1995 CIC Survey, CARA Files Chapter 11, 2005 Non-OEM Crash Parts, Select Service

1995 CIC Survey, CARA Files Chapter 11, 2005 Non-OEM Crash Parts, Select Service

20 years ago in the collision repair industry (July 1995)

A 1995 Collision Industry Conference (CIC) survey…found that 70 percent of shop owners, and 83 percent of insurers, are dissatisfied with the way business is practiced between the two industries.

The survey results are among the first steps taken by a CIC committee focusing on the “invoicing methods and practices” used within the industry. The committee’s long-range goal is to try to help the repair and insurance industries develop a new method of doing business.

At the CIC meeting in San Antonio, committee chairman Scott Biggs described the results of some inter-industry brain-storming about various other methods by which collision repair shops could be compensated for their work by insurers. Biggs pointed out, however, that each of the methods described had potential pitfalls and that no one was proposing them as the “perfect solution.”

Among the ideas discussed were:

  • A “cost-plus” method in which shops are paid for their actual costs in labor and materials plus an agreed-upon “mark-up.” This would require the two sides to agree upon what true costs are and what is an appropriate “plus,” Biggs pointed out, and some insurers say this method offers no incentives to shops to keep costs down.
  • A “real time, real dollars” method, but again, this requires that “real time” be determined, and agreed-upon “real dollar rates” be established.
  • An “incentive method” in which shops that meet certain requirements (regarding training, equipment, customer satisfaction, etc.) would have their labor rate multiplied by an agreed-upon modifier. Establishing the requirements to receive the incentive could be tricky, CIC participants pointed out; should a shop, for example, receive extra compensation just because they purchased a certain piece of equipment?
  • A “matrix method” in which a set of flat-rate repair prices are determined and each damaged vehicle is assigned one of these rates based on the type of vehicle, the severity of the damage, the quality of the repair work, etc.

“This one actually got more raised eyebrows than any others because of its simplicity,” Biggs said.

But, he said, it would require the industries to work closely to develop the categories, repair standards, etc.
     – As reported in Bodyshop Connection. Obviously, 20 years later, there’s been little long-term shift toward any of these alternative systems.

15 years ago in the collision repair industry (July 2000)

CARA Collision & Glass’ lender…has frozen CARA’s bank accounts, leaving CARA with no cash to operate its business. CARA will be filing for Chapter 7 bankruptcy protection.
    – From a sign posted on the locked doors of 13 shops operated by Minnesota-based CARA Collision & Glass, prior to the liquidation of its assets by its bank, as reported in The Golden Eagle, July 2000. At its peak in the late 1990s, CARA had 26 locations in five states and $40 million in annual revenues. After losing $2 million in 1999, in mid-2000, it locked the doors on its remaining 13 shops – leaving customers’ cars inside and 150 employees without their final paychecks – and filed Chapter 7 bankruptcy. CARA founder Randy McPherson (a founding partner of ABRA Auto Body & Glass prior to leaving that company in 1996) blamed the collapse on CARA’s rapid and far-flung growth. His goal, he readily admits, was to capitalize on the late-1990s Wall Street appetite for industry “roll-ups” or consolidators.

“I’m not going to spend a nickel on TV (advertising for CARA),” McPherson had said in a 1997 interview. “I'm going to put all that money into value-added services for insurance companies and their customers.”

To that end, CARA offered free rental cars, free pick-up and delivery, and free towing.

10 years ago in the collision repair industry (July 2005)

Digging through my files one day recently, I came across a fascinating, though discolored document. Right in the beginning of its 62-page report (in 1989), Canada’s Automobile Protection Association (APA) questions the insurance industry’s stated motive for supporting aftermarket crash parts. The idea was that once the OEMs had competition, the price of crash parts would come down, thereby lowering the cost of repairs and, hopefully, what car owners paid for insurance premiums. APA asked the insurance industry for data to support this notion, and got nothing.

I asked Jack Gillis, executive director of the Certified Automotive Parts Assoxiaiton, if any data had surfaced since. He concedes he knows of no numbers that make the connection between non-OEM crash parts and consumer savings… Gillis grants the market penetration by non-OEM parts remains so small, even after all of these years, as to have little or no effect on overall repair costs.

APA cited data from the Automotive Body Parts Association (ABPA) that claimed that non-OEM crash parts comprised 10 percent of the market in Canada in 1989. APA’s own research indicated 14 percent. The figure commonly cited today for the United State is 15 percent. If that number sounds familiar, Gillis has been putting it out for years based on the best information he can collect. He admits that it is “accepted by the industry in large part because there is no better data.”
    – From a column by Tom Slear published in Autobody News, July 2005.

The ABPA percentage for the market share of non-OEM parts was probably more correct than either the APA’s or Gillis’ number. The market share for non-OEM parts cited by Mitchell International for 2007 (two years after Slear’s column was written) was 10.5 percent. That has climbed slowly but steadily to 16.5 percent last year, according to Mitchell. The battle over whether this has resulted in lower insurance premiums for consumers continues. Doubters point to a statement by Neal Menefee, CEO of Rockingham Mutual Insurance, who acknowledged at a 2012 Congressional hearing that he “would not expect premiums to go down as a result” of passage of legislation that would reduce the length of time automakers’ could patent the design of crash parts and stave off non-OEM competition for those parts. But backers of such patent change say Menefee went on to say that while not reducing costs, competition from non-OEM parts helps “avoid a significant increase in the cost of parts and insurance premiums.”

5 years ago in the collision repair industry (July 2010)

State Farm “Select Service” shops will now receive a 3-digit number – similar to a credit score – from the insurer based on its measurement of the shop’s performance. The number, on a scale of 1 to 1,000, will be updated monthly and is established using a proprietary formula that takes into account the key performance indicators (KPIs) State Farm uses to track each shop’s performance.

Specific KPI data will still also be shared with the shop, according to State Farm’s George Avery, but the new score offers a quick way for a shop to understand how it is doing in terms of State Farm’s measurements.

The report also indicates how the shop’s number compares with other shops in the program (even taking into account, Avery said, such things as differences in the types of vehicles repaired), and lists three areas that the shop could focus on to improve its score.

Avery said implementing the new score does not signal any new planned reduction in the number of Select Service shops, though the company continues to change the number of shops on the program in some markets based on its capacity needs.
      – As reported in CRASH Network (www.CrashNetwork.com), July 26, 2010.

John Yoswick

John Yoswick is a freelance writer and Autobody News columnist who has been covering the collision industry since 1988, and the editor of the CRASH Network... Read More

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