WILL 13 PROVE to be a lucky number for the collision repair industry? As 2013 begins, what can the industry expect over the next 12 months? Here's a look at 13 things the industry will likely see in the coming year.
1. I-CAR will help get more OEM repair procedures to shops. The training organization announced last summer that, as requested by a number of collision repair organizations, it will create processes to encourage automakers to document more collision repair procedures and work to make those OEM recommendations more widely accessible to the industry.
"In all of our coursework, we do recommend the industry follow OEM procedures, and we don't see that changing," I-CAR CEO John Van Alstyne said. "Our focus here is on enhancing the repair procedures that are out there for the industry and working with the industry and OEMs to accomplish that."
I-CAR will serve as the "OEM linking pin," Van Alstyne said, to both communicate needs from the industry to the OEMs, and as a conduit of that OEM information in a variety of ways.
He said I-CAR intends to have the program up and running by this summer.
2. Greg Coccaro will get his day in court – and others may as well. It's been nearly six years since the owner of North State Custom in Bedford Hills, N.Y., filed suit against Progressive Insurance for tortuous business interference. As of press time, a January 28 court date had been set in the case, in which Coccaro alleges the insurer and one of its employees misrepresented North State's "workmanship, price, timeliness of service and character," resulting in more than $5 million in sales being steered away from the shop.
The suit moves forward after a New York appellate court last fall rejected Progressive's argument that the case should be dismissed because the state law on which North State based its case was designed to protect consumers rather than businesses. The court ruled that a business could sue under the law if the alleged claims impacted consumers at large. The court also held that the law does not require North State to identify specific consumers who were harmed.
The ruling opens the door to other suits against insurers by New York shops because, the court ruled, in general such suits brought by businesses "help to police the marketplace against misrepresentations, which constitute deception against the consumer and unfair competition with firms not engaging in such practices."
3. Severity will tick upward – but maybe not by much. Greg Horn of Mitchell International said as 2012 was coming to a close that "after quite a few quarters of very flat collision repair severity, we're starting to see it eke upwards a little bit." Horn said the increase is based in part on increases in pricing for all types of parts, but a "really rapid ride in used parts" pricing in particular.
"I think that's going to continue in 2013," Horn predicted.
Like Horn, Rick Tuuri of Audatex said the rise in "gross appraisal values" his company is seeing is also based on the rebounding new vehicle sales, which results in a higher-valued pool of insured vehicles. But he's not predicting any quick rebound to the drop in collision repair severity that began in 2008.
"People are driving vehicles now that are a year older on average than they were four years ago," Tuuri said. "That's going to take a long time to rebuild. I expect us to reach what we had in 2008 somewhere around 2020. I think it's going to take that long to build up."
4. Percentage of total losses will rise. With more older vehicles on the road, the percentage of damaged vehicles reaching total loss thresholds rose in 2012 and likely will again in 2013, according to Susanna Gotsch of CCC Information Services.
Audatex's Tuuri agreed, saying the rise in new car sales is among the factors forcing used car values to decline from their historical highs of recent years. Lower used car values also make it easier for damage to exceed the repairs-to-value threshold that results in the vehicle being declared a total.
But Horn said there are some mitigating factors that seem likely to keep the percentage of vehicles being totaled from rising too dramatically in 2013. First, with more than a third of salvage vehicles bought at auction leaving the country, how the U.S. dollar stacks up against other currency has an impact on salvage bids from overseas.
"So if the rate of the Euro tanks even more, if it comes down close to parity to the U.S. dollar, you're going to see a lot fewer international (salvage) buyers," Horn said. "I think that will have a ripple effect on lowering overall salvage values for 2013."
Lower salvage values could help offset some of the other factors that would push up the percentage of vehicles being declared total losses, Horn said.
5. Paint materials costs may rise – along with rates. "It's been a long time since we had sort of a uniform rise in paint materials costs and hourly reimbursement rate," Horn said. "I think as we go into 2013, we're going to see more paint companies push increases in their wholesale and jobber costs, and that's going to bleed through to the hourly reimbursement rate."
6. The feds may take action on insurer's "most favored nation" clauses. Just as State Farm requires its Select Service shops to offer State Farm the best pricing those shops offer any other insurer, other insurers (most notably health insurers) place a similar requirement on service providers.
But the Department of Justice (DOJ) and Federal Trade Commission (FTC) held a workshop last fall that seemed to indicate that regulators are concerned about such clauses.
"Although at times employed for benign purposes, most favored nation clauses can, under certain circumstances, present competitive concerns," the two agencies noted prior to the workshop. "This is because they may, especially when used by a dominant buyer, raise other buyers' costs or (prevent) would-be competitors from accessing the market. Additionally, most favored nation clauses can facilitate collusion and stabilize coordinated pricing among sellers."
After the workshop, the Automotive Service Association sent a letter to the Assistant Attorney General for the Antitrust Division at the Department of Justice, calling for a review of the clauses used in direct repair agreements.
7. Look for lots of the industry in Las Vegas next fall. For the first time since 2010, both SEMA and the International Autobody Congress and Exposition (NACE) will be held in Las Vegas. Coming just three weeks apart, Vegas will see a lot of the industry in its hotels, restaurants and trade show exhibition halls. Mark your calendar for NACE on October 16-19, and SEMA on November 5-8.
8. All eyes will be on the Collision Industry Conference (CIC) this month. Some in the industry, particularly those who don't attend CIC regularly, were shocked or angered when George Avery of State Farm was announced as the new CIC chairman, beginning this month. But Avery is not the first insurer to lead CIC since its founding in 1984, in part because CIC is designed as a place to bring all segments of the industry together for discussion, debate and at times, problem-solving.
"I know we don't all agree, but I'll leave you with this: You can't shake hands over the phone," Avery said when announced as chairman. "And CIC is an opportunity where those with whom we disagree have a chance to shake hands. We have some spirited discourse, of course, which I think is healthy, but it's something we work through together, and I hope you see and will support my desire to move CIC forward as a place where everyone can come together and express their opinion and make the industry better."
CIC will meet in Palm Springs, Calif, on January 23-25, then on April 3-4 in Phoenix, Ariz.
9. Toyota will move forward with its "predictive estimating" system. The automaker drew multiple rounds of applause at CIC this past November when it previewed the system, which requires the user only to select the damaged portions of the vehicle (left front fender, for example), and all items related to that section of the vehicle are automatically listed, including all necessary parts and Toyota-recommended procedures, along with links to all related Toyota bulletins and published documentation.
"Everything you need to fix our cars correctly and to our standards is there," Toyota's Rick Leos said.
He said he hopes to have the system completed on Toyota's top four vehicles during the first quarter of 2013, and he said other automakers are interested in working on the project as a joint venture.
10. A number of states will consider legislation impacting collision repairers. Just two examples: Shops in Rhode Island are discussing reintroduction of a bill passed by lawmakers last year (but subsequently vetoed by the Governor) to give shops the right to sue insurers directly in small claims court over disputed repair costs.
And in Vermont, lawmakers may consider a change to the total loss valuation law in that state, which currently requires insurers to identify the market price for the damaged vehicle in the particular town where the policyholder lives. In a small state like Vermont, the sample size for a particular vehicle can be small. So insurers may press lawmakers to allow them to use one of the larger databases of vehicle values.
11. MSOs will continue on the fast-track. Don't look for any slowdown in 2013 in the weekly announcements from multi-shop operations of acquisitions and new shop openings, most industry observers agree. The good news for single-shop operators hoping to compete is most larger insurers look at MSOs' performance as single shops.
"State Farm maintains that whether you are an independent or an MSO, you should be able to compete, and so State Farm evaluates even MSOs as individual repairers," State Farm's Avery said. "There's something to be said for having skin in the game, if your name is on the company sign. I'm not discounting (the MSOs') ability, but I am saying that those with individual repair facilities have skin in the game, and that can have a lot of value on the customer service side, which we're all after."
12. Employee pay plans may need to be in writing. A new law taking effect in California this month requires employers to detail the pay plan for flat-rate or commission employees in writing. The explanation of how pay is calculated must be signed by the employee, with a copy going to the employee and one kept by the employer in the employee's personnel file.
Business attorney Cory King thinks it's something all shops should consider doing, predicting that it's a requirement that will spread to other states.
"It's an extremely good idea to get ahead of the curve, and it's a good employment practice, period," King said.
13. Insurers may find themselves with new competition. Some industry observers say the automakers (just like shops) are watching the State Farm – PartsTrader test carefully, and though they might not make a move in 2013, they could put themselves in the auto insurance business.
"If the insurance companies keep dabbling in the parts business, the OEMs will come out with their own branded insurance," Scott Biggs of the Assured Performance Network predicts. "They're waking up to how big and strong and how much influence they have. So that's a referral source that could dominate at least 50 percent of the market."
One thing is certain: State Farm's required use of PartsTrader will likely dominate the industry's news throughout 2013.
