Thursday, 23 February 2012 17:02

NJ Shop Questions State Farm’s Denial of Cost Accounting Based Paint Allowances

In a letter to State Farm CEO Edward Rust Jr., Don Harvey, of International Collision Service in Englewood, NJ, questions why State Farm does not acknowledge cost accounting programs and practices in setting paint allowance rates.

Harvey has previously contacted senior State Farm management to no avail. His letter follows:

Feb 15, 2012

State Farm Insurance Co.
Mr. Edward B. Rust Jr.
One State Farm Plaza
Bloomington, IL 61710

Dear Mr. Rust,

Please take a moment to look at an issue regarding customer satisfaction and a “Good Neighbor” responsible commitment to proper repairs.

Paint material has been an issue often questioned and not properly acknowledged.

Several years ago the Department [of Banking and] Insurance Commissioner Steven M. Goldman issued a Bulletin #07-20 (copy enclosed for your review) encouraging insurers to utilize paint cost accounting software programs and manuals. Just after the issuance of this bulletin, State Farm (Northern NJ) changed their paint calculation from a multiplier of $23.00 per paint hour to $28.00 per paint hour. That was November 2007. Since that time, as we all know, all oil-derived product prices have dramatically increased, however State Farm has not acknowledged (NJ office: Mr. Charlie Holmes) any legitimate paint cost programs or software, holding [instead] to their antiquated $28.00 per hour calculation with no deviation.

Automotive paints used on today’s advanced vehicles require many different tints to achieve the look and appearance duplicating the original finish. Therefore all pricing cannot be properly and FAIRLY determined by one multiplier, this is why the paint cost accounting software programs are so important: FAIRLY compensating the repairer for materials used on the specific vehicle (color) being repaired.

Mr. Holmes has repeatedly stated that State Farm holds true to their survey studies. What is interesting about that is twofold:
1) State Farm (northern NJ) hasn’t sent anyone out to survey the shops in many, many years, leaving it to the shops to call State Farm and get an authorization # before being able to even get to the survey.
2) I find it interesting that if State Farm only uses their survey to change rates and materials, why after a short time and no apparent survey, did the multiplier change in late 2007 after the Bulletin issued by the State of New Jersey, from $23.00 per hour to the current rate of $28.00 per hour?

Most insurance companies are acknowledging the cost accounting software programs plus a mark-up as the programs use an average COST to the repair from the suppliers.

In closing I hope that you will review this letter and change the way State Farm, NJ, is conducting business and [have] The Good Neighbor do the right thing, properly and fairly returning vehicles to pre-accident condition.

Respectfully,

Don W. Harvey
International Collision Service
Englewood, NJ, 07631

(Copy of Mitchell Refinishing Calculator Notes enclosed for your review.)

To see additional attachments: NJ DOI Bullentin #07-20 and the Mitchell Refinishing Calculator Notes, search the article title at autobodynews.com.

If you have any relevant information submit it to Don Harvey at dwharvey@1ics-usa.com, or write:

Don W. Harvey
international collision service
328 South Van Brunt St.
Englewood, NJ 07631

Phone: 201.567.2124
Fax: 201.567.6644

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