I have to tell you all that I’ve never been more honored and humbled than I was by the positive response to “The Unofficial Collision Repair Dictionary Part I” article I wrote that appeared in the October 2007 issue of BodyShop Business. I’m very appreciative of your kind words and support.
So, back by popular demand is the second version. It wasn’t too hard to come up with more words and phrases to pick from. The challenge was having so much passion about these things and having so much to say about each one but knowing I had limited space. But I gave it a shot…
In•sur•ance \in•shur•en(t)s\ n: Coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril.
As in the business of insurance. The business of insurance is to indemnify (the definition of which I discussed in Part I) those to whom the carrier has issued a policy of insurance. To expand on a point made in Part I, the business of insurance is to collect premiums, responsibly invest those premiums and pay claims – absolutely nothing more. It’s not the business of insurance to control body shop labor rates and dictate operations, time allowances, vendor relations, etc.
Except for the medical field, no company or industry is permitted by our government to restrict, restrain and interfere with another company or industry the way insurance carriers do with collision repairers. It’s all done under the guise of cost control or claims mitigation, but I would argue that even claims mitigation, as it’s being applied here, is not the legitimate business of insurance.
In my view, the idea of claims mitigation is akin to changing the odds after the bet is made – in other words, cheating. A policy of insurance is undertaken for a price established using given underwriting criteria and agreed upon by the policyholder. These heavy-handed efforts to control claims cost after the claim has occurred is no different than changing the odds to your favor after you’ve made the bet. The business of insurance should be to underwrite policies properly, pay claims properly and stay out of that which is not the business of insurance – namely, collision repair.
Con•tract \kan•trakt\ n: (a) A binding agreement between two or more persons or parties; (b) a business arrangement for the supply of goods or services.
A policy of insurance is a contract – a binding agreement or business arrangement for the supply of goods and services, entered into between the carrier and the policyholder or insured. Of course, a direct-repair relationship is also a contract – an arrangement for the supply of goods and services. That doesn’t mean the terms of a contract between an insurance carrier and a direct-repair provider may be imposed upon me if I’m not a party to that agreement.
Just because another company, or a lot of other companies, agrees to provide goods and services for a prearranged pricing schedule doesn’t mean that a) the contract price may be assumed to be the usual, competitive or reasonable price, or b) that I have to provide my goods and services for that scheduled pricing.
“We can get so-and-so down the street to do it for our estimate.” So what? I cannot be held to the terms of a contract to which I’m not a party. Your contract with him and the pricing you’ve negotiated with him is not binding upon me. Plus, the car isn’t down the street, it’s here. And I have a contract with the vehicle owner to repair it per the estimate which I provided him and he agreed to. You either have to pay the claim in compliance with your policy of insurance in a first-party loss or pay the full amount of my final bill if it’s a third-party loss.
One other thing must be understood when discussing a contract: When the terms of a contract conflict with statute (law), the statute always wins – period. The same holds true with company policies. Statutes always trump company policies and terms of contracts (as explained to me by an attorney).
As an example, if an insurance policy mandates the use of aftermarket parts at the carrier’s discretion but statute requires the vehicle owner’s consent before aftermarket parts may be installed, statute trumps contract. A policy of insurance cannot nullify the policyholder’s statutory right to refuse or accept the installation of aftermarket parts on his or her vehicle if such a statute, in fact, exists. As another example, if a carrier has an internal company policy that limits the material payment on an auto claim to $XXX.XX and a statute exists that prohibits such a limit, statute trumps company policy. It’s vital that, as business people, we’re thoroughly knowledgeable in exactly what the statutes in our given jurisdictions actually say and that we know, conclusively, that an internal company policy isn’t worth the paper it’s printed on when it contradicts law. As far as I’m concerned, internal company policies aren’t worth the paper they’re printed on when they contradict manufacturer recommendations or requirements, either.
Part•ner \part•ner\ n: One associated with another, especially in an action; v: to provide with a partner. As in insurance partner. When I think of a partner, I think of one who shares the load, good and bad – my wife, a business partner, a friend. Common sense says that any one-sided relationship is unfair at best and a disaster at worst. All this business being bantered around about body shops and insurers being partners nauseates me. I say that knowing that many completely disagree with me, but follow my logic here. Partners share risk, reward, benefit, detriment, pain and victory. I don’t see any of that in the insurance partner relationship. It’s argued that insurers and collision repairers are partners because we share common customers and some common issues. An abused wife shares an address, and perhaps children, with her abusive husband, but that doesn’t make them partners. The current relationship between insurers and collision repairers is the most lopsided (in favor of the insurers) it has ever been in the history of the collision repair industry, and partnership is not how I would describe it.
Pro•fes•sion•al: \pre•fesh•nel\ adj: 1. (a) Characterized by or conforming to the technical or ethical standards of a profession; 2. (a) participating for gain or livelihood in an activity or field of endeavor often engaged in by amateurs.
Folks, collision repair is no longer a field that should be played on by amateurs – not when the safety of the motoring public is at stake and not with automotive technology advancing as quickly as it is. Collision repair is no longer simple body work that can be banged out in a garage at home. We’re minimized as experts and professionals precisely because so many people, even insurance company employees, are doing side work or hobby restoration at home. The paints and chemicals we use are dangerous and toxic – to us and the environment. The precision at which we must perform our craft to execute a proper repair is unattainable at home and without the proper equipment and training. As long as we sit idly by and allow ourselves to be perceived as doing just a little more than any handyman can do at home, we’re never going to demand the respect, or compensation we deserve.
As an industry, we must do what is necessary to stem the prevalence of side jobs and see to it that hobby work is limited to true hobby work – for instance, dolling up an old muscle car. Ever consider how much side jobs cost you in lost revenue? Sales you didn’t make because somebody’s buddy could fix it at home? Employees dragging around half exhausted at work because they’re running their own little side business at home – unlicensed, untaxed, uninsured? Ever consider the impact caused by the claims rep who builds a few totals at home? Shoot, he just knows what a piece of cake body work is and how much you’re getting over on him – he can’t justify paying your ridiculous prices because he knows how much it should cost. Ever see anybody have their buddy down the street do their kid’s tonsillectomy in the garage so they could get a deal? I’m not kidding, the ability to do side work in the collision industry should be just as ridiculous as do-it-yourself surgery. This should no longer be a do-it-yourself trade.
We must also agree upon and adopt our own ethics at the very minimum – industry-wide ethics that can assure the public that, wherever they happen to be, the collision repairer can be trusted to uphold a minimum standard of ethical conduct. Erica Eversman has done an exemplary job of starting the ball rolling. When the group of dedicated people who are working with her finally hammer out and present a collision repairer’s code of ethics, it would be well for us all to adopt those ethics as our own.
Furthermore, we must behave and look like professionals. I do mean in the literal respect that all of us have been taught in various seminars – clean the place up, make it smell nice, make it appealing to people. That should be understood. What I’m referring to is the manner in which we present ourselves to the claims folk. Assume the attitude that you’re the expert. You’re the professional here, but do it with courtesy and respect for the person who works for the insurer. Going primitive on him or her isn’t going to fix anything. We should all conduct ourselves as professionals, demand respect as professionals and politely refuse to accept less.
Ex•pert \ek•spert\ n: One with the special skill or knowledge represent-ing mastery of a particular subject.
Mastery of a particular subject. I’m a Master Craftsman in collision repair and I’m re-certified as such by the National Institute for Automotive Service Excellence. I was first certified as a Master in 1987. While I’m certainly not all-knowing nor all-powerful, I am, as defined by the Merriam-Webster OnLine dictionary, an expert in the field of automotive collision repair.
What about you? Have you reached such a level of competence in collision repair that you might rightfully be called an expert? When an automobile owner presents his or her automotive investment to you to properly and safely repair it to its pre-loss and manufacturer-designed condition and crash worthiness, are you the expert to be trusted with that responsibility? You are? Awesome! Then why on earth are you surrendering your expert knowledge and responsibility to someone else – an employee of another company? An employee of any company – even your own. You just agreed that you’re an expert and that you’re responsible for the integrity and safety of that collision repair. Why give away that right and the right to plan the repair process? Is the insurance company employee going to hang if that collision repair is performed improperly – even if he or she is the one who mandated the repair plan, even if he or she may be qualified as an expert, too? No, my friend – it’s you who will hang for the improper repair because it was you who agreed to it and it was you who surrendered your expert knowledge to another for the want of a few bucks.
You’re the expert. You call the shots on what’s right for the repair plan. You stick to your integrity.
First Par•ty \ferst•parte\ n: Not listed in Merriam-Webster.
Although Merriam-Webster doesn’t list first party, we all know who that is – it’s the insured. It’s the person or company that’s the owner of the policy of insurance with the carrier. This is the person with the insurance contract. That person is bound by the terms of that contract (assuming that the terms don’t contradict statute) as he or she has agreed to the contract by paying the premiums. We all know that nearly every insurance policy requires payment of a deductible. Obviously, this means that the policyholder pays the first $XXX.XX of the actual repair costs and the carrier pays the rest up to the limits of the policy. Ever have a claims rep tell you your rates are above market so the owner will have to pay the difference? Ever see that stipulated or defined in an insurance policy? I haven’t. Now remember, an insurance policy is a contract between the carrier and the policyholder that requires the policyholder to pay the first $XXX.XX (deductible) of the actual repair costs and the carrier to pay the rest up to the limits. Requiring the policyholder to pay any amount in addition to the deductible (not talking about betterment here) violates the terms of the policy and defrauds the consumer.
There’s some new language appearing in some policies that says that the insurer will pay the reasonable cost as determined by the repairer, which muddies up the issue. I’m not aware of the new language yet, so I don’t know if it passes muster as a consumer sales issue. I guarantee you that the policyholders aren’t aware of that phrase in their policy and they certainly weren’t told, at the point of sale, that it’s all good unless you take your wrecked car to someone who doesn’t charge what we as the insurer say to charge. It’ll be interesting to see how that one plays out in the courts. As collision repairers, we need to be aware of which carriers have that exclusion in our areas so that we may better assist our consumers at our points of sale.
Third Par•ty \therd•parte\ n: A person other than the principals.
No, not the school principal. We all know who this is, too – it’s the claimant. Technically, both the insured and the third party are claimants, as they’re both making claims against a policy of insurance. But we’ve all just understood the claimant to be the person the insured hit – the injured party. By the way, the second party is the insurance company.
The primary principle we need to meld into our consciousness is this: There is no contract with the insurance company in a third-party situation. The policy of insurance and the internal policies of the insurance company are entirely meaningless. The injured party has no contract with the carrier. You have no contract with the carrier (assuming you’re not a DRP for it). The insurance company is required to pay the true measure of damages – the reasonable cost of repairs, reasonable being defined by statute, not what the carrier thinks or wants to dictate. Remember the lesson from Part I: The at-fault party has to pay the true measure of damages, as defined by law, and the carrier is required to indemnify them for that which the insured is legally obligated to pay, up to the policy limits.
Guide \gid(e)\ v: To direct, supervise or influence, usually to a particular end.
As in estimating guide. Merriam-Webster lists synonyms as lead, steer, pilot and engineer. In trying to understand a collision estimating guide, none of this has a particularly positive connotation, does it? All of us have had our reservations and concerns about the independence and validity of our estimating guides, and if a guide is something that directs, supervises, influences, steers and engineers to a particular end, perhaps it’s way past time that we, as collision professionals, have a voice in the engineering, don’t you think?
I think that the Database Enhancement Gateway (DEG) is a great place to start. The Alliance of Automotive Service Providers, Automotive Service Association and Society of Collision Repair Specialists are to be applauded for making this happen, but applause isn’t enough. We must support not only the DEG but the groups that made it happen. We must encourage them to continue their efforts to make our voices heard and to be recognized as the primary customers to the database providers. It’s all a question of loyalty. When the guide is directed, supervised or influenced to a particular end, it seems reasonable then to ask, who’s doing the influencing and where does the guide’s loyalty lie? To what particular end are we being directed?
The 1963 Consent Decree addressed, in my opinion, prohibited, the use of flat-rate repair guides as they may be applied to an auto claims scenario. The Consent Decree states, in part: “Each defendant is enjoined from placing into effect any plan, program or practice which has the purpose or effect of…sponsoring, endorsing or otherwise recommending any appraiser fixing, establishing, maintaining or otherwise controlling the prices to be paid for the appraisal of damage to automotive vehicles…or to be charged by independent or dealer-franchised automotive repair shops for the repair of damage to automotive vehicles or for replacement parts or labor in connection therewith, whether by coercion, boycott or intimidation or by the use of flat-rate or parts manuals or otherwise.” This is a big topic deserving an article or two of its own, but to be brief, some sort of guide is necessary so that we may all build a logical foundation for our repair plans and prices. I think it’s clear that using such guides to fix, establish or otherwise control the prices charged for the individual collision repair on the part of the insurer strictly contradicts the spirit and intent of the 1963 Consent Decree.
Steer \sti(e)r\ v: To control the course of (transitive verb); to be subject to steering (intransitive verb). Another topic worthy of its own article(s). Here’s my short take on steering: Steering, in the context of current events, is really not a single layered event. I believe that steering occurs at several layers and changes its face to a continually more ominous complexion as it progresses.
Scenario one: The car owner with the freshly wrecked car calls the claim in to the insurer. The car owner has no clue where to take the wreck for repairs, and the insurer sends him or her to a repairer on the preferred list. This is not steering. This is a referral that I believe has a legitimate place in the insurance world when it’s confined to this context.
Scenario two: The car owner with the freshly wrecked car calls the claim in to the insurer and, without requesting a referral, is directed to a repairer on the insurer’s preferred list. The car owner trusts that the insurer is genuinely looking out for his best interest and complies. This is steering. An action taken, without invitation, to control the direction of the repair. We, as businesses, have no opportunity to earn this car owner’s business because the opportunity was swept away with the claims call.
When I was employed by an insurer, directing 25 percent of the auto claims to the list of its preferred repairers was a lofty goal. That goal was later set to 75 percent. This means that the goal of the carrier was to direct the course of 75 percent of all (first and third party combined) auto claims to the DRP shops. The non-DRP shop will never have a shot at 75 percent of all auto claims in this scenario.
Scenario three: The car owner with the freshly wrecked car calls the claim in to the insurer. The car owner wants you to perform the repairs on his car. He or she has done business with you before and you’re the one he or she trusts. He or she expresses his or her preference to the claims rep and is told any one of a list of scripted replies: They don’t do good work. We can’t guarantee their work. They charge too much. You’ll have out-of-pocket costs with that shop. They’ll take too long to do the work. We all know the lines (lies). This is not steering. This is interference. Plain and simple interference with the business relationship you have with your customer. It doesn’t matter if you actually lose the job or keep the job – the insurer has interfered with your fair opportunity to continue your business relationship with your customer. When you actually do lose the job, in my opinion, simple interference rises to the level of tortious interference which, in certain circumstances, may be prosecuted. You’ll have to have a long talk with your attorney on that one.
Steering and interference are the mechanism used to make the repairer comply. As insurers are successful at directing 75 percent, or more, of the claims volume to shops that they have under their thumb, how difficult is it to support the argument that the insurers’ labor rates reflect the rates charged by most of the shops out there? The same goes for necessary operations, blend times, clearcoat caps, material caps – the whole gamut. Absent their successful steering and interference with the free market economy of the collision repair industry, we don’t have all these issues.
Writer Phil Mosley is the general manager of Mercedes-Benz Collision Center in West Chester, 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].
