State Farm to continue PartsTrader pilot
Oct. 9, 2012—State Farm Insurance has no plans to end its parts procurement pilot through PartsTrader regardless of opposition expressed by industry organizations, the company told the Automotive Service Association (ASA) during a recent meeting.
Members of the ASA’s board of directors, Collision Division Operations Committee and staff met with executives from State Farm Sept. 27 in Bloomington, Ill. The meeting was meant to allow the ASA to voice repairers’ core concerns regarding the pilot program, which focus on issues related to parts profit, efficiency, administration, agreement expectations and data collection.
The ASA said State Farm acknowledged those concerns, but noted that the company does not plan to halt advancement of the program. State Farm will continue the pilot even if the ASA joins other industry organizations in opposition.
“This is a pilot and the testing of the application will continue,” State Farm officials told the ASA. “Because many acknowledge the need for electronic parts sourcing and ordering, State Farm does not see value in stopping this test.”
State Farm said it implemented the pilot as a result of several industry factors, according to the ASA. First, State Farm said repair delays caused by parts ordering generate $43 million of expense per day for the company in rental vehicle costs. Second, State Farm said claim frequency is declining due to a reduction in driver’s license registration, increased crash avoidance technology in vehicles, and an increase in ride sharing on behalf of consumers.
“Electronic parts sourcing and ordering is one of many efforts State Farm is pursuing to provide customers with an exceptional experience,” State Farm told the ASA. “Customers and repair facilities benefit from efforts to repair more vehicles [due to fewer total losses], improve the distribution of recycled parts and improve cycle time.”
But during the meeting, the ASA questioned inefficiencies surrounding State Farm’s system of “priced perfect” recycled parts, as well as the current decline of claims handling efficiency by the company. The ASA asked State Farm how it plans to address those issues in the future.
State Farm told the ASA that the size of its Select Service community is not expected to grow. Company officials added that the PartsTrader application is not the full scope of recommendations the company will make to Select Service shops. Instead, the program is part of a “larger global strategy,” the ASA said.
During the meeting, the ASA said it also addressed concerns regarding discounted manufacturer suggested retail prices (MSRPs), and the potential negative impacts that could have on a shop’s bottom line.
“MSRP pricing has not changed and the margins have not been affected during the test,” State Farm said. “In fact, the MSRP discount price column has been removed from the tool. State Farm is not collecting data on MSRP discounts.”
State Farm noted that while it is aware of parts profit concerns on behalf of repairers, there is no data from the pilot program to date that demonstrates the PartsTrader application is having negative impact on shop profitability.
“What is vital here is that ASA continues to press State Farm for data on this point and advocate for greater assurances against any negative impacts on parts profit,” said Denise Caspersen, manager of ASA’s Collision Division. “It is also vital to get a clear understanding of data collection and the implications of the usage of the data on the repair community.”
The ASA also questioned State Farm’s use of repairer data and its implications on shops’ Select Service scorecards, including the relationship between repairers and local State Farm claims representatives.
“Repairers are under no obligation to purchase the lease expensive part. Select Service repairers should continue to balance the scorecard components—quality, efficiency and competitive price—when servicing State Farm customers,” State Farm officials said.
The ASA said it stressed to State Farm officials the negative psychological effect created for repairers to select the appropriate parts for jobs, and that those choices could negatively impact their Select Service scorecard.
“This, followed by a conversation between the repairer and the local State Farm claims rep about parts selection after the transaction has occurred, creates greater confusion and mistrust between the repairer and State Farm,” the ASA said. “At the end of the day, it’s the repairer who is responsible for providing the best possible repair and making judgments on what part to pick, not State Farm.”
Although State Farm plans to move forward with the PartsTrader program, the ASA said industry engagement with the company has been beneficial. The ASA’s leadership team, along with several repairers who have voiced concerns, have negotiated positive program changes. For example, industry engagement with State Farm and PartsTrader has lead to a reduction in processing time for price quotes, more efficient integration with the three major estimating systems, additional controls within the price quoting process, and removal of the discounted MSRP column in the application.
“Accomplishing removal of the discounted MSRP column is a prime example of the importance of repairers being at the table of discussion,” Caspersen said. “I cannot over-emphasize the value of the engagement of the ASA collision leadership—a diverse group of shop owners representing businesses from large to small, from independent to MSO, and from non-DRP shops to Select Service shops—as ASA navigates through the piloting of this application.”
The ASA said State Farm and PartsTrader acknowledged appreciation of the informational accuracy the organization has provided to the collision industry regarding the pilot. Both companies have committed to continue to speak openly with the ASA about the pilot, the program application and the concerns of repairers.
“It’s essential that the ASA team continue to address State Farm, PartsTrader and all others willing to participate in analysis of the pilot. The association’s work on this important issue is a team effort, and ASA commends the many ASA collision repair members speaking up on behalf of repairers nationwide,” Caspersen said. “It’s not one person speaking to State Farm. What State Farm reps hear from ASA represents the consensus of ASA’s collision repair leaders, all of whom are shop owners and managers.”
By December, the PartsTrader pilot program will be used in five U.S. markets, including Chicago; Tucson, Ariz.; Grand Rapids, Mich.; Charlotte, N.C.; and Birmingham, Ala. Roughly 600 State Farm Select Service shops exist throughout those five markets.