Monday, 05 August 2013 18:01

Insurers Hate to Admit It, But Our Success Depends On You and Your Estimators

Written by Insurance Insider

Every insurance company knows that their profitability and loss cost expense relative to auto claims has many independent variables. We often have no control over them. For an obvious example, we can’t ask Mother Nature to reduce the number of hurricanes that ravage areas bordering the ocean. And we have no control over the number of accidents that our policyholders are involved in.

On the flipside, there are some variables within our control—to varying degrees, to be sure, but within our control nonetheless. I’m referring to our staff adjusters. If our staff is well trained, if we maintain strict operating procedures, and if we provide proper oversight of our employees, we can reduce our overall loss cost expense.
Therefore, most insurance carriers spend a lot of time and money to train and supervise their staff. In addition, they regularly make large capital investments to purchase or develop tools to automate an additional level of oversight. The challenge is that even the best electronic tools can’t replace the effectiveness of a human being.
Several insurance carriers have made a especially significant commitment to education. Allstate is one example. They are the largest insurer that requires their staff to be I-CAR Platinum. That’s quite an investment for a company that was recently reported as being on the verge of dropping into the third spot among the largest carriers in the United States.
(Oh, how the mighty have fallen. Not so long ago, Allstate was a lock solid No. 2 and looking for ways to knock State Farm off its pedestal. Instead, Allstate finds itself being pulled down by an otherwise benign English-accented lizard. Er, I mean gecko. At any rate, I’m sure it’s creating mayhem within Allstate.)
One thing is for certain: When a company begins losing market share, it causes them to ratchet down on expenses. Let this serve as your advanced warning: Allstate likely will be stingier than ever.
What makes Allstate’s investment in educating their staff even more interesting is the fact that other large carriers (including several I’ve worked for) don’t require any training. Some may wonder if they are taking an opposite strategy, sort of a “survival of the dumbest.” As Forrest Gump famously said, “Stupid is as stupid does.” If you don’t know how to properly write an estimate, nobody can blame you for trying to cheat them.
There are dozens of other independent variables that impact loss costs, but let’s focus on “dependent variables.” A dependent variable is loosely defined as those things that insurance companies depend upon a collision repair shop for. I never thought I’d say that we depend upon shops but we do.
Most of you are probably guessing that we depend on you for proper part selection or cycle time. Although both of those are critically important to controlling loss costs and improving profitability, there is one even more key variable. An insurance company’s loss costs have less to do with your standard operating procedures or part type selection than they do with your estimator.
Your profitability and our loss cost expense ultimately are based on your estimator’s ability to write an accurate estimate, manage a claim and follow our guidelines. If you have an experienced estimator that understands a particular carrier’s program guidelines, you are better off than 90 percent of the people reading this article. You should make sure that he or she is well compensated. The skills they have are about as rare as you receiving labor time for prime, block and fill on a repaired panel.
That individual can turn a company around and make a historically unsuccessful shop successful. I’ve seen shops that have performed at a high level for years fail miserably when their lead estimator left. Collision repair shops that have the most astute owner, ironclad operational procedures and long-tenured technicians have come to a screeching halt when they lose the glue of the operation provided by a good estimator.
I’m sure it is going to cost some shop owners money when their estimator realizes he’s worth far more than you are paying him. Great technicians are probably more difficult to replace, but you can overcome the loss with an average technician and strong estimator.
I’ve been in meetings where shops beg to remain on a program after a few months of poor performance. They are quick to indicate that they have lost their best estimator. Without trying to sounding heartless, I don’t care about that. My job isn’t to help you manage your operation. Our goal is to make sure that the best shops are repairing our customer’s cars. If you can’t do it, we’ll gladly take our work to the shop owner that realizes that having only one All-Star on your team is poor planning.
So do you have a contingency plan? If you don’t, today would be a good day to start making one.