How to resolve paint cap issues

Jan. 1, 2020
Paint caps have been a fact of life for collision shops for 20 years or more now, and they can have a significant effect on profits. On Thursday, Pete Petursson, owner of Absolute Collision in Shelby, N.C., discussed "Paint Caps: How to Eliminate The

Paint caps have been a fact of life for collision shops for 20 years or more now, and they can have a significant effect on profits. On Thursday, Pete Petursson, owner of Absolute Collision in Shelby, N.C., discussed "Paint Caps: How to Eliminate Them in Your Store Forever," and provided tips on working with (and around) paint caps when dealing with insurers.

"It could potentially halve a shop's effective hourly rate on materials, so it can have a devastating effect, case by case, job by job," Petursson says.

That's because caps can kick in, eliminating the material allowance for substantial portions of a vehicle that needed to be painted. The problem has been compounded as the cost of paint and materials has continued to increase, and could become even more pronounced as shops convert to waterborne paint.

But how can a shop deal with insurer paint caps and still make a profit?

"For one, you can change the way you behave in your facility," Petursson says. "Standardizing the sprayable amounts for particular repairs can have a huge impact, but the majority of shops don't do that. There are ways to standardize how much paint you need for a hood or a fender or a door, and then you can start documenting and controlling the amount of materials used, as well as your cost."

It's important to be able to have a better idea how much paint and material will be needed before the job is complete.

"That way you can find a resolution with the insurer before the claim has proceeded to the point of no return," Petursson says. "It's hard to negotiate in good faith if you just slap a bill down on the table and say, 'Pay it or else.'"

Shops can use paint and material calculator systems to get a fairly accurate prediction of the cost based on the color and size of the repair, providing a reasonable expectation for all parties involved of what materials are going to cost.

"That way you can say, 'Here's why I think this paint cap is unreasonable,' and you have a third-party estimate to back you up," Petursson says.

"If you want to accept the paint cap, and you think you can still make money on it, that's fine, but at least you've gone to the trouble of showing the insurer that you're going to be X-amount of dollars short," he says.

Having that estimate also allows shops to do job costing (tracking the complete cost of the job plus overhead), which many shops don't do.

"You can account for the true cost of materials," Petursson says. "You can have software built in house or use an Excel spreadsheet. Any jobber can also help a shop with that, or even the paint companies."

By having more accurate information on actual paint and material, shops can recoup more of their costs and avoid conflicts with insurers down the road.

"If you just slap them with the cost deficiency at the end of the process, insurers will be very defensive because they never had an opportunity to discuss it with you," he says. "They don't know what's fact or fiction because you just hit them with a supplement.

"If you do some of this negotiation on the front end, it's not a surprise to them and you can account for everything on the back end with a cost analysis to prove that you used what you said you were going to use."