Wednesday, 13 November 2019 15:07

The Future of DRP: Is There One?

Written by Autobody News Contributor
L to R: Stacey Phillips and Pete Tagliapietra. L to R: Stacey Phillips and Pete Tagliapietra.


With an estimated 22,000 collision repair shops across the country dependent on Direct Repair Programs (DRPs), Pete Tagliapietra of NuGen IT said businesses need to pay close attention to the paradigm shift occurring in the industry related to these programs.

Tagliapietra explored the current status and future outlook of DRPs in his recent SEMA presentation, “The Future of DRP: Is There One?” His talk was part of the Society of Collision Repair Specialists (SCRS) Repairer Driven Education (RDE) Series.


Tagliapietra discussed four main reasons that the number of DRPs have been shrinking for top insurers. They include high administrative costs to run DRP programs, the growth of MSOs, alternative appraisal methods now being deployed and new technologies that are changing shops’ business relationships with insurers.


“Insurance companies are selling a commodity product—it’s all about price,” explained Tagliapietra.


During his presentation, he pointed out that both GEICO and Progressive have had rapid growth in market share over the last several years because both have focused on “price,” while other companies, such as Allstate, Farmers Insurance Group, State Farm and Travelers Insurance have typically sold “service” and as a result, lost market share.


“While these companies focused on service over the years, they lost market share and GEICO and Progressive took it,” he explained. “This is relevant because as those companies shifted and they had their own claims processing models, the number of DRP shops in this country continued to shrink and will continue to shrink.”


In response to changes in the industry and the diminishing number of DRPs, he said top insurers are taking action a number of ways to reduce costs. One of which is striving to reduce Loss Adjustment Expense (LAE). This is the amount that it costs an insurance company to adjust a claim. Tagliapietra said insurance companies are working to reduce their infrastructure by eliminating field and independent appraisers and relying on inside desk appraisers and third-party administrators, such as Snapsheet. They are also reducing management and administrative support and raising prices.


In addition, he said companies are increasingly deploying what he referred to as the “self-service model.”

This is when a vehicle owner takes photos of the damage, forwards them to the insurer through an app with the license plate and VIN number, the estimate is written and then sent to the repair shop of choice.


“Five years ago, this model didn’t represent even 3 percent of the claims processed,” said Tagliapietra. “We now have companies that have reached over 30 percent of self-serve photo estimates sent in by the vehicle owner … and they love it.”


Insurance companies are also embracing technology to analyze and audit claims. Tagliapietra highlighted several of these technologies in his presentation, including Artificial Intelligence (AI), image recognition, machine learning, predictive analytics and robotics automation.


Options for Collision Repairers


For many collision repair businesses, particularly those located in rural areas with one or two DRPs, the changes with DRP programs has caused a significant impact on their companies. Tagliapietra suggested several options independent repairers can consider incorporating into their businesses to meet these challenges.


Currently, there are opportunities for collision facilities to seek DRP relationships with second-tier insurers, according to Tagliapietra. For the most part, these companies don’t have the same infrastructure challenges as the top 20 insurers. He suggested shops reach out to local companies and demonstrate they are willing to meet Key Performance Indicators (KPIs).


“Learn more about the regional carriers in your local and state market area and how you want to promote business to them,” said Tagliapietra. “Then, call and find out who the local DRP coordinator is and let him or her know how you can differentiate yourself in performance.”


He stressed the importance of understanding that insurance companies are focused on cycle time, alternative parts, customer service and indemnity management.


“If shops can promote and support those KPIs for insurance companies, they may be selected to participate in a DRP,” he added.

Another option for shops, especially for those that aren’t part of a DRP, is registering and participating in a non-network services program such as Customer Shop of Choice and Open Shop, which send assignments to shops via the Internet. Ameriprise’s Shop of Choice Program is an example of online claims handling for non-DRP shops.


Tagliapietra recommended getting aligned with one or two of the 18 OEM certified repair networks available based on the most popular vehicles in a shop’s geographic area. Although these programs are often costly, he said it’s worth considering.


“OEMs are becoming increasingly concerned about protecting their brands,” said Tagliapietra. “Over the next five years, you will see OEM certified repair networks have a big influence on how cars get repaired and where they get repaired.”


In addition, Tagliapietra mentioned that shops can seek to be a preferred dealer repair service and/or a third-party administrator (TPA) network shop.


The presentation also included information about the importance of participating in social media and digital marketing. Tagliapietra invited a media consultant, Stacey Phillips, to explain why it is relevant and how it can help grow a collision repair business.


Phillips shared some of the benefits of digital marketing, in particular social media, with attendees. They included more accessibility to customers; the ability to interact with customers and find out what their needs are; and the opportunity to build relationships with insurance companies. She also said it can be very cost-effective for businesses and is measurable.


“The bottom-line is that your competitors are online and it’s becoming vital to survival,” said Phillips. “As DRP programs continue to shrink, it’s important for businesses to look at new ways of marketing. This will not only help publicize their businesses in their local market, but it will also help contribute to their future success moving forward.”