Why Are the Discounts an Insurer Receives from a DRP Shop Not Shared with the Policyholder? - BodyShop Business

Why Are the Discounts an Insurer Receives from a DRP Shop Not Shared with the Policyholder?

Most insurance companies consider the first dollars spent on a claim that's paid to be the deductible. For example, in a claim with a $500 deductible, the customer would be required to pay the first $500, then anything above that would be covered in the insurance contract. In the event of a car being repaired under a direct repair contract where discounts are given, why are those discounts not shared with the policyholder?

Question answered by Barrett Smith, president of Auto Damage Experts, Inc., in Dover, Fla.:

You pose a great question! Your question deals primarily with first-party (insured/policyholder) claims due
to the deductible issue, and I would agree that if discounts are to be offered, why isn’t the faithful policyholder getting the same benefits? After all, it’s their vehicle, policy, repair and claim monies!

Simply stated, the answer is: because the consumer/customer is likely unaware of such discounts and concessions between the repairer and the insurer! Repairers who enter into DRP agreements with insurers are doing so to benefit themselves. And, of course, the insurer benefits from the discounts and lower claims costs (administration, vehicle expense, office space, employee salary/benefits, liability, rental, etc.) – all of which equate to increased profits.

The consumer/customer who receives discounted repairs but no benefits or incentives to do so allows this course of action simply because they’re unaware of the true relationship between the repairer and insurer. The consumer may know there is a relationship, but they’re “sold” or steered due to the insurer’s promises of such benefits as “convenience” (“It will take longer at a non-approved repairer”), “financial” (“You may incur out-of pocket costs if you go elsewhere”), “lifetime warranty” (“We can’t guarantee work done by those who don’t meet our criteria”), “faster service” (“You may have to pay for rental for avoidable delays in handling”), etc.

It’s important to note that this is not an issue that involves just DRP repairers. When insurers generate estimates, they generally include all discounts and concessions in the estimate and settlement, such as when they “cash-out” a customer who hasn’t selected a repairer.

It’s important to understand that when discounts are taken, they aren’t taken from the repairer – they’re taken from their customer’s claim settlement. For policyholders who have a deductible, this is a double whammy. For third-party claimants (non-policyholder victims), it may be seen as an unwarranted and
non-authorized deduction from their claim settlement. While I’m not an attorney, I would think this may be considered a “Conversion of Assets.”

As far as I’m concerned, in an industry where profit margins are excessively low, a shop providing discounts is no different than saving deductibles – except that the consumer isn’t receiving the perceived benefits or savings.

Generally speaking, when repairs are discounted, something somewhere has to give. Ultimately, it will be the repair (and the customer) who gets shortchanged through cost-saving measures. And such cost saving measures often end up negatively affecting the safety and economic well-being of the consumer and their family through poorly performed and/or insufficient repairs, inferior parts and other remaining issues.

In advising repairers on such a situation, I encourage them to explain to the customer where and when discounts are attempted to be imposed or taken by the insurer (i.e. capping, labor, parts discounts, etc.). After all, it’s a portion of the customer’s insurance settlement monies that’s being taken from them, and if discounts are available, why shouldn’t they get them?

I encourage independent repairers and their associations to educate and edify consumers on such issues so they can fully understand and appreciate these issues and assert their rights for proper and thorough repairs and full compensation for their claims. Only by involving the customer in the estimating and repair processes can such practices be curtailed.

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