Wednesday, 31 January 2001 17:00

ADP reverses position, says no encryption of data planned

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Seemingly conceding that its previous position on estimating system data was untenable, ADP announced in April it was putting on hold its plan to encrypt that data and make it unusable by unlicensed third parties such as Internet claims management companies. 

The ADP announcement in late 2000 that it was protecting its rights by encrypting the output files of its estimating systems created an uproar in the industry, both from collision repairers and insurance companies.

At the Collision Industry Conference (CIC) held in Minneapolis, ADP announced the reversal of its plan. Over the previous five months, Rick Tuuri, director of industry relations for ADP, had defended his company's right to encrypt data, saying it was necessary to protect proprietary information, both its own and that licensed from third parties such as OEMs that provide vehicle parts numbers and pricing data.

Critics, however, had called it an unfair restriction on ADP customers' ability to transmit estimate and claims data over the internet rather than only through ADP's network. They charged that encryption plans were more an effort to stave off competition rather than a data privacy issue.

At CIC in April, however, Tuuri said ADP is putting encryption plans on hold. "Although ADP takes the issue of data security and privacy very seriously, we also recognize that the industry is still working on all of the issues related to implementing and managing secure transactions over the internet," Tuuri said in a prepared statement. "Therefore, ADP has no plans to encrypt output files and will not take measures regarding this issue until the appropriate standards and policies are created, or unless it is deemed necessary by clients, business partners or government regulations."

CCC endorses open systems

CCC Information Systems announced that it, too, would enable its customers to use Internet-based communication services to transmit estimate data from their CCC systems.

"We are pleased to announce that CCC will work with all Pathways Estimating Solution customers to turn on the EMS extract on request, so that they may work with third parties of their choice," said CCC's Jim Dickens, who added, "CCC will take appropriate action to safeguard all estimate interests in the EMS data."

CCC had never formally announced that it would encrypt or otherwise turn off the EMS extract file, but industry media had reported that several customers had trouble getting the company to turn on the extract file feature.

The EMS extract is a data file standard developed by CIECA, an industry group established to develop standards for the electronic exchange of information.

Mitchell welcomes announcement

Mitchell International, which had been the sole voice among the `Big-Three' information providers to endorse open communication of estimate data, applauded the ADP and CCC decisions.

"We support open systems very ardently," Paul Gange, Mitchell's vice president of product management, said at the CIC meeting. "We want to compete on the merit of our product and on the merit of our service offerings and allow you (repair shops) to be able to responsibly use the data from an estimate you created."

"We have always strongly supported open communication of estimate data," said Mitchell CEO Jim Lindner in a press release. "We believe it is the best interest of the entire industry because it promotes open competition and the ability to share information between shops and insurers - which is so critical in our industry.

Supporters of "open systems" say the ability to exchange information via the internet will allow greater competition by giving shops and insurers more options as to how they communicate electronically. Under open systems, for example, a shop may not be required to use a particular estimating system in order to exchange assignments and estimates with a particular insurer.

Consolidators, insurers meet

Also at CIC, Rollie Benjamin of the Minnesota-based ABRA Autobody and Glass, a consolidator with about 70 shops, said that representatives of several consolidators and 10 insurers met in March in Las Vegas to discuss the need to simplify administrative processes in shops.

Media reports indicate that the consolidators included ABRA, CTA, Gerber, M2, Sterling and True2Form. Noticeably absent was Caliber Collision, the largest operator in California and Texas. Caliber's CEO, Bill Lawrence, told Hammer & Dolly magazine that "we prefer to address client issues one on one." Insurers included Allstate, GEICO, Nationwide, Progressive, Safeco, State Farm, Travelers, USAA and several others.

Benjamin said that the discussion at the meeting - such as the expense of having to have multiple estimating systems to meet insurer direct repair programs - will benefit all repairers, not just consolidators. Independent shops at CIC voiced interest in participating at such meetings, including one planned for August; Benjamin said the request was noted but said he views the meetings as another avenue to push forward some of the same issues CIC committees are working on.

Shops doing more admin work

CIC's new "Operations Committee," for example, announced at the April meeting that it is compiling a summary of the various claims administrative processes shops perform for insurers. Tom Moreland, co-chairman of the committee, said the summary will be a step toward analyzing to what degree differences in insurer administrative processes lead to higher costs, and also may help lead to more standardization among insurers.

In a related discussion, Rod Enlow of USAA said he recognizes that insurer direct repair programs are shifting some of the claims processing costs from the insurer to the shop, and that shops should be compensated for those added costs.

"If this task transfer is a burden to you and you're not able to find some way to recoup that expense, then it's no longer a good relationship," said Enlow, director of auto industry affairs for USAA. "It's a cost that we cannot continue to hide in the estimate. I don't want to see it in the frame time. I don't want to see it in the refinish time. We either need to have it in the door rate or we need to have it as a line item. The costs have got to be somewhere because they're real."

Enlow said he would prefer to see such added costs reflected in "a realistic door rate" rather than a line item, so the estimate is more clearly just an assessment of what needs to be done to repair the vehicle.

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OEM parts win -- and lose -- in test fit

The latest CIC blind test fit demonstration resulted in mixed results. CIC participants rated OEM and non-OEM replacement parts installed on a 1997 Ford Expedition and gave much higher marks to the Ford fender and grille, but scored the non-OEM hood higher than the Ford OEM version.

The Ford hood scored 16% overall acceptable, while the CAPA hood scored 83.3%.

The Ford fender scored 60.2% acceptable while the CAPA-certified hood got only 16.7%.

Ford Motor Company sent more than a dozen employees to observe the latest parts demonstration after Ford replacement parts were trounced by non-OEM at the CIC parts demo last December. The Ford contingent included quality control representatives for Ford and the stamping plant that made the parts used in the last demonstration, along with members of the United Auto Workers union.

"The reason we had 13 people here is that we view it as another input into the quality of our product," George Gilbert, Crash Parts Merchandising Manager for the Ford Customer Service Division, said. "Our commitment to CIC and anyone who uses our parts is that if there's a flaw in the system, we'll find it, we'll find it fast, and we'll fix it."

A representative of Keystone Automotive Industries, through which the non-OEM parts were purchased, said the company would be paying for CAPA to run the low-scoring fender through its "vehicle test fit program (VTF)," which CAPA had not yet established when the fender received CAPA-certification. The high-scoring non-OEM hood, on the other hand, had gone through the VTF program which was established in 1999.

"As Mr. Gilbert probably wasn't very happy at [the last CIC test fit], we're certainly not happy with the way that [non-OEM] fender looked," said Kim Wood, president of North Star Plating, part of Keystone Automotive. "We won't be sending 13 people to the next test fit, but it is of obvious concern to us, and we care a great deal. We want to take some responsibility for that."

Wood said his company's records indicate they sold 164 of the hoods and 175 of the fenders "in the last few months." Of those, he said, only one of the fenders was returned because of fit or finish problems. "To have sold 175 and to have taken back just one did not seem consistent with what we saw here, so we'll pursue that and do a CAPA test fit," Wood said.

State Farm sued in Class Action for Diminution of Value

Once again, a State Court Judge in States Farm's home state has certified a class action suit against the giant insurer. A Belleville, Illinois judge certified a 45-state national class action lawsuit (Peterson v. State Farm) for diminution of value. Under the theory of "diminution of value" a/k/a "diminished value," a vehicle loses value when repaired after an accident, regardless of the quality of the repair. In theory, a poorly repaired car loses more value, but even a great job at the body shop results in a vehicle worth less than one that has never been hit.

The lawsuit asks that State Farm compensate policyholders in the 45 states for diminished value even when there is no question regarding the quality of the repair work.

Individual diminution lawsuits have been losers of late in more than one state; this is the first known diminished value class action suit. California was not one of the 45 states included in this action.

State Farm gets a hearing in its appeal of $1.2 billion verdict

Three Appellate Court justices in Mt. Vernon, Illinois heard argument in State Farm's appeal of the verdict against it for failing to tell policyholders that it was using non-OEM parts to repair their vehicles - parts that were not LKQ as specified in the policy.

Media reports from the Courtroom indicated that State Farm did not defend the quality of non-OEM parts. Rather, it argued that the class action should never have been certified - that every case was individual - and that body shops, not State Farm, actually fix the cars; that just because a non-OEM part was specified on the estimate does not mean one was necessarily used on the car; that the body shop may have used an OEM part for any number of reasons. Courtroom reporters noted that one justice seemed to find the State Farm attorney's answer to his questions about breach of contract to be evasive. There was no word on when a decision can be expected.

Allstate agents are ticked off

If you call on an Allstate agent looking for business and he or she seems in a bad mood, it probably isn't anything you said. About 50 former and current Allstate agents are suing the company for millions of dollars in back wages. The problems occurred after Allstate made many of its employee agents into independent contractors. The agents were required to keep fixed office hours, including Saturday. They say the company didn't pay overtime and violated wage and hour laws.

Caliber buys again

Consolidator Caliber Collision Centers apparently is still voracious. It has acquired another Southern California shop - Beny Canela Auto Body, a 15,000 square foot shop in Indio (Riverside County) California. The company says that this brings to 52 the number of Caliber locations, including 29 in California and 22 in Texas.

Nationwide wants to use recycled parts first

LKQ, the largest consolidator in the salvage parts business, apparently has struck a deal with Allstate in which Allstate Pro Shops will first submit a list of required parts to LKQ before ordering the parts from OEM dealers. LKQ will do a national search of its 43 yards to see if a recycled part can be found.

Dotcom parts seller ChoiceParts sues Big 3 Automakers

While the insurance processing dotcom companies struggle with getting estimate data from the info systems, the parts selling dotcoms have their own problem - getting OEM parts numbers and pricing. ChoiceParts, the company formed by a partnership of CCC, ADP and Reynold&Reynolds (R&R), has sued DaimlerChrysler, Ford and GM for antitrust violations because they won't provide parts pricing and identification numbering. ChoiceParts was thought to have the inside track in selling OEM parts because partner R&R makes the inventory systems used by many car dealers. "We already have hooks into the dealers inventory systems," CEO Chan Galbrato told Autobody News at NACE. The company says it has about 250 dealers signed up for its electronic marketplace, but needs the info from the manufacturers. In response, GM said it "believes ChoiceParts can produce a useful and competitive product without GM data." Given that the Big 3 last month announced their own effort to market parts of the Internet, it should come as no surprise that they don't feel like cooperating with ChoiceParts.

John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988.

 

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