A more level playing field

What I’m proposing with my standardized DRP profile is two-sided, more like things should be, good for both sides. How many times have our DRP partners invited us to a meeting to discuss changes before they are made? Never! We are told after they have decided to implement some trial program without them even considering our opinion or the effect it may have on us.

I am not anti-insurance company or anti-DRP. My shop is DRP driven, but it is also profit driven. All of the work in the world means nothing without profit. Why would I, as a successful shop owner give back a DRP with over a million dollars in gross sales? Because after crunching the numbers I was losing money.

Some boundaries should be established with the insurance companies. We all have boundaries in our marriages. We all know there are lines we do not cross. As the repair experts, we should dictate how the vehicles are repaired.

Choose only the best

We should cater to the insurance companies that want quality and are easy to work with – ones that allow us to maintain a reasonable profit margin. We should write fair, honest estimates with fair labor times. We should help them retain their customers by giving them the best service possible. We have to educate our customer through advertising and communicate to them who the best insurance companies are. We should take a stand against any insurer that wants us to perform a substandard repair. We must lose the attitude that we need to maintain our DRP relationships at all cost.

I have some ideas how the DRP problems may be solved, but our industry must be willing to take a stand. At this point it will be quite a battle because we have allowed the system to get so out of control. The only way for us to change the current DRP model is by force. The insurance companies will fight us every step of the way, so we will have to stand up for our rights even if we lose some DRP contracts along the way.

I have halted my DRP relationships with two major insurance companies, each bringing me gross sales of over a million dollars. With one company, I had paid approximately $60,000 in rental bills last year and demands were only getting worse. Now I’m getting paid $45 per hour instead of $33, and even though we now do substantially less for this company, I’m making more money. Sounds strange but this account required a full-time manager and took a lot of man hours to maintain. They process their own totals now and pay storage of $40 per day. Cycle time isn’t an issue and their adjuster is in my shop everyday. Their loss!

The other company was also a very large insurer that supplied a huge volume for us. It just kept getting harder and harder to make a profit. Things were very tight with no margin for error. I requested a raise formally with a letter, explaining the reasons we required a raise citing that I hadn’t received an increase in three years. They responded by telling me that they didn’t think it would be possible to give me what I was asking for. I said I couldn’t afford to continue without the raise and they removed me from their program. Their rate went from $36 to $45 and they have started steering customers away from us.

I’ve started a new advertising campaign to attract customers from both of these companies. We’ve become salesmen again instead of order takers; we sell our customers on the value of picking us as a repair shop. The pressure from this DRP is gone and we are making more money on their claims. I think this is a good thing.

More cars does not equal more profit

My approach may seem extreme but I assure you that more cars will never mean more profit. I approached both of these companies in a professional way asking for a rate increase, even though they told me no, they both gave me more than I was asking for by discontinuing our DRP relationships. I still cater to seven other DRP accounts and may be forced to drop one more if we can’t come to reasonable terms. This will make room for more work from the companies that are easier to do business with. I refuse to repair vehicles in a substandard way just to generate a profit, and I’m not in business to turn dollars.

We’re sometimes used as industry guinea pigs to try processes that are doomed from the start .Because someone sitting at a desk has some idea they think will work doesn’t mean it should be implemented at our expense without allowing us to have a say in the matter.

For example, I’m sure you’ve heard that some insurance companies think they could purchase the parts for us and give us a handling fee. We know this is one of the most difficult jobs we have and they think they can do it better – but they haven’t asked us. That’s like not allowing my wife to buy the groceries but expecting perfect meals daily.

What about our lost profits or the problems that would arise with wrong parts or the delays that we would be held responsible for? The point is that this would just be another one–sided decision from the insurance company without them ever asking our advice or being concerned on how this would affect us.

We need to create a reasonable DRP profile that is the same for every company. Many DRP accounts are holding us to their 4 hour per day cycle time. Industry studies show the national average for cycle time is 2.3 hour per day, not 4. This means that if you take the total labor hours on an estimate and divide it by 2.3 the number you end up with is the total days allowed.

For example, the estimate has 23 labor hours on it and when it is divided it by 2.3, the result is 10. This would allow 10 days to complete a 23 hour repair without any abnormal circumstances. The insurers created the 4 hour per day cycle time guideline based on what would be best for them. It wasn’t based on any real time studies from our side.