Further Behind Than We Were

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I have not posted anything new since February of this year because there has really been nothing comment worthy. The cars continue to change and the industry continues to wait. Mary Bara was right in 2015  More Change in the next 5 years and the rate of technological change has only accelerated since, with the repair industry further behind in 2022 than it was in 2015.

The articles and posts of the last 7 years have lost very little of their relevance, unfortunately. And to be honest I think there will be very little change for the better for the next few years.

One positive note is that there is a noticeable increase in the number of knowledgeable people talking about the need for change and this will have an impact in the future, but for now the people who are making the decisions are entrenched in their positions and staying away from these conversations.

Action is driven by either crisis or money and at this point, with the crisis not yet arrived the money sets the rules.

My feeling is that the crisis will come Dornbusch’s Law but we will be lucky in that it will be one of inconvenience rather than injury and fatalities.  It is the electronics not working after a repair that will clog up the repair industry. Getting the electronics right at the scale needed, where entry level cars have several electronic driver assist and safety systems will only happen if there is an overall change in attitudes, roles and policies. These changes, forced by visible problems caused by incorrect electronic systems function after a repair will carry over to the invisible structural repairs and there will be movement toward getting these right. But it will still 3 to 4 years before the broad industry commits to real changes.

Here are some examples of what is holding back the change;

No insurance company wants to be the first to raise rates more than their competitors and if they can get away with paying for the minimum repair they will.

Private equity firms are buying into the collision repair industry in a big way and this trend will do nothing to move the industry to correct repairs. The measure of success for these firms is money and they traditionally have a short term horizon  Another Significant Change There is money to be made in consolidation and trimming costs through the advantages of scale but there is no money to be made by repairing cars beyond today’s accepted minimum standard.

The flat rate technician who can make lots of money doing what he (98% of the repair techs are male) has been doing for the last 10 to 30 years will keep doing what he is doing. He has never been paid for anything other than identifiable time on the estimate repair sheet and the concept of taking time for research and not getting paid for that time collides with everything he knows about his role.

The independent shop owner is in many jurisdictions not making a lot of money now and even if the will was there for equipment upgrades the money is not. Survival in this case takes precedence over development and best bet for survival in the near term is doing what he is being paid to do, not making waves and getting on to the next car as quickly as possible. An unregulated industry and 10s all around

Government regulation is effectively non-existent Why is there still no Regulation in the Collision Repair Industry?. In some jurisdictions the rules are there, but enforcement is not. In many jurisdictions there are very few rules. This will not change in the near future. Inflation, COVID, climate change caused weather extremes, local and national health care breakdowns and a war in Europe are all very big and very real things. These demand action and take a tremendous amount of energy.  With all these big things it is understandable that regulation of car repairs is very low on the list. Statistically, bad car repairs are not yet a problem expect to the person or family that becomes that statistic.

So what is a car owner to do? I have nothing new to offer here but if you believe that correct repairs are important and you take a personal interest in having your car repaired safely it can be done. Ready for Its’ Next Accident, How do you know?

The ‘Excellent Customer Experience’

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Recently we had a message from one of the insurance companies we work with. The message promoted a restructuring of their operations and stated that the ‘customer experience’ was at the forefront of everything they do. It would have been good if they had also indicated that everything starts with the proper repair.

If an insurance company puts the ‘customer experience’ at the top of their list of they are blowing marketing smoke at their customers.

Most owners do not know a lot about their car. Not because they are not smart but because their car is a very complex thing, which they could not truly understand even if they had the time or motivation to try to. This means that it will be very easy to deliver a great customer experience while repairing the car incorrectly. The owner has no way of knowing if the frame rail was replaced to the correct factory splice point. The car will drive exactly the same with the incorrect repair and the owner’s ‘customer experience’ is enhanced because he got the car back a few days sooner than he would have if the repair shop had waited for the needed parts and done the repairs to factory spec. The car will drive the same with an incorrect repair, but it will not be as safe in the next accident.

At Tsawwassen Collision we try very hard to treat our customers with respect and provide an excellent customer experience, but we also treat the car with respect and our starting point is to deliver that excellent customer experience to the car. Of course, the car is inanimate and will not feel that great customer experience, but if we do the right work and then explain that work clearly to you as the vehicle owner the excellent customer experience stays with both you and your car for the long term.

Kirsten Felder, the very well regarded CEO of Collision Hub had a great take on the ‘excellent customer experience’ which I can paraphrase as ‘If I let my 10 year old son eat pizza every day and stay up until 10:30 playing video games he would give me a really high customer satisfaction score, because he had a ‘great experience’ It’s going to be harder for me to get that great score from him while giving him the things he really needs, but it can be done’  

A truly good repair facility can give you that great experience while also doing the right thing for your car, but it takes integrity and a commitment to the right repair.

OEM Certifications And Insurance DRP Programs

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The insurance industry uses Direct Repair Programs (DRP) to direct their customers to their preferred vendors. Despite what they say about quality of work and standing behind repairs, these preferences are based on efficiency and cost savings, not safety or true quality of repairs (see our previous article An Unregulated Industry And 10s All Around). To them good enough is still good enough.

There was an article last week about a panel at the July 15th meeting of the Collision Industry Conference (membership is almost exclusively US based) discussing whether OEM Certification Programs can co-exist with DRPs. The responses from the panelists were refreshing. While being polite, they quite clearly said that the two concepts have conflicting agendas, and a repair facility cannot be a high performer in both programs.

In BC ICBC does not have a DRP program as such but is in reality one big DRP program. Their DRP like requirements are very clearly different from the requirements of OEM certification programs. Strangely ICBC will list OEM certification of the shops in their repair network, in doing this they are appearing to give a nod of approval to their qualifications. At the same time their own rules preclude adherence to OEM procedures.

The best progressive operators get very good at interpreting the rules of each to ensure that the car is repaired properly. This can be done and there are good shops doing this, but it is not easy. As one example, that known high quality OEM part will cost more than the aftermarket non-OEM part which is, with rare exception, of lower quality. Insurance companies like less expensive parts. and track the ratio of aftermarket parts to OEM parts, with an expected level of use of these aftermarket parts. The OEM certification requirements outright forbid the use of these parts.

Again, a good, honest, and well experienced facility can provide a safe repair, but they do this by being, to some extent, offside on the certification requirements and dancing on the edge of the rules and ratios that the insurance companies set.

This does not leave the car owner in a good place. That owner should not have to rely on the good intentions of the progressive shop to get a safe repair. The system should be set up such that the safe repair is the minimum standard.

Unfortunately, in 2021 there is still too much outdated culture and fixation on cost for this to be possible.

The Present And The Future

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Over the last several years it has become clear to progressive repairers that modern cars cannot be repaired correctly without good current equipment, well trained staff and disciplined adherence to correct, vehicle-specific repair procedures.

With significant investments in equipment and training these repairers are  able repair to vehicles properly now and in the future. 

Many have followed this model, but a significant majority of the repair industry is still “repairing” cars with few changes from 5 or 10 years ago. So far, the cars are going out the door, the insurance company is not being asked to pay for sophisticated repairs, and nobody had to think outside of yesterday’s box.

In 2021 the progressive repairers are ready for a future of correct repairs but many other operators are hoping it will not arrive. They are making money now and the requirements for correct repairs include expensive equipment and training (also expensive) that will be very hard to do with a group of technicians who have not had to take any training for many years.

As examples of how hard this will be for the overall industry, here are a few observations from Canada …

  • In Saskatchewan, Saskatchewan Government Insurance (SGI) wants cars to be repaired better and operators will have to show that they have the right equipment to do the repairs. In January of 2020 they were told they would have to have some key pieces of equipment by March 2021. And if they don’t, they would still be allowed to repair cars for SGI, they just won’t get paid as much.
  • The Insurance Corporation of British Columbia (ICBC) has a new collision repair program to encourage operators to become properly equipped and trained. One equipment supplier asked me how often we use our electronic measuring equipment (we have had it for over 12 years and use it many times each week) as he had customers asking him why they would need to buy that equipment just so it could gather dust in the corner. Or the other one telling him that he didn’t need a resistance spot welder (which is the only equipment that can be used to weld light-weight high-strength steel properly) because his technicians could weld anything they came across now with the equipment they had.
  • A young estimator was at a job interview in 2019. He asked the operator how they accessed the correct repair procedure, and was told, “We don’t do any of that. Cars are easy to fix, and we know how.”

In America, Jeff Peevey, a knowledgeable industry participant, talked about being underwater at a presentation to the Collision Industry Conference (CIC) in early 2020. His point was that what had been described as a tsunami of change a few years ago was in fact not a tsunami, it was a sea level change, and most repairers are still on the old beach, underwater.

Dornbusch’s Law

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In 2016 there was a 5-year time frame suggested for the changes needed in the industry to repair cars properly. If these changes were not made there could very well be a real crisis in the industry.

In 2021 these changes have not been made, but the crisis has not yet arrived. This does not mean that the 2016 prediction was wrong—just that it was off by a year or two.

Economists recognize that there is a lot more to finance than just numbers, and many of their principles apply to a very broad range of circumstances and behaviour. 

Rudi Dornbusch was an economist who worked at several prestigious American universities from the 70s to the early 2000s. Students of international macroeconomics are fond of quoting “Dornbusch’s Law.” 

It is not a rigorous statement and there are many versions with slightly different wording. One of the most concise is;

“Crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine”.

Dornbusch was certainly not thinking of the collision repair industry of 2021 when he wrote this, but it applies exactly. Those progressive operators who have been preparing for many years and are repairing cars properly now will not be taken by surprise.

An Unregulated Industry And 10s All Around

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On Time, Clean & Tidy, Polite Staff – A Happy Owner

Below Average Severity (Cost) – A Happy Bill Payer

Efficient Repairs and a Good Profit Margin – A Happy Shop Owner

Is the Car Safe and Next Accident Ready? – We Don’t Actually Measure That

There are a lot of cars being repaired and the insurance side of the industry has to have a standardized way of measuring the performance of the repairers. These standardized measurements are commonly referred to as Key Performance Indicators (KPIs.) In the insurer/ repairer world, the relationship is based almost completely on these numbers with the most important being severity (another word for cost), cycle time (how quickly was it done) and customer satisfaction.

Cost is easy to measure and the lower the better, the time it takes to repair the vehicle is also easy to measure with the quicker the better. But how is quality measured?

There Is Effectively No One Checking

It has improved somewhat since 2016, with progress being made but Quality of Repair scores are based very much on the vehicle owner’s response. The problem is that the vehicle owner is not qualified to answer questions about safe and correct repairs. They only see the clean shiny painted result and have no way of knowing how the structural repairs, which are not easily visible in the completed vehicle, were done. They may, or may not, notice an issue if the electronic safety and driver assist systems of the car are not properly verified and calibrated.

If there is no licensing of technicians and no physical inspection of the repair then it is left entirely to the integrity of the repair facility to do the complete correct repair. There is effectively no one checking. 

Billing for a correct repair will be accepted and paid but so will billing for an incorrect repair and the correct repair will not improve the rating that the repairer receives from the insurance company. In fact, the correct repair will increase both severity and cycle time, with resulting lower scores.