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Safe Repairs Through Regulation

Over the last few weeks I saw an article and a symposium announcement that together showed a possible path to the future.

In this Collision Repair magazine article from mid July; Brad Mewes’ views on the current stage of industry consolidation are discussed and explained with extensive use of quotations. The research and business analysis he draws on is broad based and not specific to collision repair. If what he forecasts comes to pass there will be a very significant shift in power and the collision repair world will look a lot different.

Today the insurance companies have a tremendous advantage over repairers because each one controls a huge volume compared to any of their suppliers. A strong independent at $5MM a year is less than a blip, a good regional MSO at $50mm and even one of the big three or four at $500MM+ are only a fraction of what the insurance company will pay out in a year.  This imbalance gives a significant negotiating strength to the insurer with their ability to play one supplier against the other. They are very happy to put all the problems and issues back to the supplier using the blunt threat of moving their business. With many small players looking for business it is not hard for the insurers to use this as a key part of their cost control model.

In the next phase of consolidation with 3 or 4 large entities controlling the repairer side of the market each will start to approach the scale of the insurers and will be much less vulnerable to threat.

On the one hand this is a good thing for the vehicle owner as there may be some standardization of the repair experience, but on the other hand it may be a problem, because if the repair experience is not great there will not be anywhere easy to complain to. When was the last time you got great service and an excellent result from a call to a cell phone company?

While these big players are controlled to some extent by financial and anti-trust regulations there is currently very little regulation controlling or monitoring the physical repair.

This is an announcement about the Technology and Telematics Forum on August 8th at NACE.

Most of the topics listed should be familiar to progressive industry participants. Of interest however, is the 30 minute slot about Government Intervention and the possible need for legislation around repairs. My belief is that this intervention will have to happen and when it does insurers, consolidators, flat rate techs and the last independents standing will face a very different world with repairs that have to signed off by a qualified technician holding a valid license. Aviation industry regulation provides a very good model for the safe repair of today’s complex cars.

The 2017 car can be repaired without regulation today but planes (and the dog) need licensed technicians signing off on repairs


Government regulation is very hard to apply to a very large number of independent facilities as enforcement would be unworkable. Large suppliers could be mandated to provide very thorough reporting and auditing on their repairs and operations and they could afford to do this. A compliance office overseeing 500 locations would be a manageable cost per location while the compliance burden could well be the final straw for an independent.

The consolidators that Brad describes are probably already in the concept planning stages of their Compliance Departments.

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Two hoods ready to paint, one new, one original from the car. If there was a third used OEM hood it would look a lot like these two

I have written in the past about the tension between vehicle manufacturers and the other participants in the collision repair industry. In March of 2017 I criticized the OEMs for their insistence on new OEM parts for all repairs.  http://rfina.ca/2017/03/06/information-needed-get-past-no/

Since that time, they seem to have doubled down on the policy with All New OEM Parts on All Repairs. The next revision may be all caps and underlined.  Meanwhile the repair side of the industry and the paying end users, whether insurance companies or vehicle owners continue to use many used parts.

A hood with a small dent at the front edge may be removed to facilitate the repair and paint process as it is more efficient than dealing with the entire vehicle through the repair process including masking, baking and cleaning. If that repainted hood is re-installed (paying attention to the possibility of one time use parts such as washer nozzles or mounting bolts) the entire repair process has been done in an OEM approved manner. A hood has been removed, inspected, repaired, repainted and installed.

If the damage is something that cannot be repaired the correct OEM repair would be to buy a new hood for perhaps $900. However, if a used hood from the same year vehicle were available this could be bought for $450 or 500. The work required to ready either the new or used part for installation would be very similar, with perhaps an additional 15 minutes to clean the used part. The used part would have a thicker film build that the new part, but if this film build is within spec that is not a deficiency in the overall quality. Also, the paint thickness would be exactly the same as on the repaired, ‘approved’ original hood.

As a business owner with 30 years’ experience I would not be able to offer my customer any good reason why they should pay $400 or $500 more for the new hood. If I was to say that the manufacturer insists on new parts the next question would be why and my only answer would be ‘because they said so.’

If the replaced part is a welded panel I have no difficulty using the new part and defending the use of that part with a valid technical explanation of why it is needed.

There are many, with an upper case M, cases where OEM procedures are truly critical in the safe repair of a vehicle and OEMs are right in keeping the pressure on to insist that these procedures be followed. Unfortunately, by mixing non-essential requirements in with the truly important ones they are inviting interpretation of all of their policies.

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Windshield Replacement and Calibration

There was an article posted by CBC last week about a car in Newfoundland that tried to steer itself into the oncoming lane after a windshield replacement.

http://www.cbc.ca/news/canada/nova-scotia/camera-directed-car-toward-oncoming-traffic-after-windshield-replacement-man-says-1.4715817

The driver, while very surprised, had an easy time taking control and there was no collision or other damage. According to the article he had not been told clearly that a system calibration was needed after the windshield replacement.

The facility replacing the glass would have known that the calibration was needed but they also know that they do not get paid by the insurance company to manage the calibration process, with the result that it becomes a cost to the company. They will get reimbursed for the cost of the calibration, but they get paid nothing for the time spent getting the car to and from the dealership for the calibration or for the phone calls needed to set up the calibration appointment.  This post from November 2016 goes into some detail.

A Current Reality – Correct Repairs are Not Easy

It is easier and to either ignore the calibration, or tell the customer that they should take the car to the dealer for this work.

The insurance company paying for the claim would also have information that the calibration was needed. Insurance companies are quite good at catching a $75 charge for a part that could be bought on the aftermarket for $50. This suggests that their internal systems are well set up to track how claims are managed and submitted. They have to pay for calibration in many cases and these numbers must be tracked as well. So why do they not flag a submitted claim that does not have the calibration included?

For both parties above, the repairer and the insurer, there is to date no financial incentive to doing the truly complete repair. This Newfoundland case cannot be the only instance of missed calibrations which means that repairers and insurers have been getting away with it until now. They will continue to get away with it for some period of time, but as more owners become aware of how their cars are designed and how they have to be repaired the getting away with it will not be as easy.

My sense is that owner awareness is building.

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Qualification and Certification

At the May meeting of CCIF in Toronto there was the start of a revival of the discussion around Certification. It was not on the agenda and the conversation started in the halls but it did make its way into one of the panel discussions. The discussion did not go into much depth but the most important step was the acknowledgement that there was an elephant in the room.

To this point we have been mixing the two quite different things of Qualification and Certification into the same category. Qualification is based on the capability a repair facility, its equipment and people. It can be earned based on the right current equipment, the right current training, the right systems in place and the right demonstration of customer service. Qualification should be given by, to use my favorite word of this week, a ‘disinterested party’. Disinterested does not mean uninterested or uncaring. It means that party has no stake in the outcome. The outcome will be fair, but the granting authority has no financial or competitive stake in the granting, or not, of the qualification.

Looking outside the collision repair industry a good example can be found in electrical services.  A very important difference between electrical work and collision repair is that all commercial electrical work requires technician licensing. A company cannot present themselves as Electrical Contractors without having government licensed electricians on staff. No outside agency or business can provide this licensing or qualification.  It is provided by a ‘disinterested’ government agency and without this license an electrician cannot work.  There is not a lot of confusion among the consumers about the legitimacy of his work as he has been licensed by the only authority allowed to provide that license.

Private companies can then choose to certify any of these licensed electrical contractors to work with their products. As an example Eaton has an Eaton Certified Contractor Network.  Eaton has not issued licenses that are an alternative to mandatory government licensing but has selected companies and individuals from within the existing licensed pool. This inclusion in the network will likely imply that these electricians may be more efficient with Eaton products, or it may be more of a marketing or administrative function.  The electrician with Eaton certification may have technical, or marketing, or administrative advantages, but there is nothing in that certification that diminishes or takes away from the electrician who has chosen not to join the Eaton network.

In Canada, this is where the CCIAP (Canadian Collision Industry Accreditation Program) could serve the same purpose as government licensing.  The program is administered by the AIA, but the AIA does not profit by more or fewer shops, it has no stake in where those shops are, and it has no business affiliation with qualified shops.  A consumer will know that a CCIAP facility is operating within industry standards, with current equipment, well trained staff and a proper business structure.

Certification by OEMs or insurance companies is a different thing entirely; the basis for certification by an OEM has a tremendous amount of marketing included and there are a range of financial interests in that certification.  The choice of facilities that an insurer would prefer to work with is also very market and administratively driven.

Vehicle owners are bombarded with information about the virtues of the OEM Certified or insurer approved facility but are not told what criteria were used for including a facility in the program or leaving it out.

If insurers and OEM certification programs selected only from the qualified pool of shops in the CCIAP system the consumer would know that these choices have reached a high base level and will be able to do the right repairs. But they will also know that the CCIAP shop without outside OEM or insurer certification will also be able to provide fully capable and professional repair.

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Safety, Competition, and Money

As I have stated before in these pages, and countless other people have said in the past, money drives everything. This does not at all mean that actions with an eye on the dollar are unethical. What it does mean is that money is a mandatory component of all business activity and actions taken have to be based on that reality.

Awareness of and readiness for the right things is mandatory for long-run success but a rush to those right things, moving too quickly ahead of your competitors, can be very financially damaging. The balancing act in timing actions requires skill and nerve.

Going to my favorite source, John Heuter at RDN, there was an article on March 27th about the Boyd Group and its investment in equipment.

Brock Bulbuck, Boyd CEO and a solid and well-respected member of the collision repair industry, was quoted as saying “These proactive investments will position us to meet anticipated market needs.”

An analysis of the numbers spent based on the number of locations suggests that they are spending a good amount of money, probably more than most of their competitors.  Boyd recognizes the rapidly changing environment and the importance of safe repairs. The next day Bulbuck was wearing a seemingly very different hat.

In this article, he is talking to investors and explaining the performance of Boyd over the last year.

He stated that insurance company relations were very important to Boyd and they had maintained excellent relations with their DRP connected insurers. Insurers care about metrics and Bulbuck said the three most important are cycle time, CSI and severity. Reducing these terms to honest language, the faster and cheaper you can get it done the higher points you will score with the insurance company.  If you keep the customer happy you will score more points. None of these metrics give any weight to safety; cycle time and severity will suffer from the time and cost of these repairs.

A dealer calibration will add a few hundred dollars and a day or two to cycle time. The correct OEM mandated replacement of a damaged rail section will add hundreds of dollars of cost, and another hit to cycle time. The car owner doesn’t know much about how their car was built and how it should be repaired so if they get it back clean, shiny and as scheduled they assume it has been fixed right and on time they are happy. This uninformed happiness is a poor substitute for true quality control.

So why is Boyd buying the equipment if all it seems to do is get in the way of the important metrics? The answer to this is in Bulbuck’s quote with the words ‘proactive’ and ‘anticipated.’ Boyd is very aware of the need for safe repairs and they are in line with many other progressive operators in rapidly moving toward these safe repairs. It will not be, for Boyd or anyone else, a one day switch from past practice to best future practice.

For the best operators, it will be an honest and accelerating transition to these best repairs.  Progressive and intelligent operators know that they are to some extent ahead of current metrics but they also know the metrics will shift and the hard work of preparing of this needed change will pay off.  Balancing this with the need to stay alive in current market conditions is the skill and nerve part.

The participation of a large operator like Boyd in this move to best repair practices is a positive sign and will help all progressive operators…