge service department rates to do it. In fact, it sounds unreasonable to ridiculous to insist that I don’t.
Ad•just: \e•jest\ v: To make correspondent or conformable. To reduce to a system: regulate.
This one should make the hair on your neck stand up. Adjusters adjust to make you correspond and conform. They reduce you to their system and regulate you. Nothing that I’ve ever found in policy language or statutes in my area provides insurance companies or their adjusters the authority to make me conform, reduce me to their system or regulate my shop. Check with your attorney or trade association to make sure, but I’d bet the same applies in your state. I have to ask the question then: If no statute or policy language provides authority for an insurer to exert conformity, systems or regulation upon me, why should I allow it? Because heretofore I was like the little orphan begging for another morsel with the mistaken concept of who my customer truly was.
Cus•tom•er: \kes•te•mer\ n: One who purchases a commodity or
This is the meat of the issue. Who’s the customer? We’ve been duped into the misconception that the customer is the person with the larger checkbook, camera and laptop and not the person with the car keys. Folks, we have to fix this concept in our heads and get this right. The customer is the guy with the keys and not the guy with the camera and laptop. Insurance companies don’t create claims, they settle them. They
don’t create wrecks. And they don’t create opportunities.
There are a finite number of wrecks that occur and a finite number of opportunities to fix them. As long as you believe the promise that “we’ll send you lots of work,” you’ll be on thin ice.
What are you going to do when your $70,000-per-month DRP bails on you because the post-repair cleanup (the one you didn’t get paid for – you never get paid for post-repair cleaning) on one vehicle didn’t get down into the space between the seat and the console? What happens if it was the “last straw” infraction in the insurer’s list of demands and $70,000 a month walks out the door? How do you replace that volume? Do you go get another DRP? If there was another one to go get, why don’t you already have them? What are you going to do when your DRP “partner” brings you a new program that prohibits you from charging for this or that and, in addition, you now have to provide another claims administration function – all for free? How about working for the car owner instead? How about marketing to the car owner instead?
Ex•tort: \ik•sto•rt\ v: To obtain from a person by force, intimidation or undue or illegal power.
Sound familiar? You’re not intimidated? Come on, be honest. Admit you’re afraid that if you don’t “conform” to the system, you won’t get your daily bread. That’s extortion. I can’t tell you how many times I’ve been warned not to charge more than the guy down the street or else I’ll get blackballed. We’ve all heard it said – “Better not get out of line or you’ll get blacklisted” or “I’d charge for what it takes but I’m afraid of being blackballed.”
Thresh•old: \thresh•(h)old\ n:
The place or point of entering or beginning.
The point of beginning or entering? I thought threshold meant “that’s all we’ll pay.” Come on, guys, we hear it every day – “Our paint threshold is $XXX.XX” and “No, we don’t have paint caps, we have paint thresholds.”
That’s not what a threshold really is? You mean the threshold is where we ought to start? Sounds great to me. Show the definition of threshold to the appraiser in your next negotiation with him and see what he says. Ask him to show you where, according to the law, he gets to cap, limit or threshold anything. There’s no such law, and you won’t find a policy of insurance that says “we have a ‘threshold/cap/limit on paint and materials’” either.
I once had a claims manager talk to me about materials and ask, “Where does it end?” That’s easy – it ends when we get done fixing the car and count up all the stuff we used to get the work done. We input the list of stuff we used into our cost accounting system and print you the paint and materials invoice.
Ne•go•ti•ate: \ni•go•she•at\ v:
To arrange for or bring about through conference, discussion and compromise.
Sounds good on the surface, doesn’t it? Reasonable people should be able to discuss and compromise, right? True negotiation assumes equality, fairness and sincerity. How much of that is going on in your experience? If we think like independent business people, why are we negotiating anyway? We’ve already established that the customer is the guy with the keys, that the customer is the one who accepts our price by virtue of his signature on our repair authorization and, as such, is legally obligated to pay us for the repair. We’ve already established that the P&C carrier is contractually obligated to indemnify its policyholder against that which the policyholder is legally obligated to pay in the event of a loss – reasonableness assumed.
When the appliance guy comes to fix the fridge, the cost is the cost – accept it or don’t fix the fridge. When the waiter puts the steak on your table, the cost is the cost – accept it or don’t order the steak. Insurers have no legal right to negotiate with us, nor do we have the legal right to negotiate with them. We’d need to be attorneys to do so and, since we’re not attorneys, we could be guilty of practicing law without a license. Attorneys hate it when you do that.
Over•head: \o•ver•hed\ n: Business expenses (such as rent, insurance or heating) not chargeable to a particular part of the work or product.
What a great definition. Thank you, Merriam-Webster. How many times have you heard this: “We don’t pay for shop materials – that’s overhead.” I always thought that overhead was what we had to pay to open the doors, and the dictionary proves I’m right. Overhead goes on at night, on weekends and over holidays. Overhead is there if you fix a hundred cars this month or if you fix zero cars. Overhead pretty much stays the same month in and month out.
Overhead absolutely has nothing to do with how much stuff you used to fix repair order # XX. Overhead appears on the P&L after gross profit has been calculated. Cost of goods sold goes on the P&L before overhead and is measured against total sales. Cost of goods sold includes materials, parts and labor hours applied to a particular task. We accept less revenue and profit only because a claims rep is using a word track taught in claims training and we’re weak-minded enough to let it go on.
Li•a•ble: \li•e•bel\ adj: Exposed or subject to some usually adverse contingency or action.
This is where you lose the farm if you fix something wrong and someone gets hurt. You are liable for the work you and your techs perform. You should be the sole decision maker when establishing a repair plan or the execution of a repair procedure because you are going to be the one standing before the judge, naked and alone come the day of reckoning after a repair comes unglued and someone gets hurt. Remember the appraiser who told you his company wouldn’t pay for “that procedure,” a procedure you knew was technically necessary for a proper repair but you still “negotiated” by allowing him to dictate the repair process? He’s nowhere to be found and his employer is telling the court, rightfully so, that you are responsible for your repair decisions and that they had nothing to do with the mess. You’re on the hook because you gave in to an appraiser just to get along.
Prof•it: \’praf•it\ n: The compensation accruing to entrepreneurs for the assumption of risk in business enterprise as distinguished from wages or rent.
Well, doesn’t that say it all? Compensation for the assumption of risk. The person with a camera and a laptop assumes no risk in the collision repair formula – you do. And you’re clearly entitled to profit from it. Your capital is invested. Your liability is at risk. Your name is on the dotted line. All this means you deserve to profit. Profit isn’t profane, it’s the reason we get out of bed and put up with this ridiculous business. We’re capitalists, and profit is part of the deal.
We owe it to ourselves and our customers to know the language of this business. We need to know the true meanings of the words and phrases we use. This isn’t as complicated as we’ve allowed it to become. We fix bent cars for the people that own them, and the insurers’ only role in the equation is to indemnify their policyholders. Look it up in the dictionary and see for yourself.
Writer Phil Mosley is the general manager of two Mercedes-Benz Collision Centers, one in West Chester, Ohio, the other in Ameila, Ohio. In the industry since 1978, Mosley has done it all: tech, manager, insurance appraiser, physical damage manager and shop owner. You can e-mail him at [email protected].