What metrics do insurance companies include on scorecards to rate shops?
Insurance companies are trying to pre-select repairers that have achieved certain performance metric requirements that they have decided are most important. The performance metrics are often directly correlated with things that end consumers want from their repair experience.
There are literally hundreds of metrics that insurers track, but they generally fall in a couple of categories: severity costs, cycle time, rental days, administrative costs, supplement frequency, CSI quality, and quality of final bills—such as improper charges.
What steps can shops take to maximize their scorecard ratings while maximizing profitability?
Maintaining an acceptable severity cost is the item that shops tend to struggle with the most. Shops want to have a profitable repair, but insurance companies want to reduce the cost of claims. You can operate a profitable business and generate more work volume while maintaining solid scorecard results, but you have to understand how to run your business the right way.
Shops need to make sure that they’re being sensitive to scorecard metrics as they write every repair plan. To do that, shops need to understand what things insurance companies place the most value on and learn to write repair plans that reflect what insurers are looking for. For example, if the insurer wants to see more repair versus replace items, then write legitimate repair times to safely repair the vehicle until you hit a threshold when it makes more sense to replace the part. That will help put you in a positive position on the final scorecard, while still safely repairing the vehicle to pre-loss condition.
That doesn’t mean you should shortcut repairs. You just have to understand the system, and teach repair planners to write estimates according to what the insurer is looking for.
This will also be good for shop profitability, because shops make the highest profit percentage off of labor. As long as your shop hasn’t hit full capacity, writing for more labor is often more profitable compared to writing for parts. There is a finite amount of dollars in severity that repairers are able to legitimately charge for. So if your choice is to either invest in lower margin parts or higher margin labor and keep your staff working, you want to choose the option that keeps your staff working as long as it still provides a safe repair for the consumer.
Your job as a shop operator is to keep the shop full and sell body and paint labor. If you can sell and make a profitable margin on both labor and parts, that’s a good bonus. But selling body and paint labor should be your first priority.
What key processes should shops implement to maintain high scorecard metrics?
One of the key processes is full repair planning. If you have a quality repair planning process, you don’t have multiple supplements and your repair versus replace metrics will be solid.
Shops also need to be very good at parts procurement, and understand how to do that efficiently. Years ago, shops just faxed orders to dealers and they sent the parts. But today, repair planners have several options to search—OEM, aftermarket, reconditioned and salvaged parts. Shops are now making procurement decisions, and need to make the right choice for each repair to put themselves in a positive position with the insurer and end consumer.