The California Autobody Association (CAA) has learned that some of these software programs generate a paint materials charge that may be based on the shop’s average cost, not the shop’s selling price. Some insurers may try to use these programs to convince you to accept less than your standard calculation method amount.
If you are given an insurance estimate that is based on a software-generated paint materials charge, make sure you also ask for the printed report that explains how the amount was arrived at. An insurer must give you a copy of this report if they rely on the software to set the paint materials charge.
Note: An odd-numbered paint materials rate (e.g. $27.21) suggests the insurer used a paint materials calculator and then backed out the hourly rate from the total. If the report does not say otherwise, assume the amount is based on your shop’s average cost.
This is a logical assumption because most paint products do not carry a suggested retail price. If you are unsure, call the software vendor and ask. Look at the report and see if it includes a percentage markup field.
Important: At least one software program uses the word “adjustment” in the report instead of “markup”. If this field is blank, zero, or unreasonably low, then you have the right to request a reasonable markup just as you do on used parts or other items that do not carry a suggested list price.
When deciding on your markup, you may want to consider how volatile automotive paint products are, and how much you have to invest in inventory and equipment to be able to sell the product. If the insurer refuses to allow a reasonable markup on paint, then CAA advises that you file a complaint with the California Department of Insurance for Paint Capping. Quote the new Paint Capping law CAA helped get passed last year (insurance code 758.6) which states:
Insurers shall not engage in capping. For the purposes of this section, “capping” means offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.
Then add a simple statement to this effect: “Automobile repair shops do not accept any methodology that determines a paint materials charge when it does not include a reasonable profit or markup.”