Like other industries, collision repair includes many who shine at fraudulently taking advantage of any situation. While restrictive insurer pay-outs do encourage outright fraud through "get even" cost-shifting, to place all blame for shop-perpetuated fraud on such insurer practices would be somewhat unfair. Many shops view the insurance industry as a "cash cow" asleep on her feet, and feel no qualms about milking her dry when given the chance. Parts dealers have become, by association, an accessory to this "midnight milking" effort.

 

It would be somewhat reassuring to believe that shops cheat only when insurer demands leave them little option but to "cost shift" or lose the job and possibly a life-long customer. But what some shops see as necessity, others view as opportunity, and get quite comfortable cheating, rationalizing that everyone, especially insurers, is doing it. The sick thrill is in seeing how much money can be scammed from insurers (in reality, the consumer) before being caught. Billing for parts not used produces this end.

Insurance reps ignore fraud

Compounding the problem are insurance representatives who don't come down hard on shop fraud because it was perpetrated on their shift, under their nose (sometimes with their blessing), therefore jeopardizing their job. The adjuster might arrange an agreement with the shop to ignore the fraudulent act/acts so neither shop nor adjuster blows the whistle on the other. The result of this is a situation a friend, who performs damage-analysis investigations, terms "little DRPs"…his description of the palm-greasing give-and-take fraud between certain shops and certain insurance representatives that often escalates into big losses for the paying insurer. It's also the main reason why insurance adjusters seldom remain in one area for long. Continual rotation assures that dishonest elements won't have time to get too cushy. Interesting, is it not, that though insurers don't trust their own people, we're supposed to. Like Mom used to say, "Every thief, given enough rope, will eventually hang himself."

Buy back the fraudulently repaired car

In cases where fraud is too obvious to be concealed, the shop may be forced to buy-back certain vehicles, a practice looked upon by many crooked shops as just another cost of doing business. Typically, these are free to resell the vehicle to other unsuspecting persons, and continue business as usual with the insurer. An insurance fraud investigator speaking at our ACA meeting. When he was asked why insurers don't do more to counteract fraud, I inferred from his answer that there is no incentive for insurers to do so because enough money is built into insurance premiums to cover fraud. Why would insurers want to dig up trouble when they're paid handsomely not to? Besides, fraud is profitable to more than just crooked shops. Shops that regularly stiff insurers and consumers can afford to write lower repair sheets than honest shops, saving insurers millions.

Cycle-time pressures

Ordering parts "just in case we need them," is a relatively new bully on parts suppliers' block. With stepped-up pressure on shops to complete most repairs within a few days (to lower rental car costs and enhance insurers' image), plus with the great number of options available on every vehicle, comes increased pressure on parts dealers to maintain larger inventory, deliver faster, and absorb the expenses associated with shops ordering more parts than they will use in order to have the right ones on hand.

Again, insurers consider it "not our problem, since we're the big player here; we tell you what to do, and you find a way to do it." Parts suppliers that Neubauer interviewed stated they expect a certain amount of sheet metal parts returned for damage, and that they have no problem with these if returned 'promptly.' "But with DRP programs, and their tight turn-around times, shops are 'special ordering' parts [such as wheelhouse panels that dealers must purchase from national parts depots] 'just to be sure.' Ford [and others] are now charging OEM parts dealers a 20% restocking fee on special order parts returned to their depots." Parts dealers interviewed agreed that, though few dealers charge restocking fees for fear shops will take their business elsewhere, the parts industry, which has for years incurred return levels of 7-11%, is becoming panicky over present return rates of 15-20%, and more.