Monday, 16 May 2011 19:47

Allstate, Founder of DRPs, Deserves Some Credit for Improving Repair Industry

Written by Insurance Insider

Who benefits the most from direct repair programs? Insurers will tell you the consumer. Repairers will say the insurance company. The consumer has no idea and doesn’t care. They just want their car fixed correctly and quickly.

In my humble opinion, I believe the shop receives the biggest benefit. The insurance company does benefit but not more than the shops on the program.

Yes, many insurance companies report millions in profit every quarter, but do you really think they make their money by not paying for things such as block, prime and fill or OEM parts? If you believe that, you should do some research before you say it. A wise man once said, “Better to keep your mouth shut and let everyone assume you’re stupid rather than open your mouth and remove all doubt.”

Insurers aren’t raking in double-digit profits on the backs of the body shops. Insurance companies capitalize on a marketplace that has shops willing to provide discounts for volume. You wouldn’t do anything different if in a similar position.

Do insurance companies profit from insureds using the direct repair program? Of course they do. Insurers benefit from the reduction in severity and rental car expense, for example. If insurance companies weren’t making money, DRPs wouldn’t exist.

Do the shops make money from participating in a given DRP? You bet. If shops weren’t making money participating in direct repair programs, they wouldn’t be working with that carrier.

For every shop owner I see struggling to keep their doors open, I can provide a secondary list of those that are very well-heeled. Don’t misinterpret what I’m saying: I don’t begrudge anyone financial success and independence. But I don’t have the patience or desire to listen to a shop owner complain about losing money as he or she drives to the airport in a new Mercedes for their vacation in the Bahamas.

Even though insurance companies make a lot of mistakes, DRPs aren’t one of them. DRPs took an archaic body shop trade and transformed it into the collision repair industry. For decades, the body shop trade didn’t change. In fact, it has been suggested that the early caveman provided the same level of service that customers received from shops pre-DRP. I was unable to validate that, but it’s difficult to argue a lack of differences between the caveman and the 1970s shop owner.

For those who are long in the tooth, it seemed like yesterday that the body shop trade with rife with uneducated technicians running their own businesses. There was a “mom and pa” body shop on every corner. The training you received as a body man was from the old guy coughing up a lung as he sanded a 10-foot-long quarterpanel that was supposed to be replaced, according to the handwritten, illegible estimate.

Insert DRP here. That’s when the industry was transformed. In other words, every shop owner in this country should personally thank Allstate for starting what is largely viewed as the industry’s first nationwide DRP. DRPs have done more to change and improve this industry than any other single factor.

You may dispute it, but shops without DRPs are like Sonny without Cher or the Patriots without Tom Brady. Okay, I’m being a little over-dramatic. But the fact remains that if you had a toolbox and a cave, before DRPs you too could be a shop owner.

DRPs caused the body shop trade to grow into a legitimate business and industry. You had to change the way you did business or you couldn’t compete. Insurance companies were looking for professional, well-maintained shops.

Most shops, for example, purchased an electronic estimating system because it was required it as part of a DRP. Why purchase the equipment and software to upload electronic images of the damaged vehicle? If you guessed that an insurance company required it, you are right.

Hopefully, you are starting to see a pattern. The collision repair industry doesn’t change very quickly, especially when there is an associated cost. Unless an insurance requires something as part of  a DRP, most body shops won’t do it.

Before anyone drops to their knees to praise Allstate, I should state that the advent of DRPs also spawned a monster called the unethical adjuster. That probably warrants an article itself. I guess you need to take the good with the bad, and to me, the good that DRPs brought significantly outweighs the negative impact caused by the unethical or immoral behavior of some.

The point of this article was to make you think about one thing: Who has benefited the most from the direct repair programs that some shops swear were the demise of this great industry? The answer is obvious: Body shops.

Collision repairers would still be using a hammer and chisel is it wasn’t for insurers demanding a quality, cost-effective repair.

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