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Who’s Really to Blame?

The “sacred cow” issue of fraud in the collision industry.

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Recently, I read an editorial written by Georgina Kajganic, editor of BodyShop Business (Sept. BSB “Editor’s Notes”). The editorial concerned itself with the “sacred cow” issue of fraud in the collision industry. I won’t dispute Georgina’s comments. On the contrary, what she wrote was unfortunately true. I’ve witnessed the abuse of fraud from both perspectives, being a shop owner as well as an insurance adjuster/investigator. While the practice of fraud may be more prevalent than we’d care to admit, I think it needs to be examined in its entirety, with appropriate responsibility being equally shared by all parties concerned.

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Today, as I entered my shop and turned on my computers, I was disappointed that none of the terminals would access my main server. A call to my computer tech resulted in wane attempts to correct the problem via the telephone.

I knew I needed to brace myself for the service call that was about to follow.

The tech arrived at my shop, walked into my office with his 6-inch-by-12-inch toolbox, smiled and proceeded to spend the next hour and a half correcting my problems. When he completed his repairs, he cheerfully handed me a bill for $285.

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In reviewing the bill, I was charged for travel time, as well as the time he actually spent here. It resulted in a $100-an-hour labor rate. I then reflected on his liability exposure in his chosen profession. What was the absolute worst case scenario he might encounter? Refund the customer for a new computer? Cost? Maybe a few thousand dollars. I compared that to our liability in the collision industry, which could conceivably be thousands if someone were injured as a result of our repairs. As a result, we need a costly insurance policy for this exposure. We also need a building to house the costly tools and equipment needed to repair today’s vehicles. These investments are easily in the $100,000+ area. And then I wondered why our hourly rate was only one third of the computer tech’s?

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I bring up this comparison not to justify why fraud exists, but to bring awareness to the pathetic state of affairs we face in this industry. I wonder how much longer we can expect to attract competent individuals into our industry considering the wages are fractions of what other trades pay. How much longer can we compete with other trades regarding benefit packages? Why should people spend thousands of dollars on their own tools, as well as thousands of hours learning this trade, when they can easily learn any one of a number of trades that will reward their efforts more generously – and with fewer investments and less exposure to toxic conditions?

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We in this industry have been entwined in a vicious circle of fraud for decades now. There was a time when our labor rates were synonymous with mechanical shops. Since the gap between wages began, it’s only widened further with each passing year. Is an auto mechanic any more or less qualified than today’s collision repair tech? I don’t think so. Unfair restriction of hourly rates has only served to increase the practice of fraud. Someone has to get out of this vicious circle. Unfortunately, I don’t think I can foresee collision repairers initiating the action.

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If insurers paid their current employees what they did in 1970, would they be naive enough to think their employees wouldn’t find creative means to “fill the gap” to meet equality to 2000 wages? Yet, this is exactly what occurs when labor rates are unrealistically suppressed year after year in the collision industry.

What’s the answer? Pay the same as virtually every other trade that exists out there. Allow collision repairers their right to generate an honest return for their investments. Monitor repairs during and after the repair process, and if fraud is found, prosecute the offenders instead of the entire industry. Once it’s known that criminal and civil penalties will be enforced, the practice will cease. Someone has to start somewhere. I’d love to see it start in my lifetime, and I, for one, welcome it.

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Writer Mike Melfi Sr. is owner of C-M Motors in Chicago, Ill.

The views expressed in this guest editorial do not necessarily reflect those of BodyShop Business.

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