Free estimates have been a staple of the auto body repair process for years now. Who would have imagined that from an inexpensive giveaway, estimates would become one of the most costly and cumbersome elements of the business?
It used to be a rather simple process. After examining the vehicle and taking notes on the extent of the damage, the next step was to break out either the Mitchell or Motors guide and handwrite the estimate on a duplicate or triplicate form. It is interesting to recall that a shop was not required to subscribe to both services. Using a calculator, the estimate was added up and then a copy was given to the customer. The shop retained copy and the last one was for the insurance adjuster to use as a working copy to write his estimate.
Our only concern in those days was the bottom line. Most adjusters were very respectful and, even though they changed a few things, they would normally match the bottom line. As a rule, we got to our bottom line figure one way or another. We never took pictures unless there was a supplement involved and then only if something major was found. Most adjusters had the habit of paying the shop a little extra so we wouldn’t bother them for the small supplements.
The expenses for writing an estimate have increased dramatically. Now it is required to own two or three data base subscriptions. We need additional EMS programs to transfer photos and other data. We now need $25,000–50,000 in computer equipment and an entire office staff to input the required data. Supplements used to be something repairiers hated as much as the adjusters we worked with. We would never even ask for one unless it was absolutely necessary because we didn’t want to develop a reputation with the insurance companies that we were constantly supplementing them.
The cost of estimating was considered overhead, a regular responsibility of the managers. There were so few supplements, they were not even considered as a separate expense. Today estimating is the single most costly thing the collision industry does – and we continue to give it away for free.
Good Ol’ Days
Free estimates came about to help shops draw in customers. After selling them on our repair facility they would contact their insurance company, an adjuster would come out and look at the vehicle, ask a few questions, and send out a check. It was really just that simple.
If we got paid a certain amount of money for a LKQ door and we found one cheaper, the money was ours. We were rewarded for the time we spent price shopping. Now we are forced to spend our time saving the insurer money with no compensation for our efforts. More cars they promise us, but never more money!
We could make a lot more money then by spending the time to look for parts. Original reference numbers were used to show availability and the price of the LKQ part to reach on an agreed upon price. Shops were never required to show the insurance company the invoice. The estimate showed the mark up on it and that was the price you were paid.
I used to complain about the insurance companies for slowing the process down by taking so long to get out to see the cars. Back then each insurer had a staff of adjusters and they would still use independent adjusters when they got busy. This cost them a substantial amount of money. Most adjusters had company cars and were paid quite well. They were usually a little older and were quite knowledgeable about collision repair. Many had run shops or been body men in the past. We never had to argue with some idiot on a telephone why we couldn’t use an LKQ glue on side mold. Every one had more experience repairing collisions and very little experience crunching numbers.
Complexities of Estimating
Now our estimating process has become so complicated. CIC has cited that every supplement costs around $250. If this is accurate, then the cost of an estimate should easily exceed this $250 figure. How much does it really cost to write each estimate? If we include personnel, software subscriptions, computers and IT maintenance, I think that it is safe to say that it costs at least twice as much to generate an original estimate than to write a supplement. Today’s estimates are a far cry from the free quotes we used to give our customers.
The DRPs have been able to pass this cost onto the shops, by quietly and subtly transferring the major part of their claims administration over to us. Keep in mind that when they passed the baton on to us, we were more than happy to take it. But what estimating has evolved into is not what we signed on for.
We spend thousands and thousands of dollars every week just to give “estimating” away, which we do willingly and voluntarily. Further eroding our profits are the insurers’ discounts.
I have a problem when I see insurers paying non-program shops higher labor rates with no administrative responsibilities such as claims handling or discounts. Logic would suggest that a better business practice would be for the insurers to pay more to the shops servicing their accounts and helping them with their claims – partners, so to speak – than to occasional repairers.
So if the reward for associating with an insurer and preparing costly estimates is to watch other shops get paid more, maybe the next insurer request will be for free body work and paint. Just as body work and paint are not free, neither are estimates. The requirements for writing estimates today are worlds apart from the days when the estimate was free.
Collision repairers can get lost in the way things have always been done without realizing that they hold the keys to change in their own hands. We need to be charging for the time involved in producing estimates to accommodate the various insurers. It is time to attach a fee to the estimating process or receive the higher, non-discounted labor rate who do less work for the higher pay rate.
Insurers should take heed that by paying non-DRP shops more than your Direct Repair Partner shops, it is a slap in the face of the DRP. When pushed, DRP shops may decide they can earn a greater profit by being a freelance shop as opposed to a repair partner. There is nothing “free” about estimates.
In business for over 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 likes to receive email.