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State Farm Announces 2016 Initiatives, Could Downsize Network

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April 21, 2016—State Farm Insurance discussed its outlook for 2016 in a video posted Tuesday on its business-to-business website, highlighting strategies for repairers in its network and saying that it may downsize the number of repairers in its Select Service program. 

Gregg McDonald, claim manager for State Farm, addressed a wide range of topics in the eight-minute video, which FenderBender was provided access to by a Select Service shop.

As McDonald highlighted company initiatives for 2016 toward the end of the video, he stated that one of State Farm’s goal is to address markets where repair capacity exceeds customer demands. 

“We will be applying consistent reviews across all network participants, and we will continue to determine which repairers are the best fit for our program,” he said. “There are markets where we will see fewer repairers in our network. We want to work with repairers that are committed to providing our customers with the highest quality and the most competitive repairs possible.”

That doesn’t signal a preference to large MSOs, though, McDonald explained: “Independants, and the two, three location MSOs still handle a majority of our customers’ repairs. They are a vibrant part of our network.”

Instead, determinations will likely be made depending on the company’s “RPM Reports” issued to each Select Service repairer—reports that measure a number of KPIs and issue each business a performance score and ranking within the system.

McDonald first addressed the RPM reports earlier in the video when he discussed opportunities for repairers to work with State Farm in strategic ways to improve efficiency and performance in State Farm’s Select Service program. 

“Repairers often ask how they can improve their performance on Select Service,” McDonald said. “Our strong suggestion would be to focus on the top three areas highlighted on the RPM report.”

Focusing on quality, efficiency and competitive price, McDonald said repairers could yield positive results on the RPM. In regard to competitive pricing, he suggested ways repairers could address those issues. 

“We’ve seen repairers choose to be more competitive by offering lower labor rates or judgement times. Some have chosen to provide parts discounts,” he said. “Others use a higher percentage of alternative parts. Some use a combination of approaches. Our data does show that repairers who focus on repairing parts versus replacing them are among our most competitive.” 

"Repairers with questions about the program can continue to reach out to their State Farm contact," State Farm spokesperson Justin Tomczak said when reached for comment by FenderBender,

A full transcript of the video is provided below: 

Hello, and thank you for taking the time to watch this video. And more importantly, thank you for all you do for our mutual customers.

We appreciate working with you to ensure they have the best repair experience possible. Today I’ll provide some details on the current state of our Select Service program. I’ll touch on how you can continue to have success as a participant on the program, and finally, I’ll discuss our plans for 2016.

In past videos we’ve talked about the pace of change in our industry. This pace accelerated in 2015. We believe staying informed on changes in our industry is one of the best ways to prepare for the future. Here are a few things in particular that caught our attention.

GM kicked off its Dynamic Parts Pricing initiative. We noticed a significant increase in the availability of technology features in new model vehicles. And as we say every year, the pace of consolidation in the repair industry increased. We also couldn’t help but notice the continuous drumbeat surrounding autonomous vehicles and “On Demand” transportation services. And connected to this, the recent investment GM made in Lyft.

It appears that auto manufacturers may be planning for a future that looks much different than today. There certainly are a lot of indicators of a changing landscape around transportation in general. Each of these developments have implications both for repairers and insurers. Our customers expect us to prepare for the future. And our Select Service program needs to be positioned for the future. 

As we said in our last video message, “We are looking for opportunities to work together with you in more strategic ways.” 

Our program administration team will mark its first anniversary in April. Since implementation, we’ve facilitated performance discussions with each of you at least once. With a focus on all aspects of performance we’ve removed some repairers. This has created opportunities for other repairers who were not previously on our program. Our program administrators are using a consistent approach to managing the Select Services program across the country. Their knowledge of your performance has laid a solid foundation for the coming year. 

As we look at how Select Service compares to the industry, we see many markets were Select Service results are not competitive compared to the industry. This is one area we’ll be focused on this year. Repairers often ask how they can improve their performance on Select Service. Our strong suggestion would be to focus on the top three areas highlighted on the RPM report. This is really the key to improving performance. Repairers who follow specific action plans that directly relate to the three areas for improvement see the most success. We are seeing some repairers who are truly embracing continuous improvement and consistently have scores above 950. A few have achieved 1,000 point scores.

Let’s begin with quality. As a participant in the program, we consider your ability to conduct quality repairs to be fundamental. This is the most important aspect of our program and is a requirement for every repair.  Having a quality control process in place is required by our agreement. Actively utilizing that process in each step of the repair will help ensure that our customers’ vehicles will be continues to be repaired properly. Also, your continued engagement in training and certification will help to support our common interest in quality repairs. 

Next is efficiency. Customers today are demanding faster service in all aspects of their lives. Having complete repair plans and accurate parts orders are the primary drivers to improving cycle time. 

And finally, competitive price. We recognize repairers can do a number of things to be more competitive. We know this is your business and we won’t dictate how you address competitive issues. We’ve seen repairers choose to be more competitive by offering lower labor rates or judgement times. Some have chosen to provide parts discounts. Others use a higher percentage of alternative parts. Some use a combination of approaches. Our data does show that repairers who focus on repairing parts versus replacing them are among our most competitive.

These decisions are yours. Any of them can yield positive results on the RPM. We will continue to provide awareness of competitive issues through our program administrators. 

Now let’s talk about our plans for 2016. Roughly 10 years ago, we made a significant change to the size of our network. Back then we called it Service First. In our effort to better match our network size to customer demand, we created a program that was half the size of Service First. Today we see many markets where we have more repair capacity than customer demand. This overcapacity may result in fewer jobs for high-performing repairers. One of our goals for 2016 will be to address these markets. While we don’t have a specific target for our network size, we want high performers to have the opportunity to have consistent repair volume. We will be applying consistent reviews across all network participants, and we will continue to determine which repairers are the best fit for our program. There are markets where we will see fewer repairers in our network. We want to work with repairers that are committed to providing our customers with the highest quality and the most competitive repairs possible. We also know our program will continue to have a diverse mix of independently owned repairers in addition to the MSOs. Independants, and the two-three-location MSOs still handle a majority of our customers’ repairs. They are a vibrant part of our network. Our customers have a choice, and we know you do to. We encourage you to act on the information shared by your program administrator, and use your RPM to move into the future with us. Please continue to engage your program administrators as you have questions regarding your performance. 

Once again, thank you for all that you do for our customers, and have a great 2016.

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