Just a few years ago, managing a handful of key performance indicators (KPIs)—ones focused on quality and quickness of repairs—gave a shop a leg up in earning work through insurance carriers, says Dan Young, the senior vice president of insurer relations for CARSTAR Auto Repair Experts.
Today, that’s a baseline expectation. From writing estimates and analyzing metrics to providing an entirely new level of customer experience rarely emphasized in the past, shops are expected to take on more responsibility in the claims management process.
It’s simply the price of admission, Young says.
“Does there continue to be offloading? Yes,” says Young, who spent the first 20 years of his career with Allstate Insurance. “The expectation is that there are things [insurers] want you to manage for them. They can’t guarantee work, but the quid pro quo is that we ask you to do these things and we will send you work to make it equitable.”
Trends in KPI Tracking Just 60 percent of independent, single-facility collision businesses track KPIs, according to FenderBender’s 2014 KPI Survey. That’s compared to 96 percent of MSOs. Fifty-three percent of independents still do not have an electronic shop management system, a key tool in managing those shop statistics. Of MSOs, only 6 percent reported not having one. Yet, both independents and MSOs see eye to eye on what they feel is the most significant challenge in today’s industry: “insurer influence on the repair process.” Thirty-two percent of MSOs cited it as their biggest concern, 37 percent for independents, according to FenderBender’s 2013 How I Work Survey.And it’s a trend that many see as contributing to the industry’s mass attrition of repair facilities. Consolidation is rampant, and as the big get bigger, independent shops are left scrambling to find ways to stay competitive.
“It is increasingly more and more difficult to operate as an independent today,” Young says. “Even as a small MSO, it’s tough. We see it in the news every week, every day it seems like. Consolidation, acquisition—more and more independent shops are not able to keep going as independents. This is a big part of it.”
Operational Efficiency
Service King finalized a deal to acquire all 62 of Sterling Collision Centers’ facilities in June. The Boyd Group purchased the 25-shop Hansen Collision & Glass last fall. Before, after and between those blockbuster deals, there has been a seemingly constant stream of single location acquisitions.
Caliber Collision Centers, ABRA Auto Body & Glass, MAACO, Fix Auto, even CARSTAR—name a large network of repair facilities, Young says, and you’re likely naming one that has grown substantially in recent years.
For their part, multiple insurance carriers told FenderBender that trend isn’t predicated on their preference to larger, corporate entities; it’s about operational efficiency.
But, as numbers show, MSOs have a distinct advantage over the average independent shop in providing statistical evidence to prove those aspects to insurance carriers. Just 60 percent of independent, single-facility collision businesses track KPIs, according to FenderBender’s 2014 KPI Survey. That’s compared to 96 percent of MSOs. Fifty-three percent of independents still do not have an electronic shop management system, a key tool in managing those shop statistics. Of MSOs, only 6 percent reported not having one.“[We] are looking for the best combination of quality, efficiency and competitive price,” says Dick Luedke, a spokesman for State Farm. “Whether that best combination of those three things comes from an independent shop or a shop that is part of an MSO is not significant.”
Yet, both independents and MSOs see eye to eye on what they feel is the most significant challenge in today’s industry: “insurer influence on the repair process.” Thirty-two percent of MSOs cited it as their biggest concern, 37 percent for independents, according to FenderBender’s 2013 How I Work Survey.
“It’s an issue facing everyone,” says Andy Dingman, general manager of Dingman’s Collision Center in Omaha, Neb. “MSOs might be able to create a central contact point and manage things across a wide base like that, but I don’t think it is necessarily an advantage.”
Building a Better Business
Sam Whiteman, auto claims director for Allstate, says independents can compete with MSOs, even in today’s market. It all comes down to execution, he says, on a repair-by-repair, claim-by-claim basis.
The Dingman family business is a prime example of an independent succeeding—and growing—in a difficult period for the industry. Since taking the reins of the company nearly five years ago, Dingman has helped expand the business to four locations and exceed $10 million in total revenue.
His message is clear: Independent shops can survive and thrive, but not by operating according to the expectations of yesteryear. They will have three options moving forward: join a larger network of shops, sell to a consolidator or remain independent. He feels the third is the most difficult path to long-term success.
Still, it all comes down to managing a business properly, and executing.
“Will this trend of consolidation and MSOs growing continue? Absolutely I think it will,” Whiteman says. “[But] I absolutely believe [independents] can be successful.”
