Thursday, 31 October 2013 15:36

Cycle Time is Money for Everyone

Written by Insurance Insider

How often have you heard the expression Time is Money?

It’s a phrase that applies to many businesses but—as it pertains to body shops, insurance companies and vehicles owners—it is only half of the equation. In this industry, time equals money and customer service.

It’s much more expensive to find a new customer than to retain an existing one. As insurers we are aware that the time it takes to repair an insured vehicle is directly tied to the insured’s CSI score and retention rates. Low cycle time equals high CSI, so we need to focus on reducing cycle time.

Here’s what I mean. Although customer service can’t be defined by an algebraic equation, it’s safe to assume that cycle time is less than or equal to customer service. (I promise I won’t reference algebraic equations for the remainder of the article.) The important idea is that the less time it takes to repair a vehicle, the greater the customer service is. That’s because, even when the vehicle owner rates customer service poorly in terms of the repair itself—or the handling of the claim, the overall score is going to be better when the repair is done quickly.

Also, if you can get repairs through your facility faster, you can move more repairs through the same facility and you make more money. For the collision repairer, reduced cycle time equals increased sales equals more money. Increased CSI increases customer-driven repeat and referral business. Therefore, reducing cycle time translates to increased collision repairer profitability, CSI, and customer referrals and repeat business.

I am not suggesting that shops should sacrifice quality just so you can get the customer’s car back sooner. But I am pointing out the importance of managing cycle time. The importance of cycle time goes far beyond the dollars saved in rental car expense. It also goes beyond the fact that if you repair the car quicker, you can get another car in the shop.

For insurance companies, there’s another factor: open claim liability. The longer a claim is open, the more likely the claim will increase, for a lot of reasons. Paying and closing claims quickly reduces open claim liability,  and that’s additional motivation on the insurer’s part to push for reduced cycle time.

Body shops tend to think that this is just part of the game for insurance companies, that we are just imposing our will on hapless shops to save a few dollars on a rental car. But if you remove yourself from that “us-against-them” posturing and think about something other than arguing with insurance companies, you will realize that this just makes sense.

We are all in business to deliver a service to the customer. You just happen to repair cars; we simply provide coverage in the event of a loss. But the bottom line is that delivering customer service is a more important business proposition than anything else the shop or insurance company does. In the highly competitive insurance and collision repair markets, retaining policyholders and getting repeat business will make the difference between survival and prospering.

The challenge for insurance companies is that we are beholden to the time that body shops take to make the repairs. With few exceptions, the time it takes for you to repair a vehicle is solely dependent upon your shop’s management and operational efficiency. Although you may think it’s an insurance company goal to manage your shop, it isn’t. We don’t have enough manpower or systems to manage your business for you. Instead we need shops to be conscientious about cycle time. Better cycle time equals high customer service scores which equals greater policyholder retention.

It is frustrating as an insurance executive to realize that we lose policyholders because the customer was dissatisfied with the length of time it took to repair their vehicle. I realize that insurance companies can adversely impact cycle time with outdated processes or lack of trust (though I’m sure many of you will email me to point this out). But the fact remains that there are tens of thousands of body shops in the industry. A small percentage of you understand what I am saying. And an even smaller percentage actually take action to ensure that cycle time and operational efficiency are dominant in all phases of your facility.

The greater percentage of body shops repair cars at their own pace because, after all, they don’t owe anything to the insurance company. They proclaim that they are repairing the car the right way and you just can’t rush such things. If you are one of those short-sighted people, please don’t repair any of my customers vehicles.  But for those that want to survive what is going to be a continual reduction of shops in the United States, please keep reading.

The moment you are notified that there is a claim, we are starting the clock. Why? Because we are doing that internally with our own staff. We are monitoring and assessing every step of the claim process. The stopwatch starts the moment you are notified of the claim, and only stops when the customer is handed back their keys.

The days of measuring cycle time by the number of days is gone. Insurance companies are measuring cycle time by the minute. We can no longer tolerate working with shops that aren’t driven to improve their efficiency and cycle time—especially when your competition down the street understands the rules of engagement and how to win.

I know that all shops aren’t created equal. Fortunately, we are getting better at identifying the “haves” from the “have-nots.” If you aren’t keenly aware of the cycle time in all phases of your operation, your fate will be sealed because your customers won’t tolerate it. Time is money. Customer satisfaction and retention is driven by how long it takes you to repair the car.

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.