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The Future of Shop-Insurer Relations

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The Future of Shop-Insurer Relations
As the insurance landscape continues to change, collision repair shops will have to adapt.

On Monday, Oct. 2, 2017, a Texas juror stood up and delivered an unsurprising verdict: John Eagle Collision Center was guilty of incorrectly repairing a 2010 Honda Fit that, after experiencing a subsequent crash, trapped Matthew and Marcia Seebachan from the inside as it burned. John Eagle’s staff failed to properly follow OEM procedures, and instead used untested adhesive to replace a hail-damaged steel roof.

The narrative that unfolded from that horrific event sounded familiar to many shop owners: Todd Tracy, the Seebachans’ lawyer, also alleged that State Farm “forced” John Eagle to defer from an OEM-mandated repair. Regardless of whose fault it was, suddenly, the consequences of not following OEM procedures had a number—a big number—attached to it: $42 million.

The verdict—a watershed moment for collision repair—capped off a year that, up to that point, had seen vast change occur in the shop-insurer dynamic, stemming from myriad lawsuits and new initiatives from insurance companies to overcome huge underwriting losses.

As vehicles become automated and technology warps the auto insurance landscape, body shops are experiencing the after effects and being forced to re-adjust, says Joe Schneider. As managing director for KPMG Corporate Finance, Schneider co-leads the firm’s extensive evaluation of the quickly changing insurance industry—and one truth has become incredibly clear:

“The [insurance] industry hasn't made money off this line of business for years, and lots of the technology and underlying systems supporting the businesses are not state of the art. So if they're having trouble underwriting profitable insurance business, what is going to happen when we enter into the chaotic middle,” he says.

The chaotic middle—a period of uncertainty following what was a stressful year for auto insurance profits. As 2018 unfolds, Schneider says that uncertainty will gain shape and crystallize into what, moving forward, will become the norm for shop-insurer relations.

So, as a shop owner, you need to know everything warping the traditional understanding of that relationship. This article details two of those major industry changes: following OEM procedures and handling virtual claims.

Additionally, check out how two shop owners entrenched in the shop-insurer battle plan to adjust to those changes.

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