| Dick Strom |
From across the country, collision repair professionals gathered for two intense days of real-life enlightenment, causing many to re-analyze the way they conduct business. The quality of information presented - and the enthusiasm of those presenting and receiving it - prompted requests for more of these seminars to be held at key locations across the country, to expand participation across the country.
The general consensus expressed that a very narrow window of opportunity, possibly as little as 18 months, remains for shops to take appropriate action to take back this industry from insurance company control before it is forever too late. Thanks to never-ending money-grabbing by certain insurers of shops' rightful profits, an ever- increasing number of shops are seeking means of shedding their ties to insurers and their one-sided DRP contracts, and returning to profitable independence. Open also to non-CCRE collision shop owners and managers, more joined the group at the seminar once they saw CCRE in action and understood its mission.
"How Did We Get Here And Where Are We Going?" was the topic of CCRE president Tony Lombardozzi's seminar. Reasoning that collision repairers need to understand how this industry arrived at its present state before we can find our way out, Lombardozzi laid out the mostly forgotten, misunderstood, or not previously realized past of collision repair. Speaking from personal understanding of the means in which the past of the collision business was typically transacted before the advent of "estimating guides" and computers (often merely "lumping" of services together with a dollar figure at the bottom), Lombardozzi expressed how repairers knew how many dollars they needed to make a certain repair profitably, and so that's how they represented it to customers and insurers.
Then Glenn Mitchell, a 1950s Chrysler parts manager, desiring a better method of identifying specific parts numbers needed by the shops he served, came up with what was known as the Mitchell Manual. Initially, this manual only listed part numbers, to which labor times and other canned information was later added as insurers and repairers pushed for more information.
Though insurers had been meddling in repairer issues for years previously, many believe that insurer pressure and input over what is included and excluded in such crash manuals has played a major part in shops' losing control to insurers.
As repairers know, few repair/replacement time studies are actually being performed today (crash manual publishers admitting this fact by terming their product "only a guide"), and so the authenticity of most of their published times is, at best, questionable.
According to one person who knows firsthand how times in the early manuals were determined, if the phone wasn't ringing off the hook with angry repairers they considered their work a success. It would seem things haven't changed much.
In discussion it was mentioned that insurers were surprised at how readily many shops gave insurers internal documentation of their personal business affairs to curry insurer favor, opening the door to more and varied forms of insurer intrusion into shops' internal affairs, under the guise of "cost-containment." As this insurer intrusion compounded, a Consent Decree was imposed in 1963 by then Attorney General Robert Kennedy to strictly limit insurer activities against consumers and shops. But this was soon forgotten by shops and ignored by insurers as things quickly returned to insurer business-as-usual.
Shops able to remain in business in the future will be those which meet their obligations and the expectations of their true customer - the vehicle owners. The importance of proper documentation was heavily stressed, along with effective wording of useful forms each shop should have to establish the shop as the repair professional.
Materials as profit center
CCRE sponsor-member Bob Collins, Wreck Check Assessments of Boston, presented the seminar - "Making Materials A Profit Center." With many years invested in the collision repair industry, Collins convincingly detailed how far from reality the antiquated dollars-times-paint hours "multiplier" system (that most all shops still use) is in a failing attempt to account for paint and materials. The same insurer reps who once insisted they would pay for everything used in repairs - if we would just itemize them, now tend to balk at recognizing any other means of figuring paint and materials. Why not, the multiplier- system shorts shops of unbelievable amounts of reimbursement. And the multiplier system gives insurers an incentive to further deflate the number of hours involved in refinishing operations (such as "blend-in-panel"). Each time they can cut a few tenths or time units, it also cuts out some more legitimate reimbursement for refinish materials, using the bogus "multiplier" formula.
Collins used numerous quotes from paint manufacturers, collision trade publications, and the like warning that paint-related prices will continue to increase, since refinish materials are directly tied to the ever-increasing price of oil. Examples include DuPont Performance Coatings which late last year increased the price of their paint products 12-25%.
For the past 15 years, my shop has yearly monitored an approximate overall 7-8% per year increase in our cost of PPG paint products. Yet shops are not even close to being compensated for these huge increased costs through the "multiplier" system that is tied to an hourly labor rate that won't even keep up with inflation, and a "book" hours/operation that only tends to shrink monthly.
Options to the multiplier system
Collins made a very strong case for accurately "cost accounting" [actual costs of materials plus "markup"… you are entitled to markup, you know] the paint and materials we use in each operation, using commercially available software. How each of the three most common commercially available cost-accounting paint and materials programs (PaintEx, Mitchell, and ComputerLogic) figure prices was examined, as were typical examples of how many tens of thousands of dollars the average shop often unknowingly leaves on insurers' table annually through continuing to rely on the multiplier system. Collins also showed how to calculate collision repair material kit prices for major panels being replaced - valuable information when calculated ahead of time saves time when cost-accounting using one of the commercially available cost-accounting systems. Knowing true costs of your figures can be used quite effectively to compel vehicle owners to pay what insurers refuse to pay, or receive a limited paint warranty [only insurers would expect shops to fully warrant something that was never paid for].
Job Costing, team-taught by CCRE Board member Steve Behrndt and wife Barb proved the foolishness of shops that have no idea whether they are profitable or not in each repair. Pointing out that "the significance of knowing the exact amount of income your shop receives on each and every repair order is as much, if not more important, than having frame specifications, achieving color match, etc."
The Behrndts explained the differences between gross profit and gross sales, true costs vs. operating costs, how to determine your shop's and employees' true labor rates, the pros and cons of automated job costing, and the like.
Advantages of job costing include tracking the labor tasks performed by every employee, tracking all part invoices to assure you were paid for every part used, and that you received your agreed-upon parts discounts from vendors, accounting for sublet parts, materials and procedures, proper mark-up, verifying that sales tax is input properly, and that items not used are returned for credit promptly.
"Legal Issues In The Collision Repair Industry" was conducted by Attorney Erica Eversman, J.D. of Vehicle Information Services, Inc. Proficient in collision and insurer practices, Eversman began by illustrating the profitless futility of shops' taking part in relations with insurers in which "LKQ," imitation, and such parts are leveraged against shops' best interests. These relationships also mandate shops to contact so-called insurer supplement "hotlines," often to be put off, sometimes for days or weeks for the insurer's okay. This insurer tactic, as we all know, is to force more shops to participate in DRPs.
Eversman quoted Grant T. Hammond from his book The Essential Boyd. "You must be able to Observe and Orient yourself in such a way that you can indeed survive and prosper by shaping the environment where possible to your own ends, (and) by adapting to it where you must," also describing what has been termed the "OODA loop" (Observe, Orient, Decide, and Act), and how this relates to collision repair. Eversman then distributed numerous representative Documents for the Successful Collision Repair Business, which she has compiled for CCRE sponsor-members only.
These include a repair contract that establishes that the shop is in compliance with state consumer protection laws, and that the insurer is not the customer. This form sets out exact terms for establishing the shop as the authority for repairs, and stipulates methods of repair, type of parts to be used, payment obligations, and terms of recovery in the event of non-payment or deficient payment.
Eversman also detailed the contents of and reasons for each of the other forms she provided for each CCRE member present; these forms included Writ of Replevin (to recover personal property wrongfully withheld), Possessory Liens, Assignment of Proceeds, Notice of Supplement, a Supplement Timing Notice, Parts Notice and Authorization, Notice of Deficiency, a Hold Harmless Document, Termination of Repair, one dealing with Contracts of Adhesion (DRP "agreements" are adhesion arrangements), and other similar forms to empower CCRE sponsor-members to conduct business ethically, legally, and apart from insurer interference.
Several productive, informative hours of Roundtable Discussion finished off the summit, with additional legal advice added by Eversman and attorney David Wattel.
The 2006 CCRE Summit Conference and Seminar Series was nothing short of a great success, in which attendees carried back to their businesses much more valuable information than could even be touched on in this article. As a bonus, attendees took home forms that would have cost thousands of dollars to have an attorney compile.
Perhaps one of the best part of the experience was conversing during meals and before and after hours with so many other dedicated shop owners brought together to further our common goal of serving our true customers better while remaining independent and profitable. And all this without a single insurance representative present to intimidate or repress discussion. Some things are just - priceless!
Dick Strom, Modern Collision Rebuild, 9270 Miller Road, NE, Bain-bridge Island, Washington 98110; (206) 842-3621; e-mail: email@example.com.
CCRE condemns perceived silencing of fraud study
In a press conference scheduled for October 31, 2006, the Anti-Fraud Committee of the Collision Industry Conference (CIC) was scheduled to release the findings of their study that concluded that insurers cheat consumers and states out of millions of dollars by systematically underwriting insurance estimates.
After months of intensive work collecting and reviewing hundreds of estimates from various insurers in ten states, the Anti-Fraud Committee was prepared to expose the routine practice of insurers underwriting insurance estimates by over 100%, which results in thousands of less-than-adequately repaired vehicles to be returned to our highways.
CCRE asserts that insurance-related forces within the CIC itself put a stop to the press conference announcing the release of this vital information that could have benefitted consumers, states, and collision repairers, and that would have brought scrutiny to the manner in which insurers control the collision repair process, potentially putting consumers' lives in danger.
The Coalition for Collision Repair Excellence (CCRE) publicly condemns this deliberate suppression of evidence concerning fraud - or at best, gross ineptitude - on the part of insurance companies, and demands that they immediately stop this practice. The CCRE also calls on state officials to investigate the practice of insurers' systematic underwriting of estimates, which was substantiated by the findings of the CIC Anti-Fraud Committee, and establish whether certain consumers are driving unsafely repaired vehicles because of this insurer practice.
"In many states, it is a crime to allow an unsafe vehicle back out on the highways," states Erica L. Eversman, J.D., Chief Counsel for Vehicle Information Services, Inc. "I expect to see states take action on the Anti-Fraud Committee's findings. People's lives are at risk, and that should be every state's primary concern."
"Insurers have no business in the collision repair business," states Tony Lombardozzi, president of the CCRE. "Collision repair is a profession that takes knowledge, skill, and integrity. At the CCRE, we expect every one of our members to follow a code of professional conduct that requires each CCRE member to deliver a safe, proper repair as requested by the vehicle owner, not some slipshod repair as is often dictated by insurers.
"The CCRE is a peer network for collision repairers, and does not allow insurers to join their ranks or otherwise influence their decisions. The suppression of the CIC Anti-Fraud Committee's findings is an unfortunate example of how once good organizations often get influenced, corrupted and controlled by those with competing interests. For this reason membership in the CCRE is only open to repairers."Editor's note: The information regarding the study was discussed at CIC. Only the news conference itself was cancelled.