Monday, 05 February 2007 08:15

Training the insurance company

Written by Lee Amaradio
I was looking over my accounts receivables last week and noticed a stack of approximately 20 files with very small amounts due. The highest one was $74, with the lowest one being a mere $12. I called my office manager Kim over, and asked her about this particular stack of files. One of my main questions to her was, how much is it costing us to collect on these small amounts? My point was clear. It couldn’t be cost-effective to spend $100 in labor trying to collect $12.

I explained to her that it made no financial sense to spend so much labor to collect such small amounts of money. I told her that the estimator would have to get involved with each of these files, and the time involved for him to collect such a small amount would become a greater loss to us. I then told her that we needed to write-off these small amounts because those types of supplements are more costly than they are worth.

She respectfully answered me and said, “I think you are wrong because that is exactly what the insurance company is expecting us to do.” She said that every one of these supplements were approved to the exact dollar amount that we billed, and she said that she explained to each adjuster that, according to the BAR, their final payment and estimate must match ours exactly, or we have to contact the customer and forward them a revised estimate.

Kim went on to say that she hears the same excuse over and over. They say the difference is because we don’t use the same database. She went on to say that they never overpay, they always underpay us a couple of dollars expecting us to do just what I was doing. She went on to tell me that when the shoe is on the other foot and they hand us one of their estimates, we spend whatever amount of time it takes to enter their estimate into our management system. We use our time matching everything exactly to the penny and they should do the same.

Kim finished by saying that if we don’t put a stop to this it will continue to happen until we train them to pay us the exact amount we agreed upon. It should be their responsibility to match our agreed upon supplement price to the penny. After all, why should we write-off any amount after the fact when we have done everything upfront?  Kim was so right and I really appreciate the point she made.

I recently purchased some closet organizers for my master bedroom closets, and I observed a couple of things about the way the company did business. We used a large, top-of-the-line company because we had some bad experiences in the past. First thing we did was get an estimate for the work that we wanted done, then we came to an agreed-upon price, then we signed a contract. Then they requested a 25% deposit before the work could be started. I handed them a check and they scheduled the work to be done when they had a time slot. They completed the work and requested payment immediately. The work was fine and I wrote them their final check for the exact amount I owed.

Now, imagine with me for a moment that this company worked by collision industry standards. This is how everything would have been…First, the consumer (me) would have been persuaded to use another company, because if I didn’t they wouldn’t get a guarantee. Second, the closet company wouldn’t have been able to bid the job according to their standards, and would be required to use some type of competitive bidding guideline. Third, the signed contract would mean that they would have to produce the closet organizers, but would have little to say about the amount of payment, or when it was due. Fourth, they would not receive a deposit and they would finance everything themselves. Fifth, the closet company would not have the luxury to schedule the work at a time that made sense to them. Sixth, and final, this company would have to make numerous phone calls, and fax document after document over a period of thirty days or more to finally get paid. Then when final payment came in it would be a little bit less than the contract amount, and they would be expected to write this off.

Now when Kim said that we needed to train them to pay us the full amount they owe us, this made me think about my next point. Who’s doing the training? The insurers have us so trained that while I battle for every dollar that is owed me on one side, I was willing to write-off the smaller amounts because it was too costly to collect. Kim said that if it became just as costly to them every time they shorted us on a payment then maybe they would stop doing it. We need to retrain ourselves as businesses and ask ourselves why we allow what we allow. What are the rules and who sets them for our industry?

We as shop owners need to make our own rules and stick to them. How many times have we released vehicles with the promise of payment, only to spend hours and hours faxing and calling just to get paid? A simple solution is to keep the vehicle until final payment is made. Would this create as big of a problem as we think it would? No. It would train the insurers that payment must be made or they will incur extra cost with rentals.

What about our DRP relationships? We all have those companies with overworked adjusters that are just plain slow at paying. Why is it that these same companies that can never get us paid promptly, seem to have all of the time in the world to study timelines, and try to pass off rental bills to us? We are playing by their rules and they have us trained to do it their way.

We need to set our own rules and train the insurers that we are independent businesses, and we require them to respect our rules as we respect theirs. This is common sense with every other business in America. If I didn’t leave a deposit to the closet company the work wouldn’t have been started. I had to play by their rules and I expected it to be that way. We need to train the insurance companies to respect our rules because if we continue to compromise and accept partial payments and write-off small supplements, they will never change the way they pay us, or have any reason to.

We complete over 250 vehicles per month, and if we were to write-off $30 per vehicle it would total $7500 per month or $90,000 per year. How many vehicles do the insurance companies process a month? Do the math… I’m sure they have. I want to thank Kim for opening my eyes to the fact that it is worth the initial loss to collect all the money owed, because at some point every insurance company out there will get the message that it is their responsibility to pay us the full amount owed.

In business for 26 years, Lee Amaradio, Jr. is the president and owner of “Faith” Quality Auto Body Inc. in Murrieta, California. With 65 employees, he attributes his success to surrounding himself with good help, claiming to have some of the best office staff and techs in our industry. Amaradio has been in this industry long enough to see the handwriting on the wall. He feels that now is the time for us to unite as an industry before it’s too late. He can be reached by e-mail at lee@faithqualityautobody.com.