Friday, 25 May 2012 17:29

Is the State Farm Elephant in the Room a Bad Elephant?

Written by insurance insider

This is an interesting story and I don’t know quite where to start. How about: Elvis has just entered the building and nobody noticed. Is it possible for Elvis to walk into a room and take a seat yet have nobody notice that the King is in the house? It’s impossible, right?

Well, it seems just as impossible that collision repairers didn’t mention State Farm and parts at the most recent Collision Industry Conference (CIC) meeting. They are the most common words affectionately uttered by body shops owners throughout the country these days. So how is it possible that during one of the industry’s biggest stages, CIC, there wasn’t even a mention?

 

Yes, there were some sidebar conversations during breaks. Yes, there was a lot of discussion at an association meeting held in conjunction with CIC. And yes, there have been some press releases.

But when everyone had a chance to address State Farm publicly, nobody noticed that the elephant was in the room. I know the elephant was there.

Maybe a gag order was issued? Maybe the industry felt that State Farm deserved a break? Or could it be that the industry realized that it’s not as bad as some have made it out to be?

I am among those who think State Farm’s parts move isn’t as bad as some make it out to be. While there are pros and cons, the reality is that overall it’s a good thing. If State Farm didn’t take the lead on this, the industry would have continued to flounder around for years to come. The inefficient parts ordering model employed by the collision repairers is archaic and wasteful.

Why wouldn’t State Farm want a shop to order the most cost-effective part on a given repair? Why should State Farm have to reimburse a shop for a more expensive part if the exact same part is available at a cheaper price? Paying more for the same part is a waste of insured’s premium dollars.

If shops were more cost-conscious over the past 10 years, insurers may have been in a position to lower the cost of insurance instead of continually raising it. I realize it’s not entirely the shops’ fault, but I can assure you that when shops are repairing one of their own vehicles, they’re looking harder for the best price on parts.

We all have a responsibility to be cost-conscious when spending someone else’s money. When you repair a customer’s vehicle, you are spending THEIR money. Yes, you are spending THEIR MONEY. I don’t care if it’s an insurance claim. The money the insurance company pays you is from the insured’s premiums.

If you understand and respect that concept, you would treat an insurance claim like it was a customer-pay job from a family member. Instead, we have an industry that couldn’t care less about the cost of parts because they aren’t paying for them and will make more money by choosing the highest-priced parts.

Don’t all of us have a responsibility to make sure the customer’s car is repaired in the most cost-effective manner possible? If the answer is ‘yes,’ why are body shops all over the country crying foul? If State Farm was trying to eliminate your parts profit, like an ill-fated pilot program many years ago, then you’d have a right to complain. But finding the most cost-effective part shouldn’t be something insurers have to ask or require you to do. You should have been doing it since the first car entered your building.

Although insurance companies inserting themselves into the body shop’s business isn’t a popular subject, you might as well get used to it. I’ve been around this industry long enough to know that unless an insurance company requires it, it’s not going to happen. Allstate requiring CCC’s first estimating system facilitated the widespread adoption of electronic estimating. If that didn’t happen, we might still be writing estimates by hand.

Why is Allstate requiring their direct repair shops to be I-CAR Gold Class? It’s because the vast majority of the industry doesn’t want to invest money into training. Shops shouldn’t be forced to keep up with the latest technology and repair methodologies. They should be seeking training without any interference or mandate by an insurance company. But they don’t.

There are many other examples of insurance companies changing the industry but I think my point has been made. When there are inefficiencies in the system, money to be saved or a better way to serve the customer, unless an insurance company decides to play the role of the evil villain, shops aren’t going to do it willingly.

If the majority of shops were operating at a high level (as a few are), there would be no reason for any carrier to manage the shops’ business. Insurance companies are similar to the government. You are better served resolving the problem yourself, otherwise your fate will be decided for you.

Elvis sang a song titled, “Don’t Ask Me Why.” The next time you are at an industry meeting and want to complain about insurance companies taking over the industry, remember the King’s song…and this article.

 

Read 2913 times