Although the parts prices listed in the ADP database are the manufacturers’ suggested retail prices, the “Parts Exchange New” system allowed the names of dealers discounting these retail prices to be listed on an estimate. More than 30 dealers were discounting retail prices through the system.
Shop owners at a previous CIC meeting had pointed out that while the discounted retail prices affected what insurers will pay, the shop was still being charged the same wholesale price.
“The dealers are not giving a discount, they’re not giving anything up,” California shop owner Darrell Malott said. “They’re selling at wholesale anyway. All they’re doing is putting a different retail price down there. They can mess with that list price all they want because it doesn’t change what they sell it for. The system encourages them to play that game and at no cost to themselves. They’re giving away our margin for their advertising so that they can be selected by a third-party to make us buy from a particular OE vendor, and they didn’t have to give up a thing.”
-As reported in Autobody News. ADP’s Claims Services Group (including its estimating system) was acquired by Audatex (now AudaExplore) in 2006. Tuuri (who left Audatex in 2004 and spent four years with I-CAR) became AudaExplore’s vice president of industry relations in 2007. Malott died in 1999.
15 Years Ago In The Collision Repair Industry (October 1999)
After losing a $456 million class action jury verdict and being assessed an additional $730 million by the trial judge, State Farm has stopped writing for non-OEM crash parts on its estimates.
The class action trial concluded early in October in Marion, IL, with the 4-man, 8-women jury finding against State Farm. A week later, trial judge John Speroni assessed the insurer a financial penalty, including $600 million in punitive damages. The total judgment against State Farm came to $1.1 billion. The insurer plans to appeal.
In response to the verdict, State Farm stopped promoting non-OEM crash parts. A State Farm memo to its employees dated October 6 said, “Effective immediately, State Farm will temporarily suspend quoting non-OEM crash parts on repair estimates. This decision applies countrywide and in Canada, until further notice.”
-As reported in Hammer & Dolly. Other insurers also halted use of non-OEM parts temporarily, but most returned to the practice of calling for their use. State Farm has not, at least in the case of 25 parts types, including hoods, fenders, doors and decklids. The insurer did, however, appeal the ruling all the way to the Illinois Supreme Court; in 2005, that court overturned the lower court’s judgment against the insurer. The case remains in the news, however, because of a pending lawsuit over whether one of the judges on the Illinois Supreme Court at the time it overturned the verdict should have recused himself from the case because of election campaign donations the lawsuit alleges he received from State Farm.
10 Years Ago In The Collision Repair Industry (October 2004)
The Automotive Aftermarket Industry Association’s recently released study, “Collision Repair Trends,” examines a number of the trends that continue to reshape the collision repair industry in the United States.
“Total collision repair-related sales by aftermarket repair shops increased 5 percent in 2003 to $34 billion,” the report states, noting that this was driven by an increase in the number of miles driven and the increasing cost of collision repair per vehicle.
The study forecasts that sales will increase 5.4 percent in 2004 and an additional 5.1 percent in 2005.
AAIA found that there were roughly 43,360 shops that specialize in collision repair—34,700 independents and 8,600 dealership affiliated body shops. That’s a decline of about 2,000 shops since 1999.
-The AAIA earlier this year rebranded itself as the “Auto Care Association.” The total collision repair market is now estimated at about $33.7 billion—about the same amount as a decade earlier—but if total industry revenue had grown just by the rate of inflation over the decade, today’s collision repair market would need to be about $44 billion to be equivalent. The current total number of shops is estimated at about 40,100—about 3,200 fewer than a decade ago, a decline of 7.4 percent. Dealership shops account for much of that decline, dropping to about 6,350 (down by more than 2,200) while there are about 900 fewer independent shops.
5 Years Ago In The Collision Repair
Industry (October 2009)
Last month’s press conference by Connecticut Attorney General Richard Blumenthal in which he condemned steering by insurers prompted a Hartford Business Journal columnist to write that, “It’s probably not the state’s business whether you, your insurer, or your Momma chooses the body shop that fixes your car.”
If someone trusts an insurer enough to do business with them, freelance writer Laurence Cohen said, why wouldn’t they trust them to suggest a particular body shop even if other shops “are unhappy about not being included in the big hug from the insurers” and say that the preferred shops “often attach new equipment with used chewing gum.”
In a letter to the editor of the paper, Bill Denya, owner of Denya’s Auto Body in Meridan, CT, and a board member of the Auto Body Association of Connecticut, said what customers “don’t know about those secret deals is that the insurance companies typically put huge pressure on these preferred body shops to reduce costs—and increase insurance company profits.”
Denya said Cohen may have been joking about “chewing gum” being used in repairs, but that the association has “documented countless instances of these shops doing significantly substandard repairs.”
“If you needed heart surgery, would you allow your insurance company to select the least expensive surgeon for the job or would you want the best surgeon possible?” Denya wrote.
-As reported in CRASH Network (www.CrashNetwork.com), October 12, 2009.