Tuesday, 24 September 2013 13:39

Eliminating the Have Not Shops Will Help the Haves

Written by Insurance Insider

It wasn’t so long ago that all shops were created equal. If you had tools, four walls and a sign, you could be a body shop. Actually, I should remove “four walls” from the list; there were many “shops” repairing cars that didn’t have one wall, let alone four.

At any rate, the qualifications to repair a car didn’t include special equipment or training. Starting a body shop business required not much more than proclaiming that you were a body man.

At that time, thankfully, direct repair programs were virtually non-existent. I can’t imagine what we would have done during that time period if direct repair programs were prevalent. How would an insurance company identify which shops to refer their customers to?

Even though shops have evolved significantly since that time, the same dilemma exists for insurance companies today: Which shops do we refer our customers to? Without having the intimate knowledge of your shop or your competitors, finding the most qualified shops in a market is as about as easy as developing a national health care plan.

Why does an insurance company care where their insureds have the vehicles fixed? There are a lot of reasons. The cost of the repair is a motivating factor in finding the right shop, although it no longer is the most important. Back in the early 1980s when there were more than 70,000 shops in the United States, price was the biggest concern. Customer service wasn’t even on our radar. The quality of the repair was assumed to be no better or worse at one shop than at another down the street. In fact, the biggest concern I had with a shop was determining whether or not the dog in back lot was chained up so I could write my estimate. Everyone was assumed to be able to perform a proper repair.

For the younger generation reading this, it’s probably difficult for you to understand what I’m talking about. To put it in proper perspective, some shops would need to wet down the dirt floor before painting a car. It wasn’t uncommon to see shops pulling full-frame vehicles with anything that was stationary. And one of my personal favorites was watching the old-time body men use a torch. A torch in the late 1970s and early 1980s was about  as useful as duct tape.

The industry has changed dramatically over the past few decades and the unprofessional, uneducated shop owner has been replaced. Professional, educated and astute operators have taken the industry to the next level.

Now customer service is religiously the topic of conversation. Insurance executives are facing increased scrutiny and pressure to improve customer service scores. Policyholder retention is the lowest the industry has seen. Insurance has become a commodity where price is the single most motivating factor to consumers. There are intense battles happening between the Top 10 carriers for policyholders, as evidenced by the marketing dollars being spent.

Ironically, our biggest challenge isn’t finding new customers; it’s keeping the ones we have. Retention is directly correlated to customer service. Unfortunately, the collision repair facility and insurance company typically share a common fate relative to customer service. If the customer likes the shop, more often than not, the customer will like the insurance company. Conversely, if they don’t like you, they don’t like us. Thus, the importance to us of finding the right shop to repair our insureds’ vehicles.

Repairing vehicles today poses a significant challenge to the collision repair industry as well as the insurance industry. Collision repair shops need to make significant investments in training to remain current with the latest technology and repair methodologies. We recognize that this is critically important to a safe and proper repair. There are still over 40,000 shops in the U.S. How do we find the shops that are the best trained and have invested in their people?

The new and specialty equipment required to properly repair many of today’s vehicle should help foster a reduction in the number of shops in the industry. The days of opening up a shop with a tool box and a sign in front of the building are a distant “bad” memory. The challenge is eliminating those shops from the marketplace. We don’t want our insureds’ vehicles in shops that are ill-equipped.

Collision repair shops need to work closely with insurance companies and state and national regulators to eliminate the “haves” from the “have-nots.” Those that have the equipment and training must survive while those that “have-not” should not. The insurance industry can’t do this alone. We need help identifying the “haves.”

The industry continues to evolve and the upper class of the industry is growing exponentially. The middle and lower tier shops are shrinking. It would be our desire to increase the pace of this, with the thought that the surviving shops would be better trained and equipped. The sooner we eliminate the “have-nots,” the better it will be for everyone in the industry.

The Insider is a corporate-level executive with a Top 10 auto insurer in the U.S.. Got a comment or question you’d like to see him address in a future column? Email him at Auto.Insurance.Insider@gmail.com.