I have been in the collision repair industry for the majority of my life, and one feature has always been exciting and challenging to me…CHANGE. Some of you may have read my stories in another collision repair publication, Body Shop Business. While I’m grateful for the time on that publication, this month is the start of a new opportunity for me – sharing my insights into the collision repair market through a monthly column in ABRN.
Growing up in the family business taught me some important lessons about not only business and people in general, but how much change actually takes place in our industry. Vehicle designs certainly are not stagnate. Repair equipment, materials and procedures have not stopped to allow all of us to catch up. And certainly relationships between shops and insurers around the world continue to evolve.
In the last few years there have been many changes to how insurers conduct their business. Not only have insurers consolidated to better compete within their own industry, but many have departed from the “norm” of how their business is conducted.
There are programs that have taken the customer completely out of contact with the repairer. Programs like concierge service have been criticized worldwide by many who argue that each vehicle owner must be able to choose where his or her vehicle is repaired. Well, for the most part, vehicle owners do make their choices. Maybe they don’t understand all the ramifications about their decisions, but they choose early on by selecting their insurance carrier.
What do you believe the customer is thinking? Do they have to get estimates at repair facilities, only to listen to how good the shop says they are, and how bad their insurer or competitor is? How are consumers expected to make a choice, given how our industry is often portrayed in the mass media? To the average busy consumer now there appears to be an offering that “takes care of everything!” And it is often less costly than other insurance offerings! “Where do I sign up?” is what many of our customers are now thinking.
I am certainly not trying to support such programs, but let’s look at what we may have missed. What does the customer want — rather than what we want?
This change is a hard one for our industry. One insurer has capitalized on this, growing from literal obscurity to be the third largest automotive insurer in our country. Believe it or not, this idea was not theirs. It was basically copied from AAMI in Australia, which has had this type of program for possibly 15 years.
We also can look at another insurer who has begun operating its own facilities across North America and see that the repair and administrative process can be done differently than most thought possible. Whether the insurer-owned facility is in your area or not, it does affect how business is conducted throughout North America. The call to get more efficient in administrative and production areas is very clear, by reducing your internal costs and improving processes.
In other directions, some insurers have begun to increase outsourcing of their claims process through companies that believe they can accurately audit claims by viewing photographs. One such provider also believes its staff is more qualified to dictate the repair process even if it is in direct contrast to published manufacturer or I-CAR procedures. From my personal experience actually listening and discussing such engagements with these providers, this is a major challenge for our industry.
But now we have the largest insurer in North America with over 18,000 repair facilities on its direct repair programs announcing the need to basically slice that number in half. To many shops this could turnout to be the greatest change and challenge in their business history. The new program compares shop against shop in a market area in three segments: Quality, Efficiency and Competitive Pricing. The top performers get the work … the others do not. Many I have spoke with about this say, “Bring it On!” But be careful what you wish for. Once in the game, it may not be what you expect. There are plenty of unknowns with this new program that will take time to digest.
Reading the current six-page agreement adds to the unknown in regards to definition of privacy, pricing and free services, and does not address issues in regards to how competitive pricing is determined (now and in the future), how each of three criteria is weighted, how work is distributed and the formula that is used, or the accuracy and independent validation of the data presented in the “scorecard.”
I have already heard firsthand from smaller facilities being “coached” about the charges they can and cannot make, and at what levels. This certainly does not seem to be independent, market-driven conditions, but similar to survey questions worded to get the response you would desire.
These changes certainly have established a new horizon for all of us. In many ways, it is a new beginning for our industry, allowing us to focus on improvement. It’s an opportunity for us to get a better understanding of our costs of doing business, as well as a time for us to make sound business decisions based on our business needs. I just hope it doesn’t become a “free-for-all” and the most important entity in the equation is lost…the vehicle owner.
Until next time, make good business decisions and treat every change as, not just a challenge, but also an opportunity that most will not make until it is too late.
