SCRS critical of American Family rate request

While shops in the insurer's Certified Repair Program (CRP) had paid a discounted labor rate to the insurer in the past, they had previously not been asked to extend the rate to customers who were paying out of pocket for repairs. According to the letter, which was published by the Society of Collision Repair Specialists (SCRS):

"This expectation does not extend to discounts being provided to American Family on OEM parts, LKQ markup or off the final bill, although we would certainly welcome the gesture if you are able to pass along the additional discounts to our nonclaims customers."

"It is highly unusual for a carrier to ask repairers to adjust pricing outside of the arrangements of an insurer paying for the repair," says Aaron Schulenburg. "To ask for concessions on customer-pay repairs that have nothing to do with the carrier is unique. They are basically asking the shop to match the rate American Family pays, even if the customer isn't making a claim."

According to Schulenburg, the American Family request, while unusual, is another example of insurance carriers pushing shops to reduce their rates. "They are constantly looking for ways to influence shops to discount their rates and deflate prices in the market," he says.

Schulenburg cited the recent ruling in Connecticut that upped the award granted to shops in a lawsuit centered on artificially deflated labor rates as more evidence of the disconnect between actual market rates and what most DRP programs require.

"I think the motivation for American Family is that they are looking for an advantage to market to their policy holders," Schulenburg adds. "That's understandable. At the same time, this potentially validates their discounted rate as the prevailing rate, and that's not true. Things like this come about because the collision repair industry rarely declines any requirement put in front of them, regardless of how outrageous it is. That encourages carriers to ask fro me. They're trying to find what the industry's limit is."

While no other carriers have asked for a similar arrangement, Schulenburg said the SCRS monitors all of the major insurers for signs they are overstepping their boundaries when it comes to pricing. "We are carefully watching carrier requirements that specify how repairers charge for services," Schulenburg says. "In general, it's frightening that any carrier would believe they have the right to extend discounts to customer-pay or out-of-pocket repairs."