Create Respectful Dialogue with Insurers
Five of the head honchos from the collision repair and insurance industries had a frank discussion recently about the real or perceived tensions that seem to exist between them. The consensus that came out of the discussion, broadcast via the Collision Repair Executive Webcast (CREW), was that the tension is absolutely real.
Perhaps more importantly, both sides agree that even more repairers and insurers are needed at the table in order to have a conversation with any hope of producing real results.
“I cannot recall a time in my career when the current nature of the insurer-repairer tension existed,” says Darrell Amberson, president of Lehman’s Garage in Minneapolis, who’s also NACE chairperson and director of the Automotive Service Association (ASA) Collision Division Committee. “I’ve seen many times when each was in the stronger bargaining position, but I’ve never seen insurers use their bargaining position to the extent they do now. I must be careful to point out, that would only include some insurers.”
The weaker position of repairers is coming from a multitude of factors, he continues, including the fact that: even profitable shops are showing margins in the 2 to 5 percent range, the number of reported claims is on the decline and total losses continue to increase—all while insurers are recording record profits with premiums that are up some 40 percent since the turn of the century.
All of these factors, says Amberson, “Make the daily experience of dealing with aggressive insurer pricing practices very frustrating. Repairers are constantly dealing with examples such as aggressive paint time and material reductions through abuse of the concept of spot paint, full clear and partial paint. Some insurers refuse to adequately compensate flexible part operations.”
New labor-rate surveys are few and far in-between, Amberson says, and implementing a periodic increase is next to impossible.
“I, for one, embrace the concept of responsible pushback,” he says, meaning that shops must assume the courage to communicate their concerns to aggressive insurers and resist those that would try to push for every concession they’re able to get. “It’s imperative that each party communicates diplomatically.”
Dan Risley, executive director of the Society of Collision Repair Specialists (SCRS), agrees that the insurer-repairer relationship is turbulent like never before, leading to new state associations and proposed legislation, although enforcement of any new laws continues to be a challenge.
He voices his feelings on the topic plainly: “Why are repairers feeling the need to take action?” Risley asks. “Repairers are tired of being told how to make a repair on their customers’ vehicles. They’re the experts. They’re tired of being told what labor rate they can or can’t charge. They’re tired of being told they need to use specific estimating software. They’re tired of being told they will not be reimbursed for necessary labor operations the insurance company refuses to recognize. They are tired of heavy-handed tactics to repress repair costs. Lastly, and probably more importantly, they are tired of work being steered away from their facility.”
Dan Bailey, who is president and CEO of CARSTAR and on the SCRS national and Missouri/Kansas boards of directors, says that tensions are heightened in part because of the influence that increasingly choosy insurers can have on shops. In addition, the survival of smaller shops continues to be a growing concern due to the evolving industry, he says, and winners and losers will be separated by the ability to provide extraordinary customer service.
“Brand and ability to back up this promise will be the determiner of success,” Bailey says.
Insurance representatives on the recent CREW panel included Bob Passmore, director of personal lines for Property Casualty Insurers Association of America (PCI). He says that for insurers, delivering on their promises means unavoidable reliance on the collision industry.
“Consumers ultimately will judge the wisdom of their purchase not by the peace of mind they may have had or the ease of making premium payments,” Passmore says. “They’ll judge the insurer based upon the claim handling and repair experience. The filing of a claim is often called the ‘moment of truth’ for insurers. The customer may have been paying for years and years before this is tested.”
Consumers also want repair costs and insurance costs to stay in line, he says, and recent legislative efforts that would prevent insurers from managing the repair process on behalf of their customers are misguided at best, and at worst are attempts to inflate repair costs.
“[PCI] supports insurer-repairer relationships—strong ones focused on the consumer benefit to both and increasing the customer’s level of satisfaction with the claims and repair process,” he says, adding that more efficiency in the claims process could reduce costs as well.
Roger Wright, vice president of claims for personal lines at AIG Insurance, says the ability of both insurers and collision repairers to adapt is key; that “lean” must continue to be embraced for better efficiency; and that training of technicians and insurer field staff must remain a priority.
THE ‘REAL’ ISSUES
Much of the liveliest discussion came when panelists were asked whether steering exists as a real source of tension between insurers and collision repairers. Risley cited a recent third-party survey for SCRS that says 41 percent of shops report that steering has dramatically impacted their business. “It’s not just perception. It’s reality,” Risley states.
What about the rights of insurers to provide customers with shop options where high standards are upheld? Good things come from this, too, Risley concedes, adding that as soon as a customer says he or she has a certain shop in mind, all other discussion or persuasion on behalf of the insurer should stop.
“The insurer should have the ability to offer their options—and incentives for their use—to basically state their case,” says Passmore. “Some of the laws that are being passed are prohibiting them from doing that.
“The insurer is being held just as accountable for the result of the repair experience as the body shop is,” he adds. “I think it’s only fair they should get a chance to influence that [choice] as well.”
In closing, the panelists offered their best short-term steps toward finding a real solution to the tensions between insurers and repairers, and, perhaps surprisingly, there seems to be consensus on this: Bring more repairers and more insurers to the table for further productive conversations.
“Take a deep breath,” says Passmore. “It won’t do either party any good to continue throwing darts at one another.”
Says Amberson, “The key to the issue is respectful communication.” We shouldn’t be afraid to voice opinions, and we should be open to hearing other views.
Risley says that both sides must be willing to accept that contentious issues do exist, and that getting everyone together in a room will help foster understanding of why.
“We need to respect one another,” says Wright, adding that part of the solution is for both parties to have shared knowledge of the repair process.
“What could repairers and insurers do together?” poses Bailey, suggesting that representatives of the top 25 biggest insurers attend CIC in order to start building some long-needed trust.