Consolidators: Fix Auto USA to Hold Conference After Two-Year Hiatus
Who is the customer? Is it the vehicle owner or insurer? The answer is not as simple as you think.
I read article after article in industry trade magazines that say, “Just take control of your customer” and “Know your customer base.” This really got me thinking about who my customer really is.
California law states that my customer is the vehicle owner, and the entire collision industry says the same thing. The vehicle owner is my customer, yes? But I’m about to not only question that statement but disagree with it completely.
I say that the insurance company is my customer, but first let me define “customer.” Webster’s Dictionary defines the word customer as: “One who purchases a commodity or service.” Also, “Someone who buys goods or services from a business.” With that definition of customer in mind, let’s move forward with my definition of who my customer is as it relates to the collision industry.
Owning Your Customer Base
In the old days, when marketing my company, I would buy ads in local newspapers. Understand that I’ve been in business a long time and started my company before the internet and computers were invented. I used to have a real customer base of people who had a choice to use my shop without being steered elsewhere. That made my customer base the foundation of my business, and this was where the real value was. This is not the case anymore.
We can do such a perfect job that it makes the customer absolutely jubilant, but still they may never return – and not because of anything we did. It could be that the insurer just referred another shop. Things changed so slowly that most us never saw it coming – and many don’t even know what it was like to really own their customer base.
There was a time when the majority of our customers came from our goodwill and not an insurer’s referral. Sure, insurers referred us, but this was not the norm – we did, in fact, really own the majority of our customer base.
Then the DRP came along and many of us happily joined these programs because now the insurer was sending us new customers – we no longer had to market or sell each and every job! They just showed up and all we needed to do was process the claim and keep the insurance company happy. But this was a double-edged sword, because while it was supplying us with the customer, it was also taking our own customer base away from us.
Insurer as Customer
As I said before, my customer is the insurance company. Everything else is a veneer made to make me think the vehicle owner is my customer. But it’s just not true.
The insurer controls every aspect of the repair process, not the vehicle owner. The insurer picks who comes to my shop for repairs, and the insurer pays me directly through EFT most of the time or even single-party checks made out to my shop alone. The insurer pushes me to get the repair done in a timely manner and watches for quality control and measures my CSI. Then, the insurer pays the bill. So tell me how the insurance company is not my customer?
The vehicle owner contacts their insurer and tells them they had an accident, which is when the insurer takes over. The insurer markets this customer and guides them to me if at all possible within the law. I don’t know any insurers that intentionally break any laws – they don’t need to because of these three magic words: “We guarantee it.” Now, we become a subcontractor for the insurance company because the insurer will offer to guarantee my work. And now the vehicle gets directed to my shop for repairs.
Controlling the Repair
The problem is that it doesn’t stop there. Now they start a dialogue with me to control the repair process and adhere to the preset guidelines according to my contract with them and their insured’s policy agreements. I’ve agreed to limit what I can and cannot charge for and we repair the vehicle. Granted, this is a great system for all involved…until it is not.
Every so often, we’ll disagree with the process to repair a certain vehicle and will quickly find out that the insurer is in fact our real customer and our job is to keep them happy. The vehicle owner is secondary, not by choice but by necessity.
The grim reality is, as a collision shop owner, I need to keep both the insurer and the vehicle owner happy. If I lose a customer, it’s one job. if I lose an insurance account, it could be millions of dollars. So I enter into more and more dialogue with my customer – the insurer, not the vehicle owner – and we agree to compromise or not compromise on certain items and get the OK to repair. But who is agreeing to the compromise? Me and the insurance company (my real customer, not the vehicle owner). Then, I notify the vehicle owner of what the insurance company allowed or didn’t allow and the repairs begin.
How can we say that the vehicle owner is my customer when they have little or no say in how their vehicle is being repaired? I know what the law says, but through the years, policies bought by consumers have been written to give the insurer the ability to control the repair process.
The Vehicle Owner as Customer
Now, I’m going to further prove my point that the customer is the insurer.
I no longer get to choose my customers because of the agreements I’ve chosen to enter into; I’ve allowed the insurer to pick my customers. They choose what kind of cars I work on and, if I get a customer that from the beginning I would not have chosen because I knew they would be trouble, I can’t refuse them. I could in theory refuse them, but in reality my relationship with the insurer (who is my good customer) will be better if I just take the job and do it.
When does the vehicle owner become my customer? When there is a problem, delay or any liability. Then, they are 100% my customer and I am responsible. From the beginning, the vehicle owner thinks that they’re the customer and that we’re given carte blanche to repair their vehicle without any restrictions. When they complain to the insurance company about anything, the insurer is quick to point out that they are not the ones repairing the vehicle and their liability ends with policy guidelines. They cannot not be held liable because they didn’t repair the vehicle, nor do they control the repair process. We are the repair experts and thus we’re liable for the safety and quality of the repair for the vehicle owner, who now without any dispute is my customer – and by law is, in fact, my customer. The law states that my obligation is to the vehicle owner and not to the insurance company, but it really doesn’t work that way.
We’re like the subcontractors that a contractor hires to do work on a project who expects us to work for less than the retail rate but at the same time expects a quality job and fair price. We agree to this because it works well most of the time…except when it doesn’t. The contractor is the responsible party, and if we don’t step up to their expectations, they hire a new subcontractor to do their next job and we’re out of work.
But what if the contractor wanted you to do something that you knew would fail or just wasn’t right and it failed? Would the consumer who hired the contractor go after you the subcontractor or the contractor? They would go after the contractor and threaten his license or reputation. He wouldn’t be able to pass the liability onto the subcontractor because he hired the subcontractor and the subcontractor did what was asked of him. The contractor would be responsible because the job was under his license. Not so with the insurers – they’re the contractors and we’re the subcontractors, but we carry the liability for how they control the repair of the vehicle.
So, if the insurance company is our customer (and it sure sounds like they are), what is the vehicle owner? The vehicle owner is also our customer, and that leaves the body shop right square in the middle, caught between a rock and a hard place with nowhere to go.
Dipping into our Pockets
We need to keep both the insurer and vehicle owner happy to stay in business. So, we dip into our wallets and perform whatever we need to do to make everyone content. When I say we dip into our pockets, I mean we pay for anything that will become a problem to both our insurance account and the vehicle owner. We pay for rentals to keep both happy and items that the insured thought they had coming but the insurer denied, we detail their cars, etc. The list goes on and on.
As President Lincoln once said (with his words heavily modified), “You can keep both the vehicle owner and the insurance company happy some of the time, but you can’t keep the vehicle owner and the insurance company happy all of the time.” But, my friends, that is exactly what is expected of us. We all know this, even if we choose to live in denial.
What can be done about this situation? And is it possible to once again have just the vehicle owner as our customer? The answer is NO. We will always have both the vehicle owner and the insurance company as our joint customers. In reality, they’ve always been combined together. Our focus needs to be on recognizing that we walk a fine line between them both, but to succeed we need a healthy relationship with both sides. We need to negotiate for the vehicle owner but realize that very few of them are willing to reach in their pockets to pay for what the insurer denies. Welcome to the new collision industry!
The Customer is the Vehicle Owner
Lee, you’re entitled to your opinion, but your position on who is the customer in a collision repair transaction is wrong for several reasons that you yourself pointed out.
First and foremost, the laws in most if not all states declare that the customer is the vehicle owner and/or the party who signs the authorization/contract for the repair. As such, it would behoove all business owners to follow the laws, statutes and regulations governing their businesses for the jurisdiction(s) they provide their services. If you disagree, you may want to try to get the law in your state changed to accommodate your disagreement with the state’s position.
It’s the customer’s vehicle, and as such, they themselves are ultimately responsible for the repair. For example, if a repairer performed repairs that were approved by an insurer, and that insurer goes out of business (as most of us have seen a time or two), who would the shop owner seek payment from? Rest assured, they’ll look to the true customer, the party who signed the repair contract.
Secondly, it’s imperative for both repairers and customers to understand the role of insurers as it pertains to collision repair. Insurers, who choose to provide payment for repairs, are not bound to pay the repairer. They’re contractually bound (be it a first- or third-party claim) to pay the vehicle owner or their policyholder…once again, by the book, the laws governing contracts.
“One cannot serve two masters,” and while you gleefully admit you see the DRP relationship as beneficial to yours business, I would wager that if your customers knew of the concessions you’ve likely agreed to (as my client shops ensure), you would lose their favor and they would likely go elsewhere on their own accord. As you stated, “The insurer controls every aspect of the repair process, not the vehicle owner.” I can assure anyone reading this, it is because you and most other DRP participants simply fail or intentionally decline to involve the true customer in matters they should be informed of…matters that have a direct effect on them and their family’s personal safety and economic well-being. These are issues the repairer may merely turn a blind eye to so as not to upset those they see as their customer, the referring insurer, just as you do.
To put it simply: The insurer owes the consumer, the repairer owes the customer and the consumer owes the repairer. Ultimately, it’s the repairer who shoulders all the associated liabilities with the repair, not the insurer. In the end, it’s the vehicle owner, the lawful customer, who receives the repair and all the remaining economic loss and potential safety concerns resulting from the repairer’s “concessions” – not the insurer. Some may surely disagree with me, however, the laws of this country and the informed consumers who operate the repaired vehicles with their family on board would. – Barrett Smith, Auto Damage Experts