Friday, 31 August 2007 17:00

Loftus --- The Great Divide: Who is the Customer?

Written by Sheila Loftus

In bowling, when two pins on either side of the alley are left standing after the first roll, it is called a split. Do you know how difficult it is to knock down both pins when you have the most difficult split? Less likely than making a hole-in-one in golf.

In the United States, the auto collision repair industry is looking at a serious split.

My friend John Beckworth, who owns a body shop in Maryland, likes to say the problem in the collision repair industry is us. He thinks repairers ought to become better business people. He likes to negotiate with the insurance carriers. He likes to be measured on key performance indicators such as severity, customer satisfaction, and cycle time. He seeks out insurers’ business. He says he’s making good money by doing so.

Another collision repairer I know studies his numbers like a bookie. He has a chain of about nine shops in two states so he is attractive to insurance carrier because he can offer his services across a broad range of markets. He wants to be in a position to give an insurance carrier whatever it asks for so he can get the work in the door. He wants deep discounts from his parts vendors so he can have room to slide the numbers around if he needs to do so.

Both of these repairers like running an efficient business. They are not alone. They represent a distinctive approach to doing business in the trade. They sit – proudly, in most cases – on one side of the bowling lane.

And the pin on the other side?

These are the auto collision repairers who don’t want to work for insurance companies. They don’t even want to negotiate with insurance companies. There are a handful of these shop owners in Vermont. They know the law. They know that the car owner is the customer. They don’t negotiate with the insurance carrier (unless, as rarely happens, the insurance carrier happens to be the car owner). Instead, they fix the vehicle and charge a reasonable price to do so. By law, the insurance companies have to pay what is reasonable to fix the car.

A few repairers try to charge the vehicle owner the difference if the insurance companies won’t pay. A shop owner in California employs someone to help his customers with the paperwork and to support them as they go to small claims court to get the money they’re owed from their insurers. For this shop owner, hiring someone to be a liaison between the customer and the courts has been worth the expense.

Another example: a couple of shop owners in Ohio founded a consumer-friendly association. Choice Autobody Repair Association advertises a consumer’s right to choose the auto collision repair shop of his or her choice.

Which pin is better?

What’s the best way to succeed as a collision repair shop owner in the United States – to cater to insurance companies or to develop a strategy to keep insurers as far from the repair process as possible?

Each strategy has advocates. Unfortunately, the existence of these two strategies has created a great divide in the industry, the impossible-to-reconcile split.

Some collision repairers who choose to go it alone accuse insurance-friendly shop owners of selling out and putting themselves at risk of doing shoddy work. Some insurance-friendly shop owners accuse collision repairers who go it alone of being idealists who are risking losing their businesses by alienating the deep-pocketed insurers.

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The animosity between the two sides is especially heated when it comes to defining the customer.

Is the customer the insurance company? Or is the customer the car owner? The 7th International Bodyshop Industry Symposium (IBIS), held in Cannes, France, devoted a day and a half to discussing this question. What it didn’t do was answer it.

John Kiff, an expert in car distribution in the United Kingdom, said the question is irrelevant. If the repair job is done “right the first time, on time, every time,” then everyone wins, he said.

What Kiff didn’t answer was how a collision repair facility could do the job right the first time, on time, every time, when insurers are interested in (a) micromanaging the repair process and thereby often delaying and complicating it; and (b) paying as little as possible to have the repair done, which encourages – or even forces – collision repairers to do less than their best work.

The dilemma

Insurers are adept at putting collision repairers in a dilemma, a choice between two bad options, which for collision repairers is either doing the repair right and losing money or doing less-than-outstanding (and sometimes less-than-adequate) work and making money.

Incidentally, it isn’t only the collision repair industry that faces questions about the nature of its customers. An article in a recent edition of the New York Times discussed a condition called atrial fibrillation, which is when the electrical system in the heart functions unpredictably. There is a costly procedure that heart specialists endorse to control the condition, but the disposable equipment needed for the procedure can cost $4,000 to $5,000 per patient. In addition, the procedure takes four hours to perform.

“Doctors say that the number of procedures would surge if the time involved could be cut to less than two hours – which would make current reimbursements less punishing – and if insurance coverage was enhanced,” the Times reported.

So far, insurers are saying no to this procedure. So who should doctors listen to – insurers or patients? Who is their customer?

The healthcare industry, like the collision repair industry, is looking at a split.

A friend of mine who works for a chain of seven repair facilities thinks the collision repair industry may be close to extinction. With all the accident avoidance technology now available in vehicles, accidents are becoming rarer. And when drivers do have accidents, their vehicles are often totaled because of how costly it is to repair them.

My friend thinks we’re headed toward the age of the throwaway vehicle. There is a test track in Virginia in which cars are driving themselves. Other cars know how to park themselves. (Good luck in cities like London, New York, and Paris, however, with their cramped, on-street parking.)

If the throwaway vehicle is coming, I doubt it will arrive within the next two decades. In the meantime, the U.S. collision repair industry will continue to be populated by men and women with starkly different views on how to go about the business of fixing cars. While I understand why shop owners would cater to insurers – insurers, after all, have a lot of money – my sympathies are with the shop owners who put the vehicle owner first.

If I’m in an accident, I don’t want the shop owner kissing up to my insurer. I want him kissing up to me.

Sheila Loftus has been a tireless crusader for the rights of the body shop owner. More importantly, she’s a journalist who works hard to get her facts straight. She can be contacted at sheilaloftus@yahoo.com.

 

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