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Non Payment for Electronic Diagnosis – Industry Culture Overrides Logic

One of the first steps in understanding the damage caused by an accident (and a mandatory step in determining the repair needed) is the pre-repair electronic scan of the vehicle’s systems and modules.

Many insurance companies take the position that they will pay for this step if any damage codes are found, but will not pay if there are no codes that can be attributed to the accident.

When I describe this stance on payment to anyone outside of the collision repair industry they are amazed and find it very hard to understand the logic. If you go to the doctor with a health complaint; the doctor sends you for a blood test or other diagnostic and the tests come back negative. That is probably good news but you wouldn’t expect to not be charged for the test. So why would it make sense to anybody to not pay for a diagnostic test on a car because the test results show no damage.

The answer lies in the culture of the repair industry, which has been built up over 50 years and still serves many participants well. That culture is that payment is made only for actual physical repair; nothing else is paid for. This worked well enough when diagnosis involved little more than looking at the damage and making a few quick guesses on what was needed for the repair.

When electronic measuring became an accepted part of the repairer’s tool kit the time spent on this measurement was not paid for. However, if damage was found set up time could be charged, which would cover the time spent on diagnosis. This worked reasonably well because in most cases it was possible to see that some damage existed and measuring was needed to confirm what was very likely to be there.

It started to work less well as cars began to be built more accurately and needed equally accurate repairs. Visual inspection did not always reveal damage; the repairer was now at risk of spending time on diagnostics and not getting paid if he could not find damage.

This is the background and current reality; nothing gets paid for other than actual repair. Electronic issues are invisible and can be caused by a very wide range of incidents or events; there is no visual check to determine if it is needed or not. Not checking before the repair starts compromises the repair.  Despite what the sellers of equipment claim in their promotional material this diagnostic work cannot be left to the least experienced and lowest paid staff member. The equipment costs money, the software licensing costs money and the analysis of the results requires a high level of skill.

The insurance companies are not paying for it because they are clinging to a model that is outdated.  As long as they have power over the repair side, based on asymmetric size and market control they will not be in any hurry to change this model.

They will change when they have to but not before. The ‘have to change ‘will come when the problems caused by the old model become too expensive.  However, this ‘have to change’ recognition will not come when the change is needed, but sometime after it should have been implemented.  It will then be implemented with some urgency and hit a repair industry that is not well prepared (the repair side is stuck in the same old culture.)  By refusing to accept the need for change and allowing it to be introduced gradually we are setting up for another long, inefficient and expensive transition

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…but, of course we all want the cars fixed right. …. but, you have to do the correct repair.

Over the last serval months, perhaps going back as far as  a year, every discussion about the challenges and costs of modern vehicle repair ends with  a variation of the phrase  ‘but of course we need correct repairs ‘ . This is said with a tone that suggests;  ‘I have met my obligations because I have mentioned that correct repairs are needed.’  With this phrase and no further investment the speaker imagines or hopes that he has transferred all responsibility to the repairer and is now absolved of all liability or requirement in further investment in that repair.

This phrase is always aimed at the repairer and is always used by anyone who has an opinion on repair procedures and repair cost, but has no hands on responsibility for that real world repair. Insurers really like it and industry commentators, speakers and trainers always close with it.

The beleaguered ‘estimator’ being told to fix the car right is not being paid for looking anything up and in fact will be penalized for doing so.

If the car is fixed that poorly that a serious comeback results then there will be repercussions. However with all metrics centred on severity, cycle time and customer satisfaction an improper repair that gets past the customer will gain higher marks than the correct repair that takes an extra day and costs another $500. There is not a lot of incentive to spend extra time doing something he is not good at if the probable result is lower marks, and a bigger stack of files still on his desk.

With each year the active fleet being repaired gains added complexity and more and more cars requiring research and careful analysis before the repair starts are becoming part of the repair mix. A time will come, not that far in the future where the incorrectly researched repair will fail almost every time. But we are not quite there yet.

Mike Anderson gave a recent presentation about position statements in which he said that even if the manufacturer does not reinforce a procedure in a position statement you still have to follow that procedure.

He is without question correct in this, however he went further by saying that if a repairer does not research the correct procedures it is simply because of laziness.  He did not acknowledge that finding relevant OEM information is not a trivial issue, requiring both an investment in purchasing access and then a very real, and more costly, investment in learning how to use the program properly and efficiently. There are many real world obstacles to getting the right information that would need to be overcome before  ‘laziness’ became a factor.

Referencing back to a July 10 2018 article about a Collision Hub Repair U video,\ 

A part of the discussion was that it took an hour to find the relevant OEM information and ‘more than that to read it and understand it.’  I am going to guess that there were no questions to answer about other files during this time and no significant time pressure to get to the other files waiting.  There is no denying that the procedures advocated in the article are the correct procedures, but there is also no denying that it is very difficult to get paid for these procedures.  Many people are quite good at getting paid but the majority of repairers do get tired of the fight to get paid.  The points made are valid and they do point very clearly to a future that will arrive, but they are not the current reality in most of the collision repair world.  In this same article the suggestion of resolving liability issues by working for free can only be described as a bizarre business model.

Repair report writing, repair procedures and the payment structures around these will have to change. For now, for most people, the old ways are still viable and still the standard.  Unfortunately the industry is waiting for this change to be mandatory before acting on it. There is only a very spotty and ad hoc process of preparing for the change.

‘Of course it needs to be fixed right’ is not preparation

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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.

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.

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.