Take another look at perks

Oct. 19, 2015
As collision repairers we are more than familiar with the perks we provide to insurers. Similar to loss leaders at retail stores, they are value added propositions we offer, or agree to provide, intended to entice the buyer, or insurer, to do more business with us because they receive “more.” 

As collision repairers we are more than familiar with the perks we provide to insurers. Similar to loss leaders at retail stores, they are value added propositions we offer, or agree to provide, intended to entice the buyer, or insurer, to do more business with us because they receive “more.” “More” can mean lower cost, extra product, or extra services. In the collision repair industry we find these perks predominately in DRP relationships.

As we are well aware, our industry trend has been to provide more and more of these perks. Examples include free storage, no mark-ups on towing charges, parts discounts, free estimating on DRP vehicles, free estimating on non-DRP jobs (often replacing insurance drive-ins), free photographs of loss damage, free photos of repair steps, free total loss handling including reporting on vehicle condition and options, free estimates on prior unrelated damage, free rental cars, free pick-up and delivery, and more. I am not arguing that these perks are right, wrong, good, or bad. These perks are services, or cost savings, provided that are above and beyond the actual or direct costs of repairing the vehicle. Our billing is based on the estimates used to identify the vehicle repair costs, which is of course the tool used to compensate shops for services. In other words, only the direct vehicle repair costs are billed, not all the peripheral expenses. As repairers we are painfully aware that many of these perks are services provided by our administrative people, including estimators. As a result we have seen a trend where shops are adding to the number of administrative people while insurers are reducing their staff. The ratio of shop administrative staff people to production people (technicians) is getting close to one-to-one.

We are told by collision industry people from the United Kingdom that their trend of shops offering, or being required, to provide more perks is even more dramatic, resulting in significant loss of profit opportunities and a huge reduction in the number of surviving shops.

I’ve become aware of some situations that have taken the costs of these perks beyond what most of us would have expected. I recently ran into an example where a shop person made an error on a total loss report, incorrectly logging the vehicle mileage. (Note the article in this issue on total loss handling.) Even though the total loss handling was provided as a free perk as part of the DRP program, the insurer sought compensation from the shop to offset their loss in overpaying the customer. Another insurer requires their DRP shops to write estimates on customer’s vehicles according to their guidelines whether the customer will have their vehicle repaired at that shop or not. They stated that if the estimate was not within their guidelines and even if the vehicle was not repaired or repaired elsewhere, they would require compensation from the shop. An example would include what they consider an ‘overwrite’, which could include panel repair judgment being too high in their opinion, not listing alternative (salvage, aftermarket, or remanufactured) parts, or not listing the lowest cost alternative parts as sometimes happens when more parts sources could have been checked, or listing an operation that perhaps could have been considered an included operation. Some of these issues are very judgmental.

The idea of writing checks to insurance companies for free services and perks because the free service was not completely to the satisfaction of the insurer puts a whole new perspective on what the perk represents. I personally find it unsettling. Should the shop be responsible? Did the shop’s staff person receive adequate training from the insurer on their expectations? Does the repairer’s liability insurance offer adequate coverage for such consequences? Who decides if the insurer’s concern justifies financial compensation, especially in a contested situation? The issue leads to many questions. In the examples I provided I don’t know if the decisions were made at a corporate level or by a regional person. They may not accurately reflect the corporate policy. However, my advice is that if a repairer elects to offer, or agrees to, a perk it should be clearly understood what the expectation is, including consequences for errors and consequences for insurer policy/procedure compliance issues based on fact or judgment. The repairer’s exposure to cost and responsibility may be far greater than anticipated.

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