The California Autobody Association is warning repairers that there are several software programs that generate a paint materials charge that may be based on the shop’s average cost instead of the shop’s selling price. Some insurers may try to use these programs to convince repairers 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,” CAA says. “An insurer must give you a copy of this report if they rely on the software to set the paint materials charge.” An odd-numbered paint materials rate (such as $27.21) suggests the insurer used a paint materials calculator and then backed out the hourly rate from the total, CAA said.
“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.”
The report should include a percentage markup field. 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,” CAA said.
When deciding on your markup, 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, file a complaint with the California Department of Insurance for Paint Capping. CAA said to quote the new paint-capping law passed last year (insurance code 758.6) that says: “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.”
