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Evolution of DRPs

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Curt Nixon has family ties to insurer direct repair programs (DRPs) that date back nearly 40 years.

“Prior to working with my father at his body shop, my grandfather worked for Allstate,” said Nixon, the third-generation president of L Monte Body Shop in South El Monte, Calif. “He helped start what was called a ‘desk waiver program’ in the late 1960s. They had him start handling files by phone, establishing a list of shops he felt comfortable to do this with.”

Almost a decade later, Nixon said, his father and grandfather’s body shop was among the first in the country to become part of a more formalized Allstate “waiver program” that eventually evolved in the mid-1980s into Allstate’s “Priority Repair Option,” the industry’s first DRP. No longer did a vehicle owner have to get three estimates or visit an insurer “drive-in claims center.” Nor did participating shops have to wait for an insurer to inspect a vehicle before beginning repairs.

“At the time, it was pretty damn appealing because you could go from seeing six or seven cars a month to suddenly 20 or 30.”
—Clark Plucinski, True2Form Collision Repair Centers

From that single insurer developing agreements with a handful of shops, DRPs have been adopted — albeit with many variations — by all of the Top
15 auto insurers that combined command two-thirds of the U.S. auto insurance market.

The percentage of claims handled through such programs varies widely by carrier. Roger Wright, vice president of material damage claims for AIG, said his company was among the latest to launch a DRP in January 2004, and the 1,200 shops in the program currently handle just shy of 16 percent of the company’s total annual auto claims.

Terry Fortner, associate vice president of material damage technical claims for Nationwide Insurance, said “a little less than one-third” of that company’s claims are now processed through the 2,400 collision repair facilities that are part of its decade-old “Blue Ribbon” program.


And State Farm, the nation’s largest auto insurer, has said that nearly two-thirds of its auto claims were being processed through its first direct repair program, “Service First.” This year, the company is completing the nationwide roll-out of its new program, “Select Service,” which has attracted about a 40 percent drop in the number of participating shops, down from a high of about 20,000 under Service First.

George Avery, a senior estimating consultant for State Farm, acknowledged that the percentage of claims handled by the smaller number of participating shops has dipped slightly during the transition, but “still a majority of our customers select the program.”

How such numbers translate on an industry-wide scale is harder to quantify, but most industry observers agree that when all carriers are accounted for nationally, at least one-third of all auto claims — and perhaps as many as one-half — are now handled in a DRP environment, up from less than 10 percent just a decade ago.

The percentage of shops that participate in DRPs has grown, too. Again, this number varies, but an Automotive Service Association survey that in 1997 found 70 percent of shops participate in one or more DRP now finds a decade later that it has risen to 91 percent. And half of those shops say they now participate in four or more DRPs.


To say that collision repairers have had a love-hate relationship with DRPs for much of the past two decades could be a bit of an understatement. But it is easy to understand the initial appeal that helped fuel their growth.

“From the inception of the program in 1993, the word track by our regional guy was, ‘Just make my customers happy,’” Gary Wano, executive vice president of GW and Son Auto Body in Oklahoma City, Okla., said of the GEICO DRP in which he participated until 2005. “He did not want to hear of problems from customers, and as long as that was the norm, he would stay out of dictating how a car should be repaired. Now there were concessions — use of aftermarket parts when applicable and a little off the labor rate — but, in exchange, there was an immediate $250,000 to $350,000 a year in referrals.”

As a shop owner in Maryland in the late 1980s, Clark Plucinski was another early entrant into the DRP arena, a decade before merging his business with others to form what is now the 38-location True2Form Collision Repair Center chain.

“At the time, it was pretty damn appealing because you could go from seeing six or seven cars (from an insurer) a month to suddenly 20 or 30,” Plucinski said. “Though, at some point, if you had any kind of business savvy at all, you knew they were going to leverage the hell out of that.”

But even some of those who have become the harshest critics of DRPs — and of the leverage they have given insurers — chose to participate early on. Mark Pierson, of Princeton Auto Body, in Princeton, Ill., was attracted to Allstate’s PRO program in the late 1980s when the only “concession” the program required was buying a fax machine.

“They’d fax an assignment to us, we would fax them back an estimate, and if they have any questions, they’d call,” Pierson said. “Otherwise you’d have a check in a couple of days, usually before the repair was finished.”

Pierson dropped the program in about 1995 when PRO assignments began identifying the locations of available salvage parts the shop was expected to use, sometimes from vendors as far away as 500 miles.

Darrell Amberson, now president of Lehman’s Garage, a six-location collision repair business in Bloomington, Minn., said the company signed on with Allstate even before he became an estimator at a Lehman’s shop in the early 1990s. Amberson liked many aspects of the program, including a change announced in 1999 under which PRO shops could receive a higher labor rate for three months, based on their performance in the preceding quarter.

But Amberson is among those who trace the demise of that reward system, as well as other less positive changes in other insurers’ DRPs, to the economic downturn led by the burst of the dot-com stock market bubble and the attacks of Sept. 11, 2001.

“Insurers were in a tough position during those years and responded by cutting costs,” Amberson said.

Lehman’s Garage still participates in a number of DRPs, but the company chose to drop the Allstate program, as well as Allied Insurance’s when it merged with Nationwide, in part because the programs started to require particular outside vendors and systems.

“I don’t think it is the insurer’s place to tell us that we have to do that,” Amberson said.

State Farm’s launch of Service First in 1997 was significant, not only because of the company’s market share, but also because the program’s “open architecture” allowed any willing shop that met the qualifications to participate. And, unlike some of the other programs, Service First didn’t require the use of a particular estimating system.

Many also view 2007 as another turning point in DRP evolution as State Farm rolls out its “Select Service” replacement for “Service First.” Not only are fewer shops being accepted, but many are choosing to not even apply because State Farm is requiring that any discounts a shop offers any other carrier be offered to State Farm as well.

While some decry the demand for discounts, Amberson said the change has some positive implications because he sees “Select Service” leading some shops to drop heavily discounted DRP work — or increase rates to those other insurers — to avoid having to discount State Farm work.


Like Allstate’s short-lived program to reward shops for performance with higher rates, other insurers have implemented variations on the traditional DRP.

Plucinski foresees more carriers following Travelers and GEICO in placing insurance personnel directly in shops to meet claimants and work with employees and managers to reach agreements on repair costs and processes.

Others foresee more “concierge”-type DRP programs like Progressive’s, in which customers have little or no interaction with the shop and instead drop off their vehicles at a Progressive service center, where the job is farmed out to a DRP shop that ultimately returns the repaired vehicle to the center.

But as this evolution continues and shops add or drop DRPs based on how the programs fit with each company’s business model, “Jack,” a Southern California shop owner who asked not to be identified, thinks everyone in the industry can benefit from looking at the agreements differently than he and many others did in the 1980 and 1990s.

“I would not have bought into them thinking I was becoming ‘a partner,’” Jack said, recalling how many in the industry referred to DRPs in the early days as “business partnerships.” Jack’s shop is still heavily dependent on its 12 DRPs, but recently chose not to apply for State Farm’s program.

“I don’t think the DRPs could have been stopped,” Jack said. “But we definitely could have treated it more as business, not just trying to be the good guys, but getting paid for everything we wanted. In trying to acquire and keep DRPs, we gave away a lot. If we had it to do over, I think we wouldn’t have done that. And that’s something we’re trying to do differently moving forward.”

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