A NACE panel of three representatives from top auto insurers discussed industry consolidation, technology and future trends during the Collision Industry Forum insurance panel discussion Oct. 12. Speaking on a panel moderated by Dan Stander of Fix Auto Highlands Ranch in Littleton, CO, the insurers responded to the noticable consolidation trend affecting both repairers and insurers, specifically the growth of several MSOs such as The Boyd Group, ABRA, CARSTAR, Service King and Caliber Collision—but also that of smaller regional MSOs.
“MSOs that can replicate quality procedures are attractive as a group,” George Avery of State Farm said. “Using a score card to rate MSOs across the board represents an interesting opportunity. But just like independent shops, they must perform to stay on our system.”
Avery said that any MSOs on their DRPs are measured as individual shops and must compete to perform on that basis. He recalled State Farms’s experience with M2, the 27-shop consolidator in California that closed abruptly back in 2005, reinforced his company’s interest in finding top-performing individual shops, whether stand-alone or part of an MSO.
“State Farm maintains that whether you are an independent or an MSO, you should be able to compete, and so State Farm evaluates even MSOs as individual repairers,” Avery said. “I’m not discounting [the MSOs’] ability, but I am saying that those with individual repair facilities have skin in the game, and that can have a lot of value on the customer service side, which we’re all after.”
Rob Knott of Nationwide concurred. “We think the mom-and-pops still have a place,” Knott said. “Some of the challenges that the MSOs have is over-saturation in certain marketplaces, so you’re not going to put (all their shops in a market) on (the direct repair program). And then there’s the consistency issue, when they expand too fast and aren’t able to maintain the same service levels and quality.”
Randy Hansen of Allstate also said each facility on his company’s DRP, even if part of an MSO, has to stand on its own performance.
But the three acknowledged that MSOs can offer some appealing services such as call centers, extended hours and a single point-of-contact. Hanson said the collision repair industry suffers from a “tremendous amount of inefficiency” that consolidation alone cannot cure. Instead, shops should consider expanding their hours of operation or finding other ways to better utilize their facilities and equipment.
Consolidation in the insurance industry is likely to continue as companies seek to grow. “The only other way to grow is by taking another company’s customers,” Knott said, and those are costly acquisitions because acquiring a new customer is seven times more costly than retaining their own customer, he said.
Avery added that MSOs present an “interesting platform” in which to experiment with a change on a large but not national scale.
“You hear people talk about how the model is broken,” Avery said. “There are components [of change] that could be perhaps introduced into an MSO that you couldn’t quite introduce companywide. So I feel compelled to tell you, not to make anyone nervous about MSOs taking over, but I do have to say that that is a place where you could possibly go and say, ‘Look, we’d like to try something different.’” Avery suggested later in the discussion that attendees think like a young driver using her mobile device to find out what to do after a minor accident. “What can we do together? Can we work together to offer her a 48-hour repair?” Avery asked. “You might say, ‘Yeah, if you quit making me take all these pictures and jump through these hoops.’ And I might say, ‘Okay, I’ll stop that.’ So as we look at the future, I’m leaning toward partnering and saying, look, that customer is going to leave us and go somewhere else. She is not going to tolerate inefficiency.”
Cloud Computing and Data Ownership
Knott said technology changes so quickly that it’s hard for insurers and repair shops to keep up. “Our customers are pushing insurance companies to evolve with technology and a challenge is how fast can we adopt new technology. But if we don’t change we will be left behind.”
Allstate has consolidated 100 legacy systems into one delivery platform, Hanson said. “It was tremendously complex and we spent hundreds of millions of dollars to implement it. We recently adopted cloud computing. It is very flexible and offers more applications and options."
With cloud computing convenience comes the more complex issue of data ownership.
“Cloud computing is great because it allows you to access your data anywhere,” Knott said. “However, there is great concern over data ownership and who has access to the data. Hanson said the issue of data ownership is clear to Allstate. “We view it as the customer’s data, not the shop’s or the insurance company’s. It is our obligation to keep it secure and protect it. State Farm is developing its own cloud and securing the data is one of the most important initiatives, according to Avery.
Advancing OEM technology is a trend that concerns repairers and insurers. Stander asked: ”If cars won’t be crashing into each other due to accident avoidance technology, what does that mean for repairers and insurers?”
Avery said that accident avoidance technology won’t be fully implemented for 15 to 20 years. “With or without that technology, we need to figure out a way to help our customers in the future. Customers will not tolerate inefficiency. They will find what they want with or without us.”
Hanson said the new OEM technology has the potential to change the way insurers do business, but it’s not clear what those changes will be.