When it comes to insurers, no matter what
you say, someone will get mad. In fact, that’s true for controversial
subjects in general. Someone always gets mad.
Good. Get mad. Mad people take action.
Why do we say this? Because this month, we
offer you two perspectives on insurer relations. You may disagree
with one of them, or maybe even both of them. Read them anyway.
One article is by contributing editor Mark Clark, whose attitude
is that 90 percent of your income comes from insurers, so it’s
in your best interest to learn to live in peace with them. The
other perspective is by John Padula, a shop owner who says insurers
are simply banks that hold vehicle owners’ money. Both perspectives
are valid and both agree on one thing: Think like a business person.
Part of thinking like a business person is
being open to other’s opinions. You may not agree with them, but
if you get one thing – just one thing – out of either one of these
articles that can help you run your business better, then get
as mad as you want. It was worth it. — BSB Staff
If men are really from Mars and women from
Venus, how is it we’ve managed to get along well enough to populate
the earth so fully? I believe it’s a result of a near universal
common ground: the attraction of the opposite sex, which has a
very strong appeal to most humans.
Let’s take that thinking a step further: There’s
little doubt that insurance com-panies and collision repair shops
have different agendas. They are, in fact, two different species
from two different planets – yet they both now live together on
the same planet, the planet of colision repair.
Considering all this, is it possible for body
shops to communicate with insurers, who are, to them, alien life
forms? The answer is yes, it is possible – they just need to learn
to speak a common language.
So, since shops and insurers must co-exist
for the other to survive, it might be in everyone’s best interest
to focus on some common ground. The largest and most important
area of common ground is the vehicle owner. If the shop doesn’t
do a good job keeping the consumer satisfied during the repair,
both the shop and the insurer lose. The consumer won’t return
to that body shop again, and he won’t renew his insurance coverage
with a carrier that couldn’t deliver on the insurance contract.
Besides consumers, there are other, less obvious
areas of common ground too. We’ll examine these areas, and we’ll
also take a look at the insurer’s world – through the insurer’s
eyes.
The World Of Business
One area of common ground is that people of
both species are in business to make a profit. No collision shop
or insurance company can survive for long if it’s not taking in
more money than it’s spending.
Virtually every business thinks it should
receive more compensation for the exemplary work it does. However,
if the insurance company raises its rates to take in more premium
dollars, its competitors will steal some of its current customers
with lower premiums. Same goes for a shop: If a collision repair
shop increases its door rate excessively, it may lose customers
to other shops with a lower hourly labor charge.
Additional business profits are available
by reducing expenses or increasing sales. But, if the insurance
company lays off employees to save money, who will answer the
phones when customers call? And if the shop hires less-than-qualified
technicians to save wages, who will repair the vehicles to safe
condition?
Holding the line on expenses and producing
more revenue with the same overhead is called productivity in
any world. Both insurance companies and body shops have found
financial success by doing a better job, faster. And striking
a balance that gets the work done and still puts profit on the
bottom line is a tricky business for people in either world.
The World of Equipment
Taking this common ground idea a step further,
both shops and insurers want the job done right – and the faster
the better.
Typically, insurers want some assurance that
a shop can return the damaged unibody back to factory specs, but
they also want to know it will be done as quickly as possible.
For example, the difference between a job repaired with centerline
gauges and one repaired with laser measurement shouldn’t be accuracy.
Both methods could ensure the vehicle structure is back to specifications.
The difference is in the time required to do that. Few body shop
owners purchased expensive, sophisticated measuring equipment
thinking they’d be paid more by insurers to repair collision damage.
Their notion was that they could repair more vehicles in the same
time period. More work done at the end of the week means more
money in the till. Mega-shops with all the cool equipment didn’t
buy any of it to impress insurers. They made a business decision
to invest some of their profits in making their business grow
by improving their productivity.
This is another area of common ground: Insurers,
too, want shops to own certain equipment that helps to increase
productivity. Some insurers have a list of equipment they consider
a bare minimum to perform collision repair, while other insurers
make no specific equipment demands, simply wanting the shop’s
assurance that it can do the repair safely.
But, as the insurer’s affiliation with the
shop increases, more equipment is often required. For example,
if a shop’s name is to appear on a simple "reference"
list from an insurance company, all that may be required is a
good reputation and the ability to complete the repair in a timely
manner. But, if that same shop is to enter into a direct-repair
or preferred-provider role with the same insurer, more specific
equipment will likely be necessary.
Most insurers’ DRPs have similar equipment
requirements. Each insurer is hopeful that with the suggested
repair equipment in house, the body shop can repair the customer’s
vehicle quickly and correctly. The insurer doesn’t want its customer
back on the road in an unsafe car – and neither does the shop.
Fear of future legal action by the consumer, if nothing else,
should prevent insurers from assigning collision repair to a shop
that doesn’t own equipment sufficient to restore the vehicle to
safe operating condition. (Although many collision repairers think
the guidelines to qualify for DRPs aren’t nearly stringent enough.)
In an effort to accommodate various sizes
of collision repair shops, at least one insurance company has
changed its methodology when selecting suggested shops. Its goal
was to recognize the shops that performed quality repair rather
than to judge the shop solely on its capacity. Recognizing that
quality repairs aren’t just a function of shop size or equipment
is an important distinction. Many smaller shops are performing
quality repairs every day to the insurer’s and consumer’s complete
satisfaction.
The World of Computers
Both shops and insurers would like the communication
process to go smoothly and quickly – yet another area of common
ground. And while interviewing insurance-company executives for
this article, I was surprised to hear many of them say they have
made significant accommodations to make it easier for shops to
communicate with them. Many shops have all three estimating systems
(ADP, CCC and Mitchell) just to participate in various insurer
programs. Some of the insurers I spoke with also have all three
systems – to enable shops to communicate with them.
Whereas several insurers had a single system
they used in house, they could accept estimates generated from
any data base electronically, and all would accept a paper hard-copy
estimate from any other system. Their goal was to make it easy
for body shops to communicate with them.
From the assignment of the repair to the issuing
of the check, computers lead the way to increased productivity
for insurance companies. If your shop can’t transmit and receive
information like your competitor down the street, you may be left
out of future repairs. Currently, several DRPs only assign repairs
electronically.
Many of the benefits of computerized estimating
are desirable to both shops and insurers. Computers don’t make
math errors, and printed estimates are generally legible. Not
only that, but the estimating computer can be one of the most
productive pieces of equipment in the shop. Computer estimates
are produced very quickly, enabling the shop to complete more
estimates in one sitting. Customers generally admit to being more
impressed with a professional-looking estimate sheet as well.
And best of all, the information can appear on the computer screen
in the insurer’s far-off claims center immediately, speeding the
completion of the repair for everyone.
Several insurers expressed a desire for a
universal estimating data base. And I’m sure many shops would
second this idea. What they desire is similar to what happened
to fax machines. In the early days of facsimile transmissions,
different brands of fax machines wouldn’t communicate with each
other. Now, as you well know, your fax machine will readily unload
into any other with minimum fuss.
Insurers are hopeful that similar technology
will allow all three estimating systems to communicate with each
other smoothly. Both insurers and body shops want an accurate
estimate. It saves the insurer the cost associated with a supplement,
and it helps ensure the shop will be paid for all necessary repairs.
Prompts on some estimating computers help produce a complete sheet
by pointing out possible additional labor tasks necessary for
a safe and complete repair.
And it’s the nature of our business that some
estimates will require a supplement. Damage is often hidden or
concealed behind other damage and can’t be accessed until the
parts are exposed. Insurers agreed that timely submission of supplements
and clear justification for the additional billing will allow
the shop to be paid quickly for the supplemental charges.
Such is also the case for most paint and material
"caps." Remember that the insurance companies have extremely
sophisticated computers that track and compare thousands of numbers
every day. If the insurance company’s computers suggest that they
generally pay "x" dollars in paint and material as a
percent of the total repair, they have the beginnings of a business
guideline.
Every single insurer I spoke with said its
employees have the authority to pay the proper amount for collision
repair. If the material costs on a particular job exceed the guideline,
insurers will pay the additional costs if they’re justified and
documented. For example, a complete repaint on a Suburban with
a three-stage red pearl clearcoat is likely to exceed some material
caps. According to the insurers I spoke with, the shop simply
needs to explain the problem and document its additional costs
in order to be paid. (That’s not to say the process will always
be trouble free once you start doing this, but it will make it
go smoother!)
The History of the World
I asked insurers what changes they’ve seen
in our business during their tenure. Most of the people I spoke
with had more than 20 years with their various employers, and
all agreed that our industry has changed dramatically.
Just look at the consumer’s deductible. From
an industry standard of $50 to a common $500 today, car owners
are shouldering a bigger portion of the risk to keep their premiums
down.
Many other changes have crept into our industry
as well. In the distant past, almost all adjusting of claims was
done face to face. The adjuster visited the shop frequently and
often examined several claims on each visit. Business was done
in person, and there was little need for an elaborate re-inspection
program because the adjuster often watched the actual repairs
in the course of his next visits.
One of the next waves of change was to try
to do more adjusting over the telephone. (It was, and still is,
hard for both parties to see collision damage by holding the telephone
up to the car.) Spending too much time talking to someone from
the other world about the repair ate up lots of time for both
shops and insurers.
Further changes in our industry include the
insurers move to centralize operations. Remember, they’re trying
to reduce their costs and do more work too.
Some insurers have enjoyed such success by
centralizing their claims offices that they’re actively consolidating
their corporate offices as well. This effort to reduce duplicate
overheads will allow them to offer more competitive rates. Additionally,
the move to handle more and more claims data electronically works
to both worlds’ advantage. By promptly transmitting digital photographs
along with the damage appraisal, the repair can begin sooner and
be completed and paid for faster.
The actual business of collision repair was
fairly simple pre-1980: The vehicles were relatively easy to fix
and were of understandable, straight-forward construction. Less
equipment was required, and it was possible to create an adequate
technician by taking someone off the street and teaching him some
rudimentary skills.
Not only did the advent of the unicoupe auto
forever change how cars are built structurally, but newer 1990’s
cars have more computer controls than the original 1969 moon-landing
equipment possessed. Training people to correctly repair these
sophisticated vehicles is a huge challenge to both shops and insurers.
Remember that I-CAR was an early merging of
both worlds for the common good. When the "X-Body" General
Motors Citation hit the streets in this country in the late 1970s,
few people understood how to repair these new sheet-metal-only
cars. The inter-industry players included the techs who had to
do the repair, the insurance companies that had to pay for it,
the manufacturer that designed it, the people who made the repair
equipment and the educators who would design the required training.
Cooperation between shops and insurers helped pave the way for
a more professional industry all around.
The World of Service
I asked the insurers I spoke with if they
were swayed by a body shop’s efforts at customer service, such
as extras like loaner cars, extended hours of operation, pickup
and delivery, enclosed storage or other concessions directed at
making it easy to do business with that shop. While insurers thought
these services were important to a shop’s success, they were primarily
concerned with more basic criteria – issues like honesty, trust
and professionalism.
The desire to be treated ethically and fairly
by the body shop was universal among the insurance executives
I spoke with. They simply want the shop to offer a competitive
price for safe and timely repairs. When shopping around for a
business-insurance vendor, what shop wouldn’t ask for the same
treatment from their insurance carrier? Rather than a contentious
relationship where both parties are hoping for an advantage over
the other, the insurers would like to trust that the shop will
treat them fairly.
And there’s no doubt that this is a two-way
street: If a shop is continually chiseled out of the last two-tenths
of overlap labor time, it’s ready for a fist fight the next time
that insurer has a car in the shop. The insurers all told me their
company policy is to pay all charges associated with a safe repair.
However, as prudent business people, they must control their costs
to remain competitive. Re-inspection of repairs shouldn’t feel
like a slap in the face to a shop. The insurance company needs
to ascertain that what was written on the estimate was affected
on the repair. However, continually re-inspecting a reputable,
trustworthy shop is a waste of the insurer’s time.
Shops might find a smoother road if they changed
their outlook toward insurers. Rather than assuming an argument
will be needed to get paid for each supplement, the insurers suggested
that the shop document the need for the additional procedures,
parts or materials. With paperwork and/or photo documentation
in hand, the insurer is more likely to pay any additional charges.
(Does this mean if you follow this advice, all your insurer hassles
are solved? Absolutely not. But, if you haven’t tried this, don’t
complain.)
Several executives also told me that a collision
repair shop’s customer-satisfaction index (CSI) served as a great
indicator of a quality operation. Those shops that can repair
vehicles to pre-loss condition are the vendors the insurers want.
The goal of insurers is to make the collision repair process seamless
for the consumer.
Guess what’s the biggest complaint insurers
hear from their customers? A delay in the promised delivery/completion
time. Honesty, trust and good customer service all meet right
here. The insurers advised that body shops be scrupulously truthful
in quoting delivery dates to the customer. They said their phones
begin to ring every Friday at noon when customers find out their
vehicles won’t be ready as promised. Avoid this grief in your
shop by telling consumers the real delivery date and by explaining
and educating them about how the repair process works.
The Future World
When asked what changes they predict for our
industry, all the insurance executives I spoke with said the trend
for a more professional repair facility will continue. Also, productivity
– doing more work in the same amount of time – has been a passport
to success for many body shops, and everyone predicted that this
trend will continue and accelerate in the future.
Remember when we claimed you could offer two
out of the three elements of a sale? Choose any two, went the
old saying: low price, quality work or good service. Increasing
competition in every single industry, from grocery stores to appliance
stores to banks, is forcing the successful vendors to offer all
three. Our industry is no different. We want it all as consumers
– and so do our customers.
Another likely view of the future is the shrinking
of our industry due to consolidation. There are fewer collisions
per capita than in the past, and explanations for this include
better roads, better cars, more stringent alcohol laws and the
aging of the population. Whatever the reason, there are too many
players at most every level of collision repair. And too many
shops means too many jobbers, means too many warehouse distributors,
means too many paint manufacturers – all trying to divide a smaller
repair pie. Consolidation has swept through many other industries.
Even insurance companies have been affected by frequent mergers
and buyouts. It’s happening and will continue to happen to us
as well, these insurance executives predicted. Bigger shops, bigger
jobbers and bigger insurance conglomerates will enjoy some economies
of scale.
Shop consolidation either by acquisition or
networking will also play a role in our future. One possible version
has our already-divided population of repairers breaking into
three camps: those shops in DRP programs, those who aren’t and
the consolidated national/regional chains. The insurers predicted
that a place will exist for everybody who can perform a timely
and safe repair.
The World in Which You Live
The hard fact is that more than 90 percent
of all collision repair is paid for with insurance money. Even
the highly visible, successful shops that publicly shun DRPs
have to deal with insurers. Motorist’s Bill of Rights aside, the
money for collision repair still comes from insurance companies.
So, rather than approach insurers as aliens
from another planet who want to bleed you dry and tan your wrinkled
hide, think of them as the source of 90 percent of your income.
Insurers, in turn, would do well to consider the huge investment
in training and equipment that professional body shops make when
they assign repairs.
Bottom line, we need each other to survive.
Whether we like it or not, our worlds have
collided, and insurers and body shops have no choice but to work
together. (You may choose not to participate in DRPs, but you’ll
still deal with insurers if you deal with consumers!)
Let’s face it, an air of cooperation is necessary
– from both groups. Once everyone learns this – and once both
repairers and insurers focus on their own ability to make the
repair safe, correct and quick for the consumer – both worlds
will prosper.
Mark Clark, owner of Clark Supply Corporation
in Waterloo, Iowa, is a contributing editor to BodyShop Business.
by John Padula
Back in the good old days, the Golden Rule
was "Do unto others as you would have others do unto you."
Today, however, this Golden Rule has become "The man with
the gold makes the rules."
It’s a shame what’s happened to our society
and our industry during the past 10 years. Nobody wants to stand
up for what’s right anymore. As a matter of fact, some people
will go as far as stating, "What is right?"
Is there really any right or wrong? Of course
there is. Yet, often in today’s society, we turn our backs and
close our eyes to the truth, which only paves the way for a weak
society. From a weak society comes an erosion of morals and values.
And after the acceptance of bad morals and bad values comes the
acceptance of wrong as right. When wrong is accepted, then there
is no right or wrong – wrong and right become one and the same.
This obviously creates confusion, which, in turn, creates chaos.
Making Sense of Chaos
Chaos: any condition or place of total disorder
or confusion.
Chaos is often created by some in order to
maintain control. This may sound confusing in and of itself, but,
in reality, it’s true. The entity, person or people creating the
confusion know what they’re doing, but others outside the loop
don’t; therefore, confusion is controlling an entire group of
people. In a confused state, people are weak and can’t ban together.
Thus they remain divided.
Is there confusion and chaos going on in our
society today? How about in our industry?
How do we maintain control of our lives and
our businesses when such chaos exists? By staying clear on the
issues and by standing up for what’s right and renouncing what’s
wrong. One of the absolute worst situations is to have allowed
yourself to be used for someone else’s hidden agenda. Ultimately,
you’ll be trapped and undoing the trap will become a full-time
job.
Know your purpose and know the purpose of
those you’re doing business with. Be clear and concise on who’s
the customer and who’s paying the bill. To do this, you need to
become familiar and prudent with terms like repairer, customer,
insurance contract, indemnity, original equipment, like kind and
quality, aftermarket and pre-loss condition.
Who’s the Customer?
Oftentimes, we tend to be confused by who
the customer is in our business. (And remember, through confusion,
we can be misled.) It may be necessary to look at the situation
from a number of different angles so we can gather a bigger picture
– prior to drawing a conclusion.
So who’s the customer in our business? Some
will say the vehicle owner is the customer; some will say the
insurance company is. Others will say both are our customers,
while still others will say we and the insurance company share
the vehicle owner as our customer. Getting confused? Well, which
is right? Which is wrong? If they’re all right, then there is
no wrong! And what’s wrong with no wrong? It’s not right – correct?
Confused yet? If not, then something is wrong!
Let’s back up, slow down and become clear
on this question. Who is the customer of the repair shop? Only
the vehicle owner is the customer. Once you accept this, it becomes
a whole lot easier to interact with the insurance company on your
customer’s behalf.
Because things have become so muddled over
the years, we as collision shop owners have become confused about
what our place is, what the insurer’s place is and what the customer’s
place is. Look out – when a customer (the vehicle owner) is taken
out of the loop, you, as the shop owner, are in big trouble. (It
may not appear that way at first, but look down the road and then
draw the conclusion.) When vehicle owners pay their money to insurance
companies and then are removed from the repair process on their
vehicles, what’s wrong with this scenario?
Think of insurance companies as banks. The
insurance company collects money from its customers to indemnify
(make them whole) in the event of an accident. This is the contract
remuneration – money in exchange for indemnification of an auto
accident within a given time period. If there’s no accident, the
customer loses (so to speak). However, during that time period,
if a customer has an accident, the insurance company has a legal
obligation to indemnify the customer as per the terms of the insurance
contract.
Know Your Place
Do we, as collision shop owners, share this
customer with the insurance company? No. What happens when you
share anything with anybody? Each party involved ends up with
a portion – but never the whole – of whatever is being shared.
If you share a customer, something will be compromised.
The vehicle owner is our customer for the
auto repairs. (Insurance companies don’t fix automobiles.) The
vehicle owner (if and only if he’s an insured) is the customer
of the insurance company. Yes, sometimes – even often – this may
be the same person. However, this person is a customer of each
entity for different reasons.
The insurance company is there to indemnify
the owner from the loss; the collision shop is there to repair
the auto to the "customer’s" satisfaction.
What happens when either party oversteps their
bounds? The battle begins.
Stay out of the middle of the situation. Know
your place. It’s really pretty basic. When you stick your nose
in somebody else’s business, there’s going to be problems.
"But," you say, "what if …
the insurance company wants to pay for aftermarket parts?"
- Go to the policy. If it’s in the policy, that’s the insurance
company’s prerogative. - Inform the customer of his rights. It’s his policy and his
automobile. If he’s willing to accept the outcome of these parts,
then go for it. - If the customer won’t accept these parts, then inform him
of the difference in price. (Remember, you didn’t write the policy,
and you didn’t enter into the agreement with the insurance company.
Don’t get in the middle!)
Note: If you’ve entered into a side agreement with an insurance
company to use aftermarket parts, then you’ve created a situation
for yourself that only you can undo. You need to ask yourself:
Are aftermarket crash parts equal to OEM parts? If yes, then there’s
no problem. If no, then will these parts indemnify the owner?
Will these parts restore the vehicle to its pre-loss condition?
Keeping Clearheaded
Once you learn to become clear on situations, it becomes easier
and easier to perform the duties of your job. And remember, if
you feel powerless, you are. David slew Goliath because Goliath
was playing games with people’s lives. Goliath used fear and intimidation
to confuse and control the Israelites. But David refused to be
powerless. He separated right from wrong, was crystal clear on
the situation at hand and – as small as he was – overcame his
fear of an entire army and killed Goliath.
Keeping clear, however, requires knowledge – and with knowledge
comes power. Therefore, you need to acquire the knowledge so you’ll
have the power to run your business the way you want.
Start by knowing your business inside and out, and learn as much
as you can about the insurance business, too. But don’t stick
your nose in their business.
Really, it all comes back to the Golden Rule. If you treat people
fairly in your dealings with them, they’ll treat you fairly in
their dealings with you. If some don’t want to be fair with you,
then remove yourself from the situation. Don’t take part in playing
games. Games always have a winner and a loser. Don’t play a game
you can’t win! Know when to draw the line and say "No, I
won’t be a part of these games." A game player can’t play
games if there aren’t any other players.
Keep your focus on the business of auto repairs and strive to
be the best auto repairer in your market. What goes around comes
around. There are plenty of good insurance companies out there
that treat customers and shop owners fairly; do your part to treat
them fairly back.
There are others who don’t treat people fairly, and that’s OK
too. Water finds its own level. If, in the end, the man with the
gold doesn’t follow the Golden Rule, he’ll be the one who pays
the price.
Writer John Padula is president of Padula Body Shop, Inc. and
Preferred Collision Professionals, Inc., a network of family-owned
and -operated collision repair businesses.
