Menefee: Reconcile Claims before Supplement Payments are Issued

April 20, 2023
This fix from more insurance companies would help improve the image of collision repair.

Hear me out before you crucify me over this topic. We have all run into customers that have been taken advantage of at some point in time by a disreputable shop. Those shops have given us a bad name that is very hard to overcome sometimes when talking to customers and insurance companies. Ultimately, those shops are why people distrust a large portion of our industry. I know personally in my area there are dozens of small repair shops, some don’t even have a frame machine or a spray booth but call themselves collision shops and take insurance repairs. The insurance companies ask what their door rate is, which is much less than the industry standard, and those shops are keeping the rates in my area drastically low.  

Our industry is rampant with things that need to be changed. Ultimately, we aren’t going to have a huge overhaul of how things are done. It’s going to have to be overhauled one small step at a time and I think reconciling claims before any supplement payment is issued is one small step that we can push the insurance industry to take that will benefit not only the consumer but the insurance companies and body shops also. Let me describe to you how reconciling a claim before a supplement payment is issued would work (currently, I only know of two companies processing claims this way). 

The insurance company provides the estimate of record and issues the initial payment in the vehicle's owners' names and the lienholder's, if there is one. The customer brings the vehicle in for repairs and the shop proceeds as usual. This is where it is a bit different. When the shop submits for authorization on a supplement, the insurance company will review the request and authorize an approved supplement, but they will NOT issue a payment at this time. The same thing will happen with all supplements for the claim. Once you are sure there are no more supplements, none at all, no paint price difference, no clips to be added, and nothing else that was missed on the repair, you will then submit for the supplement payment to be issued.

When submitting for the supplement payment to be issued, which includes the money for all of your supplements, you have to provide all of your documentation. You have to provide invoices for all parts and body supplies used on the vehicle, even if they are parts that were on the original estimate of record. You also provide a picture of the vehicle taped up and ready for paint, and an after picture of the vehicle once repairs are completed. The insurance company then goes in and reconciles or balances the estimate to make sure all parts that were authorized were actually purchased and part price differences are adjusted. If an invoice cannot be provided for a part, then the part is removed from the estimate until some type of documentation can be provided that the part in question was actually replaced. Once all documentation is received for the entire repair and the repair estimate is reconciled, the insurance company issues one supplement payment for everything and overnights it to the body shop. 

Reconciling a claim before a supplement payment is issued will not fix our entire industry. It won’t get rid of all the bad and disreputable shops, but what it will do is it will start helping to weed out those shops: Those shops that say they replaced the fender when they actually fixed it, those shops that said they put on a new impact bar and absorber but really they just hid the old damaged parts by putting on a new bumper, those shops that cannot afford to finish a repair so they rob Peter to pay Paul to try to get a vehicle out the door. I’m not in denial—this won’t fix everything. There will be shops that get around things by providing fake documentation, but the point is that this is a start. This is a viable step to help our Industry move forward. 

This is a good claims practice and good claims practices help to cut down on customers being taken advantage of by disreputable shops and it cuts down on insurance fraud. We need fewer disreputable shops if we ever want to come to terms with the insurance industry and how they view and pay body shops for repairs. If we want to continue to be nickeled and dimed to death by the insurance companies that’s fine but I personally don’t want that or enjoy it. To me reconciling claims before a supplement payment is issued is a good first step to meeting the insurance companies in the middle and it will help to weed out shops that really shouldn’t be operating as body shops. 

I encourage you to talk about this concept of reconciling claims before a supplement payment is issued with the insurance companies and adjusters you talk to. Also, talk to your local auto body associations because sometimes it is easier to get insurance companies to adopt good claims practices than trying to get extensive regulation passed. 

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