Monday, 05 March 2007 16:27

Estimating in dollar figures and billing the full cost of repair

Written by Dick Strom
In one of those only too human moments when the mouth exceeds the speed of the brain, an insurance representative informed our estimators, “My company doesn’t pay in dollars!” Making light of the obvious, one in our office quickly countered, “So do you pay in pesos? chickens…?” This insurer rep’s outburst was in response to a much needed, long overdue change we had recently enacted: Our shop now bills (actually, once again bills) our customers (the vehicle owners) for the services we perform… and we write our estimates and work-orders line-by-line in dollar amounts, no longer in tenths of an hour or time units. Reasons for this change will become obvious.

 Putting the dollars back in estimates
    

Estimating in dollar figures is a more logical means of computation than the insurer-promoted, often grossly underwritten “tenths-of-an-hour” or “time-units” method into which most of us were suckered when crash manuals became the norm, and computers became the means. Before that time estimates were written in dollar figures. This industry blindly joined the “billing in tenths” hordes because we were LAZY, not because it made good business sense to depend on a method of computation that could be easily tweaked by insurers to their own advantage.
    

At the time we couldn’t comprehend how our newfound friends, the crash information providers, could be so adversely influenced by insurers as to throw us under the bus to please insurer interests, in the process wringing virtually all reasonable profit from our labor, materials and parts. After all, writing more estimates faster equates to more profit, right? Wrong!


Working for the vehicle owner
    

In our shop it doesn’t matter to us what insurer reps think of our billing policies; we work for the vehicle owner. And we’ve found that for the most part it doesn’t matter much to vehicle owners, either. Now, from the beginning of our negotiations with them, the vehicle owner is made to understand that we will be billing fairly for all services we perform, and that all materials and parts required in the course of the repair, with reasonable markup, will be billed line-by-line in dollars.
    

We also make them fully aware that they - the vehicle owner - are responsible for every dollar the insurer finds excuses not to pay them. After all, it was the consumers, not us, that decided from whom they would purchase insurance.
Changing courses reveals surprising discovery
    

Venturing on this new track at first with fear and trepidation, we were somewhat surprised to discover that, with few exceptions, customers expect that they themselves will be financially responsible for any portion of the final bill that their insurer refuses to cover.
    

The vast majority of right-minded consumers realize there is no “free lunch” - that everything comes with its cost - and so most figure any costs of repair that insurers refuse to pay is merely a cost of their purchasing lowball insurance in the hope they won’t be involved in an accident. Others will pay the bill and then pressure the insurer for reimbursement, which is more often than not effective.
    

Paying the full costs of professional services figured in dollars is not foreign to any of us. The groceries we purchase are advertised and sold in dollar amounts, not in units of time it took the grower to produce the product, the trucker to move the product, and the grocery store to display the product. And, this side of the border, we would never even consider haggling over the dollar figure the grocer advertises.
    

The fuel we purchase at the pump (including a hefty 40+ cents average road taxes/gallon) is advertised and sold in dollars per gallon, which we’re told reflects all it took to locate and coax the crude from the ground, transport it, “crack” it, advertise it, and distribute it to us. And I’ve never been in the filling station that would let me have fuel for even a penny less than the advertised dollar price per gallon. Have you?
    

I don’t know how restaurants bill where you live, but where I live they have the nerve to advertise their culinary delights in dollar amounts, not in tenths of an hour it took to them to purchase, prepare, and produce their finished product. And if I were to haggle them over the dollar amount, I would expect, at the least, to be told to never again darken their doorstep. If I believe the price of something I would like to consume is too expensive in a fine restaurant, I can always go to Mickey Dee’s …where I will be required to pay in dollars even before being given opportunity to decide if I like what they serve… which I don’t. The nerve!

{mospagebreak}Elsewhere dollar figures abound
    

Virtually everything that touches consumers’ lives is assessed in dollar amounts. Your insurance policy is itemized in dollars (not pesos or chickens.) And you are billed in dollars for the services of your local plumber, gardener, mechanic, electrician, roofer, and every other service provider professional that you employ.
    

Even the insurance company’s own “re-inspector,” when critiquing his company’s insurer reps’ performance, figures it line by line in dollar figures, not in tenths of an hour!
    

The point is that professionals price their services in dollar figures: Could the reluctance of collision repairers to price their services in dollar figures therefore reflect a feeling deep down inside that collision repair “professionals” don’t really consider themselves “professional grade”? Or is the reluctance more a matter of being controlled by insurers, brainwashed into thinking they won’t be viewed as “partners’ with their so-called “insurer-partners”?
    

Interestingly, according to Black’s Law Dictionary, “Under the Uniform Partnership Act, a partnership is presumed to exist if the persons agree to share proportionally the business’s profits and losses (italics added).” Please do send me your DRP contracts with your insurer-partners that state that the insurer agrees to share proportionally in your business losses.

Inform customers and expect full payment   

Visualize actually being paid (and paid in full without resorting to fraudulent cost-shifting) for all your expenditures related to the true cost of repair - those costs that insurers typically refuse to pay - including hazardous waste disposal, full reasonable and necessary cost (plus markup) on towing and storage bills, crash parts, paint-related products, and materials needed in performing the repair, plus “time-out” storage charges accrued when insurers drag their feet on re-inspections, and many other such reasonable and necessary expenses related to the true costs of conducting the business of collision repair. We now (actually, once again) conduct our business in this manner. You can too.
     

In doing so, keep in mind that you must be totally honest and up-front with your customer in making them aware from the beginning of your negotiations with them that they (your customer, the vehicle owner) will be legally held responsible for any portion of their final bill for which their insurer refuses to reimburse them… prior to their taking possession of their vehicle.
    

To accomplish this, prior to our commencing repairs, our customers sign a form (tailored to legal requirements in our state), which states, among other things, that the vehicle owner understands that we will not release their vehicle until full and final payment is made to us.
    

If they want to collect the difference from the insurer for not fully indemnifying them according to the dictates of their policy, that’s between them and the insurer… and their state’s insurance commissioner, attorney general, Senators and Representatives, newspaper columnists, consumer interest programs like “60-Minutes” and “20-20”, and the like.
    

We’ve found that many customers actually relish chasing insurers for every penny due them (consumers are not stupid - they’re seeing through typical insurer scams, especially after we warn them what to beware of from their particular insurer and its reps.)
    

Others accept their out-of-pocket expenses of having a complete and safe repair as another cost for purchasing a cheap insurance policy, and/or a policy in which they have no local agent to hold accountable for recommending coverage that doesn’t fully make them “whole” again.

Dollar figures shouldn’t be a thing of the past

When we started our collision business over 30 years ago, all shops wrote their estimates in dollar figures. It was the logical way to estimate because shops knew from hands-on experience how long it actually took to repair or replace a quarter panel, fender, windshield, or whatever.
    

In many ways the advent of crash manuals has made the repair industry lazy, inordinately dependent on crash programs that have been incrementally manipulated to benefit insurer interests. You might consider it mind-boggling, but estimating and writing your final invoices in dollars is relatively simple.
    

You are the repair professional, and if you don’t presently have a solid grasp of how much money you need to be compensated to repair or replace, say, a certain fender, you, not the insurer’s college-bred buckaroo-with-laptop, have the means of coming up with the true cost of repair or replace that affords you enough wherewithal to actually remain in business. Of course, to determine this you’ll need to know your actual cost of repair per calendar hour that your shop doors are open.


{mospagebreak}Computing true cost of repair
    

The Coalition for Collision Repair Excellence (CCRE Limited), in its annual seminars and regional group meetings show members, among many other much needed concerns, how to figure their “true cost of repair” (the point at which you stop heading down the road to bankruptcy and begin to return to profitability.)
    

Though computing your own “true cost of repair per clock hour” doesn’t require a degree in mathematics, I’ll guarantee your insurer-partners don’t want you to know how to figure it. CCRE informs members of such things necessary to conduct business in a businesslike manner… practical, profitable education… much as the old 3-M ARMS programs did before they met their demise.
    

Another obvious reason for figuring your services in dollar amounts has to do with the legal side of stating, especially in “judgment” times, time allotments for certain procedures that may be overblown in order to cover the shortcomings of insurer-generated estimates.
  

 I believe the day is coming when insurers will require shops, at shops’ expense, to have a system of live, motion-activated cameras directed at the vehicle and tech in question, throughout the entire repair procedure, constantly monitoring every second the vehicle is being worked on, and even discounting the labor rate if Big Brother decides the tech isn’t moving at “industry-average speed”.
    

Laugh if you must, but the technology is here today to easily accomplish this. All that is needed is shops that are foolish enough to sign on to such requirements… and there surely is no shortage of fools in this industry.
    

CCRE can assist you to implement billing your services in dollars, figure the dollar per shop hour you need to break in order to remain profitably in business, and other such practices that will enable you to take back control of your business, and feel good again about owning your own business. For more information, visit www. theccre.com or call toll-free, (877) 700-7743.
    

Dick Strom, Modern Collision Rebuild, 9270 Miller Road, NE, Bainbridge Island, Washington 98110; (206) 842-3621; e-mail: moderncol@ qwest.net.

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