State Farm’s foray into parts procurement. Growing dissatisfaction with direct repair programs. “Underwritten” initial estimates by insurers. These were among the most talked-about topics in the industry this past year. Here’s a quick review of the year through a collection of some of the most memorable, important, interesting or enlightening quotes heard around the industry during 2007.
“I can’t tell you the number of calls I’ve had saying, ‘We had an issue pop up in our state. We did our due diligence. We tried to contact the Department of Insurance and submitted an inquiry and we’re not getting any response. Or they say they can’t help us.’ So there’s a lot of questions from repairers about what they need to do in the event that they have an issue they are trying to resolve.”
– Dan Risley, executive director of the Society of Collision Repair Specialists (SCRS), expressing in January the frustration he hears from collision repairers getting little or no response or action from their state department of insurance or other government regulators to concerns or questions pertaining to claims issues.
“We got in front of a group of state insurance commissioners and started outlining some of the issues we’ve talked about today, and you could not believe the eyes that were popping out of their heads in shock and disbelief. When we were done with our presentation, we had six or seven of them come up and say, ‘We want to spend more time with you; we want to understand the issue more.’”
– SCRS’ Risley, speaking later in the year about a presentation he made before the National Association of Insurance Commissioners.
Desk audits legislated out
“From a practical standpoint, the passage of this legislation means that repair shops will no longer be tied up in disputes based solely on an insurer’s or third-party auditor’s view of a photograph of a damaged vehicle. In addition, the legislation ensures that shops can continue to work with parts suppliers with whom they have established a good working relationship and who they can rely on to provide quality parts and good service.”
– Judell Anderson, executive director of the Alliance of Automotive Service Providers in Minnesota, on legislation passed in her state that prohibits insurers from adjusting a claim without a physical inspection of the vehicle (eliminating so-called “desk audits” based on photos), and prohibits insurers from requiring that shops use a particular vendor for parts.
Painting a positive picture
“We are delighted to complete our merger with Keystone…Keystone’s aftermarket product line is a perfect complement to LKQ’s leading presence in the recycled parts marketplace. We now have an expanded national network of nearly 300 facilities that allow us to offer readily available, high quality recycled, refurbished and aftermarket collision repair parts to our customers.”
– Joseph Holsten, president and CEO of LKQ Corporation.
“This is not hotheaded or suicidal insurrection…Rather, it is what we at CARSTAR have begun talking about as “responsible push-back.” To us, “responsible push-back” means standing our ground on the basis of the facts of our work. It doesn’t mean threatening to give up relationships with insurers if we don’t get immediate relief. But it does mean letting our insurance partners know, for example, that a partial blend on a panel doesn’t reduce time and materials by 50 percent, and that many shops already deliver consumer experiences that meet and exceed their expectations – and that those of us who meet those standards will not sit passively by and comply with new rules that are not grounded in the relevant facts of safe and responsible vehicle repair or customer care in our shops.”
– Dick Cross, chairman of the board of the national CARSTAR chain, in an open letter to the industry last spring.
Bad to worse
“I’ve been part of this industry my entire life, and in the last year, I gotta tell you, the things I’ve seen going on in this industry just make me sick to my stomach…We need to unite and start to address some of these issues instead of allowing people to run all over us. Enough is enough. I’m not blaming any one segment. We all have blame in this thing. The insurance companies have abused the database times to the point where the repair facilities are going after the information providers and scrutinizing tenths of labor on individual operations. And the reason is because it’s the only outlet they have to try and collect an extra tenth of an hour to pay their bills at the end of the week.”
– Lou DiLisio, an industry consultant, one of a number of participants at the Collision Industry Conference (CIC) in Atlanta last spring issuing passionate pleas for changes in the industry.
Insurer is not your friend
“It was said by one gentleman in this room at a meeting one time that, ‘Make no mistake. The insurance industry is not your friend if you are a repairer.’ We’ve lost sight of that. Yes, we have to do business and co-exist. But we’ve kind of opened the door and invited them in. And now we are reaping the benefit. I’ve suggested for a long time that as an industry, we simply do what we tell our children to do as it relates to drugs: Just say, ‘No.’ It’s written on many police cars around the nation. It needs to be written on your building.”
– Kansas shop owner Bill Eveland, speaking at the same CIC meeting.
“If you don’t like what’s going on this industry, and it doesn’t matter where you come from in this industry, you can no longer sit back and say, ‘Gee, I hope somebody does something,’ If you think that something is wrong, you better stand up for your beliefs. If you don’t believe this industry has some value and meaning and purpose, then do us all a favor and step out now. Because the rest of us do care about it. We can’t just sit here and believe that somebody else is going to solve our problems. If you have a mirror, look at it, because you’ll see where the solution starts.”
– Massachusetts shop owner Chuck Sulkala, speaking at same CIC meeting.
“Most OEMs have engineers who really know how to build vehicles that can minimize damage in a collision. However, the most important influence on OEMs is the customer who is buying the vehicle…And what customers want has really changed over the years. In the past, it was high performance and styling. Today it’s safety and fuel economy…The fact is, customers don’t consider repairability as a factor when they are buying a new vehicle…Perhaps if the national media promoted the cost of ownership as much as safety, customers would place more emphasis on it in their purchase decisions. This would lead OEMs to look harder for ways to accomplish all three: fuel economy, safety and repairability.”
– Steve Nantau, collision repair engineering supervisor for Ford Motor Company.
Legal consequences
“It could be a breach of the insurance contract with the insured if an insurance company is making a practice of deliberately not including (on an estimate) all of the repairs necessary to restore the vehicle.”
– Ohio attorney Erica Eversman of Vehicle Information Services, Inc., at one of several meetings held early in the year to discuss “underwritten” initial estimates.
“If it eventually comes out that you didn’t necessarily fix the car in (the consumer’s) best interest because you were operating under some external agreement (with an insurer), those are things that society tends to have a problem with.”
– attorney Eversman, addressing practices for which a shop could put itself at risk of being sued for engaging in unfair trade practices.
Industry voice
“We all have the same love for the industry. We all have the same passion. We want things to be better. We want to be respected and have the pride that goes with the accomplishment of our work. We’re good at what we do. We’re damn good. That’s the thing that SCRS gave voice to. We brought that forth. The problems today are different. There are different challenges. But the fact is, you have an organization to deal with them. That’s the difference. There was nobody to deal with these things until we came along.”
– John Loftus, retired executive director of the Society of Collision Repair Specialists (SCRS), speaking at an event last spring celebrating the association’s 25th anniversary.
I-CAR re- stresses training
“The fundamental question is still the same: How do we repair these new cars safely and properly? Do we really think that today every repairer and estimator, every adjuster and reinspector has all the knowledge necessary on what is required to complete safe and proper repair? It’s time for every industry segment to recommit to the founding principles of I-CAR, to come together to ensure that every industry segment has access to the training they need to complete a safe and quality repair.”
– John Edelen, an Allstate Insurance executive and board chairman of I-CAR, speaking at the training organization’s annual meeting last summer at which it was announced that lower class attendance resulted in a financial loss of $1.1 million for I-CAR’s latest fiscal year.
“These changes are designed to improve the quality and relevance of our training and its delivery, and to enhance our abilities to support the training administration needs of the inter-industry, now and in the future.”
– I-CAR’s Edelen, announcing significant changes in I-CAR’s top executive positions and organization this fall.
What part of painting a bumperwith different materials don’t you understand? Stop the double-speak.”
– Arizona shop owner Bob Isham, questioning last August Information Service’s initial refusal to change its estimating system to acknowledge that flexible parts are not painted in a continuous process with the same materials used on the rest of the car; CCC later that fall announced it was changing its system.
Gratuity arrangement unacceptable
“In September, Autocraft discovered the gratuity arrangement with its former employee and Autocraft fired him. Two days later, Autocraft was pulled from the Auto Club’s IRP program. Palmer’s termination followed shortly after our complaint was filed with AAA. And then, within a few days, Autocraft was reinstated on the IRP program.”
– L. Douglas Brown, attorney for Autocraft of Torrance (California), speaking about Gil Palmer’s firing as manager of the Auto Club of Southern California’s Immediate Repair Program (IRP) direct repair program amid allegations he extorted gratuities from one or more shops, a story that eventually made it into the Los Angeles Times.
“It’s making the other carriers step up.”
– Gil Grieve, owner of Concours Body Shop in Reno, Nevada, speaking last March about how State Farm’s new “Select Service” requirement of “best pricing offered” was leading some shops to stop offering discounts to other insurers.
“We didn’t do a huge amount of volume with State Farm anyway, so it was relatively easy to say no thank you. We went from maybe eight cars a month to maybe four cars a month. Not a huge loss. But because of the loss we would have had in order to extend the discounts to all eight of those cars – and we weren’t confident that count would increase – I think we’re in a better position. And the shops around here that stayed on (Select Service) don’t seem to be exploding with volume like everyone thought they would.”
– Curt Nixon, the third-generation president of L Monty Body Shop in South El Monte, California, about his decision to not participate in State Farm’s Select Service program.
“It’s really built with two things in mind: That the repairers can still buy from whom they want. And two, we’re not going to get into their profit margin…We understand how important that is to the repairer.”
– George Avery, a State Farm claims consultant, announcing a test this fall requiring shops in its “Select Service” program in two markets to order parts electronically.
“I don’t think this is it. This is not the end. We’re looking at rental. We’re looking at towing. We’re looking at ways to make you efficient because…of the customer that we share. I want to make it a positive experience. That positive experience, we believe, can be achieved, by getting into what is really making it inefficient.”
– State Farm’s Avery, speaking in late October about the launch of its parts program.
“But during the last two years, I have seen my dream turn into a nightmare. Insurance carriers have leveraged their economy of scale to implement concession- based DRP contracts, and forced collision repair businesses to offer the cheapest and quickest repair possible, many times sacrificing quality, safe repairs. Insurance carrier concession-based DRP contracts now list pages and pages of requirements that are imposed on us. And when I refer to concessions I don't mean only labor discounts, part discounts, paint caps, and zero mark-ups on sublet items, but also and more importantly, I refer to concessions on the quality, integrity, and safety of repairs.”
– Todd Fox, in an open letter to the industry upon his closure in late October of his 18-location collision repair business because, he said, of his unwise choice to participate in concession-laden direct repair programs.
“ASA requests the EPA to consider tightening the final regulation to ensure that any exception…to the spray booth requirement exclude ‘miniature spray guns’ or similar technologies. Those persons or business entities using ‘miniature spray guns’ should be required to have a spray booth.”
– Bob Redding, Washington, D.C., representative for the Automotive Service Association (ASA), in a letter this fall generally supporting a proposed EPA regulation that would require collision repair shops to use HVLP spray equipment, approved spray booths or prep stations, enclosed gun cleaners, and certified paint technicians.
Across the pond
“When the government sat down and looked at how an estimate for repair was done, they couldn’t understand it. ’Why isn’t it $90 (per actual hour) instead of $30 times three (book time hours)?’ It’s a crazy system.”
– David Newton-Ross, a collision repair trade publication editor in Australia, speaking of that country’s government-mandated shift to “new times and rates,” designed to eliminate the “funny times, funny rates” system of shop charges.
“Insurance companies are really focused on building their brand. So when the moment of truth occurs, the auto accident…the insurance company wants to do everything they possibly can to hug that customer during the repair process so the customer will have a higher propensity to renew his or her insurance policy. So they’re not spending these (advertising) dollars and just letting their customers go off to any shop they choose. If they can direct them to a high-quality, professional, high-integrity repairer, they prefer to do that.”
– Matt Ohrnstein, the former CEO of Caliber Collision Centers who now serves as managing director of Symphony Advisors, a California-based consulting firm, speaking of auto insurer industry’s record-setting advertising spending.
“It’s long overdue that the women in this industry had a professional forum to get together to develop ideas, build camaraderie, get to know one another and walk away with a new sense of confidence and awareness that they’re not ‘the only one.”
– Gigi Walker, a California shop owner and secretary of the Women’s Industry Network (WIN), which held a two-day conference last spring.
“We’re not really sure how long it took it to address it, but the bottom line is for (that) period of time, which was at minimum 90 days, the repair industry had to deal with the (labor) time that was in that system and unfortunately lost a lot of money. We feel those are the types of things that need to be disclosed to the industry, both when they are uncovered and when they get resolved.”
– Lou DiLisio, coordinator of the CIC Database Taskforce, speaking of a “pretty significant error” the Taskforce found in one estimating database.
Compiled by John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988. He can be contacted by email at jyoswick@SpiritOne.com.
John Yoswick