Amaradio

It was like a new marriage – we were so happy that we were willing to do almost anything to keep them. When our DRP partners asked for something more, we gave them whatever they wanted. We wanted to keep them happy and worked hard at it.

This trend continues to this day, only now it’s like a marriage that is on the rocks. Marriage is essentially a contract; it takes both sides working together to be successful. If one partner continues to take and take, the other will feel neglected and taken advantage of. If this type of attitude continues, the marriage will soon be in serious trouble.

It doesn’t matter how someone treated you in the past or how nice they used to be. When things get bad, all of the nice gestures of the past no longer matter much. What matters is what steps you take to correct the problems. A solution that both parties agree with must be reached or the problems will just get worse. Compromise is the key to success.

The present state of the DRP relationships in our industry, in my opinion, is an unhappy marriage with one-sided contracts. Some serious changes are needed for shops to value our present DRP relationships. I believe it can be fixed if both sides are willing to work at it.

Force their hands

What now? Unfortunately I believe the only way to change things will be for us to force the hands of the insurance companies; they have a good thing going and need to be persuaded the same way a labor union persuades a large employer. We need to unite as an industry. We watched high school students in California get the President of the United States’ attention by walking out of class. No one knew it was happening until it happened. They organized the walk out through the internet from a web site called, “my space.com.” If California high school students can pull this off, the collision repair industry should be able to do the same.

Insurance companies don’t create claims, they process them. Accidents happen all by themselves. Lower labor rates won’t create work in a shrinking market and working cheaper isn’t going to solve this problem. What we have, is what have, and DRP contracts are going to gravitate to the shops that can handle a large volume of repairs. The smaller shops think that if they work cheaper they will be handed some huge contract. This is never going to happen. State Farm proved this by cutting their program in less than half. They realized that they were doing 90% of their repairs in 60% of the shops on their Service First program.

More shop owners need to become number crunchers. Look at your profit margins. As shop owners, we need to change the way we think, educate ourselves on the DOI laws and use them when necessary. We need to switch our focus from more cars to regaining control of our industry. We must become better businessmen with profit driven guidelines.

When insurance companies ask for a labor rate survey, put your current non-discounted rate on the survey. Don’t think that by showing a discounted rate it will somehow bring you work. It will only establish the guidelines you can’t afford to live with.

We continue to do whatever the insurance companies want and it has come back to bite us. Look at the beginning of DRP programs. Our discounted labor rates used to be only $2 less per hour than our door rate; they paid us $5 for the photos; they let us repair the vehicles using our judgment, and they processed their own totals. I remember those days. Now my discounted rate is $11 less than my door rat; they tell me how to repair the car and who to order parts from; I process totals for free; pay rental bills and finance them with my accounts receivable; etc. .etc. etc. All of this changed because we were willing to agree to anything for more cars.