Knowing When a DRP Isn’t the Right Fit for Your Shop

Aug. 1, 2017

How one shop owner learned to make his business successful without multiple DRPs.

Picture this scenario: An insurance adjuster calls you regarding a job you did eight months ago and says that upon looking at a photo of a dent you charged eight hours of work for, believes it should only have taken four hours. He then proceeds to ask if you can cut him a check for $50.

This was one of many real incidents for William Parkins, general manager of Metro Auto Rebuild in Seattle and RNR Automotive Refinishing in Bellevue, Wash.

Between dealing with insurance adjusters and customers, Parkins had to also fix cars as properly as possible, all in a timely manner. But even when trying to fix cars the right way, he encountered obstacles.

Namely, the manufacturer stipulates that certain parts and equipment should be used to fix the car properly, whereas the insurance company counters that it won’t pay for certain procedures—while still expecting the car to be fixed as accurately as possible.

After years of trying to strike this balance, Parkins had hit a wall. He realized that being on direct repair programs (DRPs) was no longer a good fit for his business. Instead, he was determined to find a way to effectively deal with insurance companies while still making the margins he required.

The Backstory

Parkins has managed both shops now for 16 years, which bring in a combined total of $16 million. Mostly working on high-end vehicles, the shops managed to have a consistent average repair order of about $3,400 and a monthly car count of 500 for both shops combined.

Higher-end vehicles are the shops’ specialties; the Bellevue location’s techs are Lexus and BMW trained, while the Seattle location is BMW, Mercedes-Benz and Maserati certified. As a result, they are a trusted shop among clients and insurance companies.

Ten years ago, Parkins’ shops participated in DRPs with State Farm, Progressive, PEMCO and Allstate. In fact, he says that at one point, the shops were doing more State Farm work than anyone in Washington. At its very peak, 40 percent of the shops’ work came from DRPs.

The Problem

Parkins says that although he deals and negotiates with insurance companies every day (“We are not insurance haters,” he says), he came to realize that participating in certain DRPs was just not the right fit for his shops anymore.

Initially, there was some worry about the work that would be lost after leaving the DRPs. He had to ask himself whether the cars and customers were truly his or if the insurance companies were responsible for sending most of the work to him.

After leaving the major DRPs for his shop 10 years ago, he had to tackle regaining the work that those DRPs had brought into the shop, or so he thought.

“I can only service one master and that master is the car and the car’s owner. It will not be Allstate,” he says.

In addition to the apprehension there was with losing out on DRP work, there were a few other issues.

The last straw for Parkins was in an interaction between one of his most experienced techs, who has 15-20 years experience, and a young insurance adjuster, who was adamant that a panel should be fixed despite the tech explaining that it needed to be filled. Parkins says that he did not want his tech being rejected, let alone his experience being undermined.

“I just could not have someone who went to two weeks of training overrule a person who’s been doing it for 20 years,” he says. “… I need to ask myself, as each and every one of these car leaves, ‘Will I put my daughter and her baby in this car?’”

 Parkins says that leaving those programs would free up the sometimes more than $100,000 in accounts receivables the shop had, in addition to increasing margins and charging for everything.

He still negotiates every single day with insurers, but now he repairs on his own terms following the ethical guidelines that he abides by.

The Solution

Parkins did some research to find out whether the people coming in for their cars were actually his customers or if they were coming in because of the insurance company. The results worked in the shops’ favor.

In the last 3-4 years that he participated in the DRPs, his staff asked customers how they heard about the shop or encouraged customers to fill out that information on the general paperwork. At the time, Parkins wasn’t doing anything with that information; he was just curious.

However, once he was ready to break away and in the process of making the decision to leave most of the DRPs, he started looking closely at that information. If a customer didn’t fill out that information on their paperwork, Parkins made it a point to ask the customer how they heard about the shop.

He slowly realized that a majority of his customers were referred to him from the dealership and not the insurance companies. That gave him the confidence to leave the DRPs. The clients they serviced via DRP work have always been their clients. In fact, they still service a great deal of them today.

Despite leaving some DRPs—such as the biggest one for his shop, State Farm—Parkins did stay with one insurance company: Chubb.

He started working with Chubb, a luxury insurance company that typically services high-end clientele, about 10 years ago, even before the insurer had a DRP. Once Chubb’s DRP became official, Parkins joined.

Parkins’ favorite aspect of the insurer is that they cover the costs of OE parts. He says that their stance on repair work—which is to repair the car the best way possible via the factory guidelines, take care of the guests and complete the work in an equitable window—is desirable to him, his staff and his customers.

Chubb only makes up less than 5 percent of the work in the shops compared to the 40 percent that State Farm provided back when Parkins participated in DRPs.

Parkins is no longer the middleman between the customer and insurers and the check is cut directly versus having to finance work by the time the shop gets paid.

The Aftermath

Since leaving most popular DRPs, Parkins now has one master, and that’s the customer. He now manages shops that fix the cars as the manufacturer recommends they be fixed. His net profit margins also increased since leaving major insurers, now steadily around the 13 percent mark.

His staff uses resources such as the OEM websites, ALLDATA, CCC ONE and each other by efficiently communicating.

“We work very hard to be compensated for what we’re doing,” Parkins says.

The Seattle location alone has had to expand twice, and the gross and net profits for both shops have increased since leaving the DRPs.

When asked if he is open to negotiations, Parkins responds “most certainly,” as he does it almost every day. The customer will receive the original repair estimate, and the car will then be meticulously disassembled and inspected. The shop will then retrieve a parts and labor list, as well as the documentation from the manufacturers.

The next step is pre- and post-repair scans. And with the recent purchase of scanners, Parkins says they are now figuring out the best way to scan the vehicles and be compensated for doing so.

The Takeaway

For Parkins, the biggest takeaway is simple: peace.

“I know in my heart of hearts, that every one of the cars that drives out of this shop—out of either one of these shops—I can put my daughter and her baby in and I can sleep all night,” he says. “… the peace that we’re doing it the right way.”

SHOP: Metro Auto Rebuild and RNR Automotive Refinishing   LOCATION: Seattle and Bellevue, Wash. OPERATOR: William Parkins SIZE: 30,000 square feet (Seattle), 25,000 square feet (Bellevue); STAFF SIZE: 55 (combined) AVERAGE MONTHLY CAR COUNT: 500 (combined) ANNUAL REVENUE: $16 million (combined)