Q: Barrett, I read your articles all the time and find them frustrating. I’ve worked in the collision industry since the early 80s as a technician and body shop manager and now I work for an insurance company. I always feel like you pile on all this blame on insurance companies for trying to save money and not paying for necessary operations, using alternative parts, etc. I was trained by my employer to repair vehicles the way the manufacturer recommends, and all of the adjusters who work at our company are all Platinum I-CAR trained and, in most cases, have more I-CAR training than most of the shops we serve. Nothing frustrates me more than hearing how we don’t pay for things and how work is steered to DRPs, but honestly I’ve seen what our DRP shops charge for and they aren’t leaving any crumbs behind. I feel that it’s sour grapes with some shops because they missed out on the gravy train. I also feel that some of these shops talk a big game but sometimes charge for things that they don’t actually do or have the capability to do, such as pre- and post-repair scanning. I don’t mean to sound bitter, but when it comes right down to it, insurers are keeping this industry profitable and there’s going to come a time when it will be easier to total a vehicle than let some shops repair it. Just because a repair costs more in one shop than it does in another doesn’t make it a better repair.
A: Thank you for your comments. It seems we share similar career paths, as I’ve also managed and owned several collision centers and was also a senior claims adjuster for a nationally recognized auto insurer. I developed Auto Damage Experts (ADE), while you entered the auto insurance industry as a claims person.
The Golden Rule
Your message made me think of “The Golden Rule”: “The one with all the gold … makes all the rules!”
Today, those insurers who spend the most in advertising seem to be the most aggressive and abusive when it comes to what they often refer to as “cost containment.” One well-known carrier spent over $5 billion in advertising last year and will up that to $5.5 billion this year. Insurers cannot gain that kind of marketing budget merely through savvy investments and astringent business practices.
When an insurer denies a dollar for a legitimate claim and doesn’t pay it, that dollar now becomes 100 percent net profit to them. They should have paid it but were able to hold on to it. And they don’t even need to get the dollar … they already have it in their company’s coffers! I only know of a couple professions that are able to earn a 100 percent net profit … and in most states, neither one of these professions is legal!
On the other hand, if you and I owned an insurance company and I came into your office and said, “Hey, check this out! Twenty-eight percent of the estimates and settlements we write never get repaired, another 40 percent go to low- to mid-quality shops and 12 percent go to those repairers known as high-quality shops and the rest unknown,” we would likely agree that when making settlements where the repair shop is unknown, we could write a bare-bones initial estimate/settlement. If the vehicle owner chooses a higher-quality shop, we’ll handle the supplement accordingly, but if they don’t get it repaired or elect to go to a lower-quality shop, then it’s likely we’ll save money. We would likely agree, as would our stockholders, that that was a reasonable business plan and implement it right away via a simple e-mail memo to our claims staff nationwide.
Deception and Fraud
I also understand there are repairers out there who don’t and/or are unable to perform what they might get paid to do, and that would be considered to be deceptive business practice, consumer fraud and/or insurance fraud. The fewer dishonest repairers, the better for the collision repair industry. Unfortunately, some insurers don’t want to eradicate these players or repairer fraud, as it keeps their claims costs down with no posed liabilities for the insurer.
Unfortunately, many repairers don’t know how to properly deal with insurer underpayments. So, rather than combat it, they go what seems to them to be the easier route and take advantage of the unwary consumer through providing short-cut repairs and over-charges.
I refer to this as the gravity theory that says that “c*[email protected] rolls downhill,” where insurers under-pay the shop and the shop under-delivers to the customer to try to make a profit and the customer is the one who’s harmed “down the road” with defective work, defective parts, potential safety concerns, premature wear and tear and failures, loss of warranty and a lower re-sale value. While ADE has effective methods to combat such issues (and without getting into litigation), some repairers have become accustomed to “business as usual.”
The problem I have is when the consumer goes to a quality shop and is denied reasonable and necessary repair procedures, parts and/or materials simply because the insurer doesn’t want to pay for them. This is when shops hear from claims people, “We don’t pay for that,” “You’ll have to get your customer to pay for that,” “You’re the only one I have ever heard ask for that,” “That’s not a prevailing competitive practice,” etc.
Like you and millions of others, I spend a lot each year for insurance and I’m supportive of insurers reducing their costs to help keep the cost down. However, I draw the line at them doing so at the expense of the consumer. When insurers’ efforts result in consumer abuse by withholding funds for recommended processes, parts and materials that may negatively affect the consumer and their family’s safety and economic well-being, I take issue with that.
Are All Bad?
Are all auto insurers bad? No, I don’t think so at all. Some of the most trusted insurers provide a high level of ethics and integrity when dealing with repairers and consumers. These are generally not those who spend billions in advertising and their premiums may not be the lowest, but if ever there was a marketing truth, it may be: “You get what you pay for.” However, with some insurers, you may not be provided what you’re entitled to. And the unfortunate thing about insurance is that one doesn’t know the quality of the product they purchased until they need it most … and then it’s too late!
Are all insurance claims people bad? Absolutely not. However, there are many good people doing wrong things for the sake of a paycheck. Many do what they do simply to keep their jobs. I’ve had claims people break down and cry in my shop due to the pressures applied on them by their managers to follow company mandates they didn’t believe in. It’s good for an employee to be loyal and “ride for the brand,” but they need to make sure they get to wear the white hats.
Looking in the Mirror
You seem like a reasonable person, and I hope you work for one of the good guys and are not pressured to under-pay claims. I understand good people can be compelled to do bad things. This is also true for repairers who fail to receive proper amounts to perform proper repairs and under-deliver to their customers.
I couldn’t, in good conscience, do what the insurer I once worked for wanted me to do, and that was why I left that business. I also couldn’t do what some dishonest shop owners/managers do, or those who feel they don’t have a choice. And that’s the reason I started pushing back by educating my customers at my shops and started ADE.
I believe you have some valid points, and I strongly encourage you and others to continue to do the right things for the right reasons, as life is simply too short to look at yourself in the mirror each morning wondering if you’re doing the right thing.