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FeedAASP expresses opposition to State Farm parts bidding program
May 16, 2012—The Alliance of Automotive Service Providers (AASP) believes that State Farm Insurance Co.’s new online parts ordering and bidding process through PartsTrader is an unprecedented and uninvited intrusion into collision repair businesses, the organization said in a statement released Tuesday.
“Despite posturing from the largest national insurance carrier on what it believes to be positive attributes of the program, collision repair facilities, parts suppliers, parts manufacturers and interested parties around the country have been consistent in their perception that this type of activity will ultimately harm their businesses and the customers they serve,” AASP said.
AASP said that collision repairers are in the business of selling parts, labor and materials at a retail level—each of which are revenue sources that contribute to a shop’s overall success. The pursuit of a profitable return on investment is a core business principle, and one that collision repairers should not relinquish to other outside parties, the organization said.
Meanwhile, AASP said, insurance carriers are in the business of insuring risk and settling losses at market value when losses occur.
“As the payer of claims, insurers should not be ‘market makers’ for pricing of individual products and services that are components of final invoices,” AASP said. “To date, insurance pressure and influence over collision repair market pricing has driven average profit margins to low single-digit figures, despite the fact that the business of collision repair has a high cost of entry and requires ongoing capital investments to keep pace with automotive technologies.”
AASP said it has received feedback from industry professionals in other markets outside the U.S. who are familiar with insurer-mandated bidding platforms. The feedback indicated that State Farm’s parts procurement program is a losing scenario for shops—repairers stand to lose both profit and control of their business.
“The negative impact of this parts program has the very real potential to quickly spread beyond parts to other areas, such as paint, and beyond the boundaries of voluntary direct repair program (DRP) agreements to the industry at-large,” AASP said. “The collision repair industry has gradually transitioned from a proud trade of hard working owners and employees to a service provider that subcontracts to the insurance industry, working on net margins that it no longer controls and that jeopardize its ability to invest in its business and to attract and train qualified employees. AASP has grave concerns for its members’ future welfare if giant insurance corporations are permitted to trample on the free market philosophies that support a culture of small business success.”
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I see nothing positive in this. Customers, collision shops, and parts vendors. State Farm is headed from being one of the best to deal with to being the worst. I guess the previous law suit they dealt with in the 90s did not get their attention. What a shame.
Insurance companies want to "own" your company without the overhead --- PLAIN & SIMPLE!! Wake up out there
I agree fully with ITSDEENY. The only thing we forget is, there is one large company out there that actually does own its own shops already. By the way how is that even legal?!!!??? At least SF hasn't gone that route yet. Oh and by the way has anyone checked who is on the board of CAPA Certification? There is another big question/answer session I would like to be a part of. If this isn't stopped more and more shops are going to go by the way side and they will have the market all to themselves to keep bullying guys (both shop owners and their customers) around. But the way things are going; if we don’t stop stabbing each other in the backs it going to happen anyway. $45 an hour to fix a rolling death trap if it isn't fixed properly is only half what people pay to have an estimate on their toilet bowl..
It is just par for THIS course. It appears to me that the insurance companies come to the auto side to take, take, take BECAUSE WE LET THEM! We let them tell us what the prevailing rate is and what they are going to pay. On the health insurance side they try the same thing to no avail because the doctors get together and discuss this and we cannot. from my point of view the steering is rampid so if you are not on their list then you will not survive. In 20 years they have taken a good business and turned it to something I will not let my kids consider as a career, which should be a crime. we are the only side of business that deals with an insurance company that actually relies on skill and experience to complete our task, techs are artists! That is why they call a doctors job a PRACTICE, and if they don't do their work properly than they have malpractice insurance to step in. On this side we have the same end result someone could die, our recourse is to REDO the work. It just appears that we take ALL the risk and now we will reap less profits. My stand on the whole thing is... Let State Farm repair their own cars then they can keep all of the profits, I mean really, it is such an easy business to run. HA!
Boycott State Farm work! Sorry the direct repair shops can't afford to do that. Seeing as they are already sleeping with them. The small independents will take it in the pocket book again. The large consolidators look only to the bottom line they will make up the difference in volume. lol wait that's not funny !
I am in the middle of 3 or 4 SF shops and I maybe see 2 or 3 of their calims a year so there is nothing to boycott!! How is that for steering evidence? We should boycott all of them and take our business back. Probably 95% of them can't fix a dent, weld a panel, pull a structure, or remember how to put one of these jig saw puzzels back together let them try to LOL! I can feel my blood pressure going up already!