The collision repair industry for many years had a reputation of having more than its share of scruffy, low skilled and unscrupulous operators. The bad ones looked the part, and the consumer stood some chance of avoiding these based on appearance. Now there is a different owner of potential concern. These new players in the industry do not give themselves away by outward scruffiness, but they may be just as dangerous.
At the same time that the industry is grappling with unprecedented technological change there is another significant change with a tremendous amount of outside money coming into the industry. The collision repair industry is now seen by private equity firms as an opportunity, made more attractive by the lack of regulation. To these new operators the better repair is the one that generates the most profit. In many cases this may be the safer repair, but if this safe repair is not mandatory and does not generate more profit then it will not be the first objective.
A recent trend of very large multi shop operators is contractual agreements with insurance companies (more in America than Canada to this point) that reward performance through rebates for good performance or penalties for poor performance, with good being lower costs for the insurance company and poor being higher costs. It is seldom that a good repair will result in a lower cost than a ‘good enough’ repair. In an unregulated industry good enough is a very vague standard.
The front end of the operation will look bright and clean, the advertising and corporate image will be good, but if no one is seriously verifying the integrity and correctness of the repair then ‘good enough’ becomes the core of the business model.
One of the themes of the overall collision repair industry that now always comes up at conferences is ‘we are all working together for the good of our mutual customer, the vehicle owner’
I have called out this theme as disingenuous before, but here is another look at why it can be viewed as insincere or even outside the rules.
There is no denying that there is tension between the different players within the any industry. Everyone would rather have more than less and if the supply is finite then the only way to get more is for someone else to get less. There is nothing dishonest or sinister about that, it is a big part of how business works. But the tension between parties and the competition to get as much as possible is a reality and does not quite fit with ‘we are all in this together for the good of our mutual customer.’
Importantly one significant party that does not have a voice in the discussion is the collective vehicle owner, while it is that collective vehicle owner supplying the finite resources. Whether this is by paying for a repair directly, or more commonly by paying an insurance company to cover future repairs it is only the vehicle owner paying.
If the parties in the repair industry are competing for their share of the money that is coming only from the vehicle owner, it certainly starts to look suspicious if they pretend that ‘we are working together for the good of the vehicle owner’ without including that vehicle owner in the discussion.
Fortunately, and counterintuitively, despite the fact that people like to start conferences with the ‘we are all in this together’ phrase this is not how the industry works. Without the real involvement of the vehicle owners the result is arguably better for the consumer if each active party is looking after their own interests than if these industry parties were working together to split the pie while leaving the vehicle owner out of the conversation.
At a 2016 industry panel in Vancouver a representative of one of the large banner programs referred to ‘common sense’ when he said that electronic scanning a vehicle for a scratch on the door was not necessary. This person had limited technical background, but the moderator of the panel did not challenge the comment. The repair of that scratch using proper paint procedures requires removing the door handle, which means that the trim panel has to be removed and for this a number of electronic components have to be unplugged, possibly including the side airbag. The final step in a correct repair is an electronic systems scan to verify that everything is connected correctly and the main control module has recognized this reconnection.
The next year at another conference an insurance rep was going on at length on the concept of ‘case by case’, which seemed to have taken over from ‘common sense’ as the theme for that year.
Both common sense and case by case are only valid if the person using the concepts has the background knowledge to apply to each case or situation. In the two examples above the people speaking were not qualified to apply either common sense or case by case.
The question may be why they did; and a good guess at the answer is money. The banner program rep was signaling to insurance companies that he was ready work with them to save money and the insurance rep was signaling that they were putting a lot of weight on saving money in repairs and that they would decide on which OEM procedures to work with and which to ignore.
IIHS is the acronym for the Insurance Institute for Highway Safety.
This is an American organization focused on highway safety founded in 1959 by a group of insurance companies.
One of the most publicly visible areas of IIHS work is their crash safety rating system, which is developed based on crash tests in their own testing facility. This rating has real world implications, with a 5 Star IIHS rating used by manufacturers as a selling feature and by insurers as a guide to setting insurance rates.
You will be safer in a 2020 vehicle than you would be in a 2010 or 2005 vehicle in the same type of hit. You will probably be safer still in the 2021 because none of the manufacturers move backwards on safety.
The car may be more expensive to repair, but you will not care much about that if you walk away from the accident with no injury. Your insurance company should be ready to pay an extra $2,000 or $3,000 or even $10,000 to repair your car if tens or even hundreds of thousands in injury costs are saved.
5 Stars to 3
The insurance company should be ready to pay; but then we run into measurement and reward in a compartmentalized business. The insurance adjuster, and the entire claims department, is judged by the amount of money paid out; lower claim costs are viewed as a good thing and the in-depth quality of repairs is still, in 2020, not measured.
When these insurance companies are working with a repair industry that values throughput and volume it is not surprising that 5 star rated cars are leaving the repair shop with their rating compromised.
In the unregulated world that we work in the insurance companies are probably the best positioned to insist on a proper repair but the huge emphasis on cost is preventing them from doing this.
There is an irony here; the same company that from one department contributes to the IIHS is from another department rewarding repairs that take that 5 Star car to a 3
For years insurance companies assumed that inexpensive cars were easy to fix and did not need special attention.
The people who bought premium cars had an expectation that they would get top level repair and maintenance service. If the MB sanctioned repair facility told them that these parts and these procedures were needed, then that was what they wanted and they let the insurance companies know that. The insurance companies knew that they could not easily fight a determined owner armed with the logic of a proper repair (and a lawyer) and with so few of these cars on the road the additional costs of their repair could be made to fit into their business model.
Now inexpensive cars have sophisticated technology and repair requirements and there are a lot of them on the road. These cars need the same standard of repair as more expensive cars, but the insurance model is not designed for MB level repairs on every car on the road. The long-term solution will be a revision to the insurance busines model, but the short-term solution is to resist the need for these repairs.
As a step in the right direction, they will pay for the right repair if the repairer shows that repair is needed. If, however, the repairer is not equipped or motivated to do the right repair the insurance company will happily pay for the lesser repair while rewarding that facility with a higher score for cost control.