Monday, 05 March 2007 15:29

Write the first estimate and win

    I have a friend who made so much money in the body shop business that he had to retire because he was paying too much in taxes.
    It was obvious my friend, whose nickname is Fast Eddie, knew how to make a profit. He made a profit in large part because he knew how to write an estimate. His goal was always to write a complete estimate from the beginning. He wrote every estimate himself, taking whatever time he needed—sometimes hours—to tear down the car. He ordered every part, including nuts and bolts, needed to fix the car. Once the estimate was written, he pulled the car out of his shop and stored it in a lot across the street.

    He would begin working on the car only when every single part necessary for its repair had come in. Once all the parts were in, he delivered the car to the body man’s stall. He said his body men were tools. By this, he meant that they were the hands needed to repair the cars. He didn’t say this in a pejorative way. He said it as a fact. He didn’t want his body men involving themselves in non-essential tasks such as moving cars around, ordering parts, or looking for parts. He wanted his body men to just fix cars.
    Don’t get me wrong. He was nice to his workers. They made a lot of money, too.
    Eddie was called Fast Eddie because he could get a car in and out of his shop in no time, once all the parts were in.
    The insurance companies loved Fast Eddie. His cycle time was better than every other repairer’s in the neighborhood. In fact, he was so good that he finally put a closed sign on his door. This was intended to deter walk-in customers. He focused only on insurance work. He considered himself a wholesaler to the insurance industry.
    Fast Eddie’s mantra was: “Whoever writes the first estimate wins.” How true. Last year, the Collision Industry Conference’s Anti-Fraud Committee collected 726 estimates written by a variety of insurance companies from 10 U.S. states (Arizona, California, Illinois, Iowa, Kansas, Massachusetts, Missouri, New York, Oklahoma, and Virginia). The average estimate was $2,498.20. The average final invoice was $5,048.47, meaning the average supplement was $2,550.26—more money, in other words, than the original estimate.
    When the committee revealed its results, some at CIC tried to sweep it under the rug. A former insurance executive said that if this information became widespread news, and if CIC proceeded to examine the information further, he’d stop coming to CIC, as would his fellow insurers.
    After the revelations at CIC, two roundtable discussions followed: one in Phoenix, Arizona, the other in Chicago, Illinois.
    For its part, State Farm—the largest insurer of automobiles in the United States—volunteered for the roundtable discussion. Another surprise: Not only did State Farm’s legal representative say that it would be bad faith to write lowball estimates but that it also might expose the company to punitive damages. This could result in the loss of millions of dollars.
{mospagebreak}    Erica Eversman, an attorney with ties to the collision repair industry, asked why the collision repair industry treats the estimate as if it is something to be negotiated. Either it needs to be repaired, Eversman said, or it doesn’t. It’s the car manufacturers—not the insurers—who set standards for repairs, Eversman said.
    Eversman said that insurance adjusters and body shop representatives who negotiate the repair might be engaging in the unauthorized practice of law.
    My friend Fast Eddie might not have been aware of the legal ramifications of negotiating an estimate, but he didn’t have to be. Negotiation means time—and Fast Eddie wouldn’t have been called what he was if he was willing to waste time haggling with an insurance adjuster.
    Fast Eddie knew who was setting the benchmarks for repair—the automakers. He learned to repair the car as near to how it was put together in the factory as possible, and he did this by using dedicated bench repairs, a repair method that most of the vehicle manufacturers recommend today but not all repairers adhere to.
    When Allstate, the second largest insurer in the U.S., bought Sterling Autobody, which now has about 80 body shops around the U.S., it hired a staff well versed in business management and shop production. Interestingly enough, it came up with the same repair process as Fast Eddie.
    Here’s a difference, however: What Fast Eddie did, and what others using his method today are doing, isn’t writing an estimate; it’s creating a blueprint for repair—a repair plan. All the information necessary to repair the car is on the blueprint/repair plan.
    So why are so many collision repairers in the United States, especially those on direct repair programs with insurers (in which the shop writes the estimate first), still requiring supplements to their estimates?
    Whatever the reason, they haven’t taken a page from Fast Eddie’s book. It’s high time they did.
    Fast Eddie retired on top. (He’s a real estate mogul now, watching the rent checks come in.) But in the United States, too many collision repairers are sliding toward the bottom.
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