Question for b/shop managers

[cain12]

Our dealership has both a body shop and service department. I am fairly new here at my position as Fixed Op Director. When our body shop has a claim for let's say a theft recovery, we send the work to our 15A service tech who repairs the column, ignition, etc. Problem is when our insurance companies only pay $35-$45 an hour and our tech recieves $20 the body shop makes very little. If we instead send out the work to a company who specializes in this we can mark up the sublet repair bill and be WAY better off. Problem is the ownership here wants to keep the money in-house. How do you guys/gals typically do this?

Thanks in advance,
cain

[scotstrong]

Your first problem is letting insurance companies attempt to dictate your labor rate. Your customer is the vehicle owner; not the insurance company. Stand your ground and include the customer in any discussions with the insurer(s) about what they say they are willing to pay; and that yes, you will be charging the customer for any differences. You will be surprised how fast they back away when they realize the customer is aware that they are trying to short-pay a proper repair. The customer can (gently or not-so-gently) point out to the adjuster that there is no clause in their policy that says they can pay less than what is required for a proper repair (other than the deductible). You can also remind any adjuster that insurance companies are not in the business of repairing vehicles; and any attempt to influence labor rate or labor times crosses the line into the repairer's domain.

I sincerely hope that as a new car dealer, your body shop does not participate in any DRP programs. Most such programs create a HUGE conflict of interest. In the sales depts. we preach to customers to 'bring your car to the dealer for repairs because we only use genuine parts and we are the experts on repairing and maintaining your vehicle.' Then, at the behest of some insurance company, we use aftermarket or used parts; and do short-cut repairs to satisfy the 'limitations' placed on us by the insurer. New car dealers should be the one true advocate for the proper repair of their vehicles; and totally discourage such practices.

For lots and lots of good info and real-life scenarios, go to www.prodiscussions.com and click on 'discussion forums'.

Bottom line -- remember who your customer is (and it is NOT the insurance company).

Scot Strong

------------------

[fburrows]

Here is another opinion. I would approach the insurance adjuster the next time he writes a steering column claim and ask for a higher hourly rate. Simply explain that your costs are significantly higher and you believe you can do a better quality job in house.

I have spent a long time in this business and there are two philosophies when it comes to insurance companies. One is to fight the insurance companies and the other is to be cooperative and work within the system. Body shops learn to take the good with the bad. You dont always get paid exactly what every line is worth but when you look at the whole job it is very profitable. Over the years I have found that fighting them is a lost cause. It is like wrestling a pig. You both get muddy but the pig enjoys it.

I am sure there are some tiny body shops in big dealerships that can pick and choose the work and dictate to the insurance companies. But if you want to run a high volume body shop, you need the insurance companies on your side.


------------------
Frank Burrows
fburrows@absdata.com

[AKTOYPM]

What is to keep you from "subletting" it to your Mechanical shop at the going rate?
One Ro for Body repair and one Ro for Mechanical.
Post the Mechanical ro as a vendor bill to your bodyshop and "sublet" it on the Body repair Ro.

[cain12]

thanks for your replies.
AKTOYPM- but if the service department charges $86/hour and the insurance company (and yes unfortunately its a DRP) is paying us $42/hour, for instance, isnt the b/shop already way behind the 8 ball?

[scotstrong]

Frank:

Some of your points are valid in theory; one of the basic premises being that working with insurers is supposed to be a two-way street with some 50/50 give when needed. Unfortunately, the reality of the collision repair industry is that this has morphed over time to 40/60, 30/70, 20/80, etc. (and the increasingly higher percentage is NOT the repair shop). To continue to bend over and continue to acquiesce to insurance company 'demands' makes one part of the problem and not part of the solution. I do not define a business relationship that significantly benefits one party at the expense of the other as "working with them".

The reason the situation has gotten so lopsided is that we have allowed it to become this way. The only way to reverse the trend is to start saying "NO, I do not accept those terms". There are many, many successful shops out there (both independents and in dealerships), that have proven to themselves that the perceived "blacklisting" by insurers if you do not acquiesce to them is a hollow threat. By law, in almost every state, the CUSTOMER has the right to choose the repair facility. Educating your customer as to what their rights are keeps them in your corner.

There are some major changes brewing on the legal front for insurers. The Katrina hurricane claims situation has turned up the heat and long-overdue scrutiny of the insurance industry and its claims handling practices. There are a significant number of exposes under way as I speak in several areas of the country about auto insurance claims practices specifically. Currently there are only about three states out of fifty that make any serious effort to hold insurers accountable for their actions. The reversal of this trend is already starting.

You can continue to be part of the problem and just accept the few scraps of profit insurers will "allow" you (and leave correcting the situation to someone/everyone else); or you can choose to run your business like a business and make your own decisions about your required markup and selling prices, and help put an end to such undue influence attempts.

OEM dealerships are in a much better position to stand up to insurers. They absolutely do not want a consumer knowing that they are suggesting that you not repair the vehicle as the manufacturer recommends. Kinda hard for an insurer to come off as knowing more about repairing the vehicle than the OEM dealer (unlike an independent body shop).

Scot Strong

[fburrows]

Scott:

The battle between insurance companies and body shops has been going on for a long time. Twenty years ago the insurance companies were in big trouble but they have great legal departments and lobbyists and they always seem to survive.

I had a shoulder operation a couple of months ago. The surgeon billed the insurance company $13,000 for the 2-hour operation. They paid $1800 and he accepted it. Similar discounts were applied to the hospital, anesthesiologist, surgical assistant and physical therapist. Before I agreed to the surgery, I asked if they accepted Blue Cross and they said they did. If they did not, I would have found another surgeon. I am sure these people would have preferred to get list price but they settled for what the insurance paid. Their problem is very similar to the body shop.

I dont think the body shop should lay back and take what ever the insurance company offers, but unless they have a huge book of non-insurance business they have to learn to deal with these companies.

A DRP will bring in lots of customers that you would otherwise not see. If you get a total loss, then your new car sales department had a golden opportunity for a sale. Over 75% of our DRP customers were brands that we did not sell. I had 5 DRPs and most of them had an annual review of the terms of our agreement. First they reviewed our performance over the last year and reminded us of how much money they spent in our body shop. Then we negotiated the rates for the next year. The negotiations were business like and reasonable. They have their needs and so does my shop. They had no problem with us using OEM parts for the brands we carried and in turn I had no problem giving them a better break on these parts. They sent us a lot of business and in turn we looked out for their interests. One company did $700,000 a year with our shop.

I think that the most important issue in bargaining with insurance companies is the quality of your work and your estimates. If you are getting supplements on a lot of your estimates that is a huge problem. A DRP requires a different philosophy but the relationship can be very profitable if handled correctly.

When dealing with insurance companies, unfortunately you wind up dealing with lots of individual adjusters. Some of these guys are great and others are idiots. You have to be careful to pick your battles and make sure you are not going to war over a trivial issue. I dont think putting the customer in the middle is a good plan. It will work for one battle but you can wind up loosing the war.

Like everything else your local market has a lot to do with your success. If you are surrounded by body shops that produce quality work then your bargaining position is diminished.


------------------
Frank Burrows
fburrows@absdata.com