My garage keeper's insurance was first. After receiving several quotes of substantially different amounts, I contacted each company. I wondered why there would be such a large price difference if they were all substantially the same. Obviously, they weren't the same, which accounted for the significant price difference.
To prove the point of this experiment, I took the average of all the quotes, then approached the highest charging insurance company and told them the amount I was willing to pay. I explained that I had conducted a survey based on the quotes I received and the amount I was offering them was usual and customary for this type of policy. Needless to say, I wasn't surprised when they politely told me, "I'm sorry, but our company doesn't operate that way." I then offered to give them all of my insurance business if they reconsidered my offer, but they declined.
What did I expect?
Would workers' comp be different?
My workers' compensation carrier was up next. When I requested a quote, they gave me a form asking how many full-time employees I had (68) and other information they considered necessary, saying they would be in touch shortly.
About a week later they called with a quote that was, as expected, a little higher than last year. When I asked for the rationale, they explained that the cost of doing business had increased over the last year and they were forced to pass this on to their policy holders to stay profitable.
While this makes perfect sense to anyone outside the collision repair industry, it bothered me because, due to some of my DRP contracts, I am unable to raise my prices to compensate for my own increased cost of doing business.
Going one step further, I asked if they would shift some shop employees over to the office side of the column. This would create a substantial savings since the office staff premium is less than one-fifth of the cost of shop staff. They looked at me like I was asking them to commit a crime because, of course, it is a crime to incorrectly categorize an employee.
Does cost shifting come to anyone's mind? Insurance companies want us to do what they wouldn't even think of doing themselves. I couldn't help but remember how often I've been asked to cost shift by the insurance companies I do business with.
How about a quantity discount ?
Next, I decided to raise the ante by approaching my auto insurance company - the one that has had my business for years. I own five cars including my new Cadillac. When I received my quote, I wasn't surprised to see that the Cadillac carried the highest premium - almost twice as high as my daughter's Hyundai. And after all, why shouldn't it - it's a Cadillac.
I asked my agent if there was something he could do to decrease this premium to somewhere close to what I was paying for the Hyundai. He explained to me that there was nothing he could do because a Cadillac costs more to repair. Unless you are in the auto body industry, this is logical.
Realistically, when I repair a Cadillac, I make less money than if I repair a Hyundai. The discount on Hyundai parts is smaller because it is a foreign car. With a Cadillac, not only are the parts more expensive, but I give a larger discount to the insurance company. Though I do it, somehow it doesn't make sense; I should be charging a higher hourly rate to repair a Cadillac than I charge for a Hyundai.
Insurance companies charge higher premiums to insure more expensive vehicles. It makes perfect sense for the labor rate to be more costly for high-end vehicles, since the quality of the vehicle is built to a much higher standard requiring more complicated repairs. I do need to start running my auto body shop more like an insurance company.
Pushing my experiment to the limit, I asked the agent to throw in rental coverage and towing. After all, shouldn't I get a quantity discount for insuring five cars with his company? I thought of how many procedures I've been asked to throw in for the promise of more business and wondered why they would even ask. Ultimately, my agent said he was sorry, but his quotes were as low as he could go. Should I respond the same way?
This has been a great experiment so far.
Let's make a deal
With sixty-eight employees, I decided to bargain a little with my health insurance provider. The quote was again higher than the previous year, and, once more, I asked why. The cost of healthcare coverage is going up and you're lucky to get the quote you have, my agent responded. Somehow I didn't feel so lucky.
For the sake of my experiment, I pushed him for some concessions, like so many insurance companies ask of me. I told them if they wanted my business they needed to give me a discount based on the fact that I have sixty-eight employees and have been with them for years. They told me that this quote was as low as the company could go because the profit on medical insurance is so low that if they sold it for any less they wouldn't make a profit.
Now I've heard this "profit" word from all of the insurance companies I've dealt with during my experiment, leading me to conclude that insurance companies are seriously concerned about their profits. They should be; this is the reason they sell insurance. They sell policies to generate a profit. Isn't that why we are all in business?
Insurance companies are not in the "favor" business. Just mail a premium in one day late, and see how fast your claim will be denied. And it doesn't matter how many years you've mailed it on time. One thing I have learned from this exercise is that insurance companies want to be paid for their service and they will not sell you a policy unless they see it as potentially profitable.
What I have discovered is that the collision repair industry needs to rethink the way we do business; we need to learn from the insurance companies. Just as their primary goal is to make a profit, our primary goal needs to be the same - to make a profit.
There is nothing wrong with profitably being part of your company's mission statement. There is nothing wrong with running a profit-based company. There is nothing wrong with holding your head up and saying "I'm sorry. But if I do this job, it just won't be profitable."
We need to reclaim our industry by keeping the highest standards of integrity, by insisting on doing quality repairs, by only charging what is reasonable and fair for us to be profitable, and by demanding the same respect as professionals that we give to our insurance company clients.
After all, we are not in the "favor" business either.