Sunday, 30 November 2003 09:00

Clout is generated when everyone works together

Written by Dick Strom

Clout is generated and precedents are put into play when shops work together with repair organizations that really have a heart for the concerns of the collision industry. But even more favorable results are possible when consumers are willing to go to bat for their rights, and for those of shops that encourage them to take a stand.

Such has been the case for Robert DelGallo, a member of theCCRE, immediate past-president of the Massachu- setts Auto Body Association and owner of Factory Collision of Weymouth, Massachusetts (www.factorycollision.com). As he explained in a recent phone interview, "Insurers have a problem with the words 'expensive' and 'thorough' . . . they refuse to acknowledge it is more 'expensive' to do a 'thorough' repair."
Squeaky tight insurers are no new phenomenon. All across the country shops and stockholders have been paying the price for insurers' poor investments in the tight economy of the past decade. It doesn't seem to faze insurers that shops have also been hamstrung by the poor economy, and shops in Massachusetts are no exception.   
According to DelGallo, "Some insurers have successfully held shop labor rates down to $32/hour…since 1988 or 1989!" DelGallo is quick to note that a few of the better insurers are paying somewhat more realistic rates, "We have several insurers who are paying our $36/hour rate, which we've been at since we notified all insurers in 1/1/01. When we notified them, several companies had no problem with the $36 rate."

Others, like Arbella Mutual Insurance Co., though, have stubbornly refused to budge from the going door rate of 14 years ago. Of interest, DelGallo points out that just across the border, in Rhode Island, these same tight insurers are paying between $42 and $48/hour.

Consumer fights back

And that's where the friction started for Diane Rice, a very determined postal worker, who knew from past great experiences with Factory Collision's workmanship that no one else was going to touch her collision damaged vehicle, even though her insurer, Arbella, refused to pay any more than $32/hour. According to DelGallo, "We've had hundreds of cases where insurers refused to pay any more than the $32/hour, and yet, for the most part, these other customers have just paid us the difference between our hourly rate and that which the insurer paid, and dropped the matter. Insurers are preying on the fact that people live very busy lives, and won't make the effort to haggle with insurers, even at additional out-of-pocket expenses of hundreds of dollars each."

But with DelGallo's encouragement, and the financial and legal assistance of the MABA, Rice took this 'matter of principle' to court, suing the insurer, who lost through betting on the odds that no person would be likely to take the time, and be willing to pay a lawyer $2200, to collect the $602.80 that this insurer was taking from her.

Referral system replaces DRPs

I wasn't surprised to find that in the Commonwealth of Massachusetts, in which DRPs are supposedly illegal, insurers still steer work through a "Referral System" in which certain shops make certain concessions with insurer reps (no storage, low labor rate, etc) in exchange for having work referred to them. And it is these Referral Shops that have (in exchange for volumes of insurer-referred work) kept the labor rate in DelGallo's market area artificially low for so many years.

"It's the same old story everywhere; some of these referral shops, in making up for the low labor rate they've fostered, fraudulently cut corners, repair when they wrote to replace, and the like. Insurer reps on the local level know what's going on, but their boss says, 'Keep the labor rate down at any cost.' And so a lot of under-the-table games are going on. It's when these games they play cut into my paycheck, when consumers think I must be a crook because my door rate is higher than the referral shops, that I take offense. I've been telling customers, where it applies, 'Insurers are auctioning off vehicle repairs to the lowest bidder, and yours is on the block.


Reverse marketing

"We (repairers and consumers) have more clout than insurers would like us to believe. For instance, we use 'reverse- marketing' with insurers who stab us in the back - our customers regularly ask us, when their insurance is up for renewal, which insurer would we recommend they use and which insurer is most reasonable to work with when repairs are needed?

"So we have the opportunity to influence which local agent and insurance company insures them in the future. Then we let that agent know we've been recommending certain insureds visit them. Also, we just shot a picture of a badly pealing bumper cover, one that was repaired and painted at a major insurer's Referral Shop, and it's going to be on the front of paperwork we hand out to every potential customer, with the tagline, 'This is what a cheap estimate will get you.'"

The original estimate on Rice's car was $7300, plus a $1700 supplement, of which $602.80 was the $4/hour difference between Factory Collision's estimate at $36/hour and the rate that some local Referral Shops are supposedly charging ($32/hour). According to Auto Body Repair News (October 2003), on July 17tArbella owed Diane Rice full payment, because "…the insurer wasn't able to prove that Factory Collision's labor rate was unreasonable," and that "Arbella never made Rice aware that she would be responsible for any labor charge in excess of $32/hour." in Quincy Massachusetts District Court, District Court Judge Paul V. Buckley Jr. ruled that

Clout comes with cooperation

In a phone conversation I conducted with Rice, she stated, "Six hundred and two dollars (on top of my $300 deductible) is a lot of money to me, and I wouldn't have been able to be reimbursed for it if not for Factory Collision's encouraging me to pursue the matter, and for MABA's footing the legal bill. Arbella was counting on my not pursuing this matter, because of the cost."

Though this case may not have set a precedent (Arbella is still only paying $32/hour, though in some cases it has paid more according to DelGallo), shops, and some insureds and claimants are encouraged by the clout generated when shops and repairer organizations work together for the common good of the industry. As a long- standing member of theCCRE, and the MABA, Robert DelGallo knows the value of networking with other independent shops, knowing his rights, and those of his customers, and encouraging his customers to exercise their rights, in spite of oppressive insurer practices. And in so doing he, and the tenacity of certain consumers like Diane Rice, has made a difference in this industry.

Dick Strom writes opinion columns on the collision repair industry from Bainbridge Island, Washington.