Insurer-owned shops, fraud highlight the year

Insurer-owned shops, fraud highlight the year

From a crack-down on fraud to attempts to halt the growth of insurer-owned shops, it's been an interesting year for the collision repair industry. Here is our annual year-in-review wrap-up, a collection of some of the most memorable, important, interesting or enlightening quotes heard around the industry during 2003. 

"Hopefully as long as I'm here, it won't be."

- State Farm senior claims consultant John Kent, when asked if owning its own shops was on the insurer's list of plans for the future.

"On welded panels, anywhere from half to as much as two-thirds of the cost of all materials needed are for those used in the metal department."

- March Taylor, a shop owner in Hawaii and co-chairman of the Collision Industry Conference (CIC) Estimating Committee, on the need for the industry to address not just paint material capping but also payment for shop or body materials.

"It kind of blows my mind."

- Chuck Sulkala, one of the moderators of the National Industry Issues Forum, on the fact that insurer-owned collision repair businesses wasn't raised as an issue during the 3-hour event, at which industry leaders from around the country discussed what they see as key issues facing the industry.

Aftermarket parts

"We requested CAPA-certified parts, and the hood that came was certified but the fender, which showed in the computer as being CAPA-certified, wasn't. "When I called on it I was told, 'That's all we've got.

It's that or nothing.' So I sent it back and used an OEM fender. I warned the guys to watch out for sharp edges on the non-OEM parts we ordered, and boy, was I right. You could have really lost a finger on the fender.

- Geralynn Kottschade, owner of Jerry's Body Shop in Mankato, Minn., and national chairman-elect of ASA, on her experience ordering non-OEM parts after returning this fall from touring a number of the factories that manufacture the parts in Taiwan.

"If you're on a DRP that is watching your cycle time, and you're getting non- certified [non-OEM] parts delivered when you've ordered [certified], you have to make a decision about whether to return it or put it on the car because you can't hurt your cycle time. This is one of the biggest issues that we're all facing: What do you do when somebody hands us a part that we've got to have in order to deliver a car, and it's not what we're required to use?"

- Gene Hamilton, co-chairman of the CIC Cycle Time Task Force.

Education and testing

"We are welding a car back together, and putting someone else's family in that car. We have an obligation to ensure that our repairs are as good as they can be."

- I-CAR's top executive Tom McGee, responding to those who had criticized the requirement for those who have passed I- CAR's "Welding Qualification Test" to recertify every five years.

"Vocational education has really been at the back of the bus. We need to change that."

- Dr. Patrick Ainsworth of the California Department of Education, quoted on National Public Radio in a story about a returning emphasis on the value of career education.

"As a responsible manufacturer, Jui Li regrets any inconvenience caused by this situation, and encourages you to contact me directly if you have any comments, questions or concerns regarding this recall program."

- David Chen, president of U-Land International, the U.S. branch office of non- OEM parts manufacturer Jui Li, as the company announced a voluntary recall of 5,000 of its hoods earlier this year. It was found that if the primary hood latch for the hoods is not engaged, the secondary latch on the part -- designed for the 1995-2000 Toyota Tacoma and sold between August 1997 and early 2002 -- may not have been positioned properly to prevent the hood from flying up.

Popular alliance

"With 75 million NASCAR fans, most of whom are regularly logging on to, this locator promises to deliver unprecedented attention and recognition to ASA members."

- Automotive Service Association (ASA) President Ron Pyle, as the association announced the creation of the NASCAR Performance Network, an online shop locator service allowing NASCAR fans to find automotive service professionals in their local areas.

Commenting on NACE

"We have a responsibility to listen to the attendees and the exhibitors and make sure we continue to provide the value everybody is looking for. Some fundamental changes need to be made, and I can assure you they will be. NACE has been successful for 20 years. And there's no reason for us to expect that it won't be successful for the next 20, but it has to change. It has to evolve into something new."

- ASA's Pyle, last January, one month after NACE attendance and exhibitor counts took a dive.

"The decision to forgo NACE for a second year in a row was a difficult one. In making it, we considered a number of factors, from the uncertain economic conditions to alternative investments and activities to support the industry and our valued customers."

- Doug Moore, vice president of DuPont Refinish Americas, in March, joining most of the other paint manufacturers in deciding for the second straight year not to exhibit at NACE.

"We think one of the benefits that accrues from this is that the entire industry will now be in Las Vegas during one week. For NACE to be part of that is very significant."

- ASA's Pyle, making it official in mid-June that starting in 2004, the collision repair convention will be held in November each year in Las Vegas, Nevada, during Automotive Aftermarket Industry Week when two other automotive industry trade shows are held there.

"DuPont is enthusiastically supporting ASA's decision to permanently move the NACE show to Las Vegas."

- Rich Morecz, marketing manager for DuPont Performance Coatings, in June following Pyle's announcement; he added that DuPont hadn't yet decided if it would exhibit at NACE 2004.

"There's been some fairly strong positions that have been taken from the podium during NACE and those positions have left the insurance folks feeling somewhat alienated at NACE. And that's not in anyone's best interest."

- Galen Poss, president of Hanley- Wood Exhibitions, which manages the NACE show, on the addition of an "insurers only" session at NACE, later changed to be open to all attendees.

More second guessing

"Although most auto repair facilities do a thoroughly honest job on repairs, consumer fraud is well-known in many areas of the country. We're not attempting to 'police' the industry, we just want to make certain that our members don't get ripped off when it comes time to have their vehicles fixed."

- Mike Munson, founder and president of Auto Repair Estimate Advisors (AREA), which in 2003 launched a new service that claims to use computer database information coupled with professionally-trained and certified mechanics to alert consumers if they may be getting cheated by a shop.

Letting the experts perform

"To put it simply, State Farm is letting the experts -- collision repair professionals -- do what they do best: assess damage and repair the vehicle. They respect our experience and expertise. As a result, we're freed up to do the best possible job."

- Don Keenan, past chairman of the Society of Collision Repair Specialists (SCRS), in an association press release praising State Farm's efforts to keep "the integrity of the repaired vehicle and the interests of the consumer in clear focus."

ASA speaks up

"As the technician marketplace continues to evolve, our organizations recognize the need for more industry discussion about how best to enhance opportunities for Hispanic technicians entering the automotive field."

- ASA's Bob Redding about an October summit on the topic of Hispanic technicians held in Washington, D.C. and organized by ASA, the National Institute for Automotive Service Excellence (ASE) and the National Automobile Dealers Association (NADA).

"The aftermarket continues to make progress in obtaining a level playing field for service and tool information. ASA diligently monitors this issue on behalf of all service professionals and works with the automakers to assure information availability to the aftermarket."

- ASA's Pyle, as all of the major automakers announced the launch of websites offering independent shops and consumers access to OEM repair information.

"It is our goal for all 50 states to require its glass installers be licensed and that they be licensed through training and testing."

- Phil Hames, president and CEO of the National Glass Association.

"All of these statements are intended to erode the consumer's confidence in the shop he or she has chosen, and all of these tactics will be prohibited under SB 551. Passing SB 551 ensures that consumer choice will be honored."

- California Senator Jackie Speier, speaking of insurer "word tracks" used to push consumers to specific repair facilities, a practice she hopes to curtail through the tougher anti-steering legislation passed last September in that state.

"We've always talked about the quality of work shops do, but we've had no way to quantify that. "We needed to figure out a way to measure the quality. We're guessing that down the road shops will have a quality rating much like they have a cycle time or customer satisfaction rating."

- Ron Guilliams, director of quality assurance for the Fix Auto network, on the organization's post-repair vehicle inspection and repair quality rating program.

"If you can better balance out your schedule, we've seen that cycle times have dropped by an average of two days, with a 31 percent improvement in the hours produced per repair order per day. So the fact that you had some of the vehicles carry over an extra two days is offset by the fact that the average of all the vehicles was a 2- day decrease in cycle time."

- Kent Carlson of Collision Resources, Inc., on his company's study of shops shifting away from bringing in the majority of vehicles for the week on Monday.

Visit to Taiwan

"Back in 1999, we gave you a list of things we felt needed to be improved upon in the factories. And we're very happy to see that many of those things have been improved. There are some things that still need to be improved, but as we've talked about, continuous improvement is a way of life. It's important that you understand who your customer is. Repairers are the people who purchase your parts. We need to tell you what we need, and you need to deliver to us what we need."

- Former shop owner and industry consultant Lou DiLisio, to a gathering of representatives from non-OEM parts factories during his second trip to tour the Taiwanese factories.

"Your lamp may be made as well or even better than the OEM, but it also has to imitate the look of the other part."

- Bob Pearson, owner of Pearson Auto Body in Shakopee, Minn., and a representative on the Taiwan trip for the Alliance of Automotive Service Providers, speaking to non-OEM parts manufacturers about the importance of even the appearance of non-OEM parts matching that of the OEM.

Allstate vs. the state of Texas

"Texas collision repairers exercised their right to petition policymakers for help with a potentially devastating concern. The Texas Legislature promptly responded with a solution protecting vehicle owners and small businesses throughout Texas. This landmark legislation will most likely be mirrored in states across the nation."

- ASA's national lobbyist Bob Redding, after the Texas Governor in June signed into law legislation banning the growth of insurer-owned shops in that state.

"Allstate vigorously opposed this legislation in Texas. These are changes Allstate is being forced to make in our Texas claim strategy to comply with legislation we continue to view as anti- business and anti-consumer. In order for us to help ensure DRP referrals on identical terms for all facilities, it is necessary to create a new direct repair program in Texas."

- John Edelen, an Allstate assistant vice president, as he terminated all existing Allstate PRO direct repair shop relationships in Texas last August.

"No evidence suggested that customers were cheated, received lower quality, or (were) otherwise harmed by insurer ownership of Sterling."

-- from lawsuit Allstate filed in Texas in August claiming the restrictions placed on insurer-owned shops in that state are unconstitutional.

"[P]olicyholders and claimants will be misled into believing that Sterling and local auto body shops are of equal quality [which could lead a policyholder to choose] "a less efficient, or worse, fraudulent, local body shop."

- from the Allstate lawsuit in Texas

"It's absolutely unacceptable when you have that kind of statement [made in the lawsuit], especially from someone that considers themselves a part of this industry."

- Chuck Sulkala, executive director of the National Auto Body Council (NABC), on the Allstate-Sterling lawsuit.

"Careful reading shows it to be defamatory of the industry, inaccurate, contradictory and probably deserving of some attention on our part. It says we're generally crooks and that we need [Allstate-owned] Sterling [Collision Centers] in order to cure our ills and ensure good quality work."

- Ric Pugmire of Auto Body World in Phoenix, Ariz., criticizing the Allstate- Sterling lawsuit about the new Texas law limiting the growth of insurer-owned shops in that state.

  "We were on the front lines with the collision repairers in Texas in support of and securing passage of House Bill 1131. We believe it protects Texas motorists. We're just as strong in that belief today as we were the first day we met in Texas to discuss it with those repairers who were involved. We trust the courts will carefully weigh all the issues and give proper consideration to consumer implications arising from this insurance ownership of collision repair facilities."

- ASA's Redding on the Allstate-Sterling lawsuit in Texas.

Certifying salvage air bag modules

"We have the program laid out. I can't give you all the details yet, but I will share with you that there is multiple testing that would take place to validate that the bag itself is functional. We've engaged some folks who were involved in airbag development and design for many years as consultants in helping us build the process."

- Keith Manich, a vice president of Entela, Inc., a Michigan-based testing and certification company, speaking last spring on his organization's plans to certify salvage airbag modules.

Charitable efforts

"Often when a great cause comes together with the right people, the result is something that's extraordinary. I think this building is ample testimony to something extraordinary."

- Doug Webb, president of the National Auto Body Council (NABC), at the dedication ceremony this fall for the new medical facility, named in honor of the collision repair industry, at Camp Mak-a-Dream, a 'cancer camp' in Montana, for which the NABC helped raise $500,000.

Cutting out the middle man - you!

"This new standard of service is about respecting the customer's time by putting all the services they need under one roof. Using this service makes getting a car fixed easier and more convenient."

- Brian Passell, claims group president for Progressive Insurance, announcing the national roll-out of its "concierge" program which allows customers to have their vehicles repaired without seeing or speaking to a collision repair facility.

BAR - devil or angel

"[P]rotocols should be developed that better define the roles of, and the relationship between, the auto insurance and auto body repair industries. These discussions should also include a serious consideration as to reforms in the methods of estimating collision damage."

 - from the California Bureau of Automotive Repair (BAR) report on fraud in the collision industry, suggesting that the document produced by adjusters be called a "visible damage assessment" rather than an estimate, so the vehicle-owner knows "it may not be a comprehensive, complete and itemized" listing of all the repairs necessary.

"The definition of 'fraud' being used by the BAR is overly broad. From a legal standpoint, to find fraud you need to find intent. The BAR defines fraud so broadly that it may include unintentional mistakes."

- David McClune, executive director of the California Autobody Association (CAA), on the California BAR fraud report, which claims to have found fraud in 42 percent of approximately 1,300 recently-repaired vehicles it inspected.

"Coverage of the BAR study has been presented as a representative sample of the work of our entire industry. That is clearly not a fact supported by the BAR's research methodology."

- Chuck Sulkala, a Massachusetts shop owner and executive director of the National Auto Body Council, pointing out that the BAR's study was based on those vehicle owners who contacted the agency and therefore might include more people concerned about fraud or a problem with their repaired vehicle than would a truly random study.

The last word

"This isn't just their problem. It's going to become our problem if this trend moves out from that state like a lot do."

- Atlanta area shop owner Gene Hamilton, of the fraud crack-down in California.

John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988.

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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