At least one recent industry survey found a significant percentage of shops reported one or more insurers paying a lower labor rate now than they were earlier this year — something the Society of Collision Repair Specialists (SCRS) called out at the Collision Industry Conference (CIC) in Las Vegas during SEMA week.
“This is in a time when nearly every cost that we have in our business is going up,” said Aaron Schulenburg, SCRS executive director. “Inflation is going up, wages are going up. The cost of running a collision repair business, the cost of performing repairs, is going up. Yet there is this sudden and concerning restriction on rates.
“When the reimbursement levels contract, or when they never kept pace with the investments that we had to make to perform repairs properly, it threatens the sustainability of our businesses and the availability of the skilled professionals that we need to keep the motoring public safe,” Schulenburg added.
Schulenburg pointed to a survey by CRASH Network this fall that found, among more than 300 responding shops, 1 in 4 said at least one insurance company is currently paying a lower labor rate than it did in January.
“We’re seeing this concern voiced by shops in nearly every region across the country, nearly every state,” Schulenburg said. “It’s not isolated. It’s systemic. We’re seeing a shift from things like ‘prevailing competitive price’ to ‘reasonable rates’ without any definition of what ‘reasonable’ means, without documentation being provided to the repair facilities, without providing justification, without any indication of any statistically valid survey. It’s simply: ‘We’ve determined it’s enough, even though we’ve lowered it significantly from what we’ve recognized before.’ There's no way to argue it because there’s no documentation provided to the industry.”
He called on all segments of the industry to help address the issue.
“I think it’s important that we talk about it and address it and figure out a path,” he said.
Michael Bradshaw, current chairman of SCRS and vice president of K&M Collision in Hickory, NC, also spoke about the issue during CIC.
“It’s not just rates, it’s also procedures, required procedures,” Bradshaw said. “Procedures that have been identified as reasonable for seven or eight or nine years, but now no longer are. Procedures that have been recognized by the [auto] manufacturers, by I-CAR, everybody in the industry. So these things are getting worse. They’re not getting better. And my fear is that if we as an industry don’t address it, the overreach, it’s going to continue.”
He said customers are being told the shop is charging for things that aren’t needed or are not reasonable.
“But as a shop, when you have historical data, years’ worth, that shows that this [has been] paid in the past, how do you combat that,” Bradshaw said.
Business Diversification, Right to Appraisal
Also during CIC in Las Vegas, the newly-formed Business Operations and Management Committee presented the first of what it intends to be a four-part series focused on business diversification. A panel discussed the importance and opportunities of business diversification in changing economies, and offered some different possible models, as the basis for discussion at future CIC meetings.
Jill Tuggle.
The Governmental Committee focused on successful legislative efforts in Texas and Washington state this year to enact legislation requiring auto insurance policies to include a right to appraisal clause. Representing the associations in their respective state, Jill Tuggle and Justin Lewis highlighted what was entailed in those legislation efforts, how the appraisal process works, and what it means for the industry in states with — and without — such a requirement.
Tuggle, executive director of the Auto Body Association of Texas, said the legislative effort there was helped by a state Department of Insurance (DOI) study into how often appraisals take place.
“It really isn't invoked in that many claims, but it has been very successful for the ones in which it has been conducted,” Tuggle said.
About half of the personal auto appraisal awards were between $13,000 and $38,000, according to the Texas DOI report; in relation to the insurer’s pre-appraisal offer, about half were between $2,100 and $5,900 higher. The average was $5,300 (21.7%) above the initial offer.
OEM Certifications
The OEM Industry Relations Committee offered perspectives from automakers, shops and dealers on leveraging OEM certifications for “an exceptional, differentiated customer experience.”
“One of those thought-provoking questions you can ask customers when the vehicle drops is ‘Why did you buy this particular car,’” suggested Jake Rodenroth of Quality Collision Group, which operates 96 OEM-certified shops in 13 states. “Corvette owners will give you a very different answer than Prius owners, and as shops, we’ve got to be receptive to that.
“If they bought the car for the technology, you better be going through that diagnostic report with them when you deliver the car,” Rodenroth said. “If they bought it for the leather seats, we’re going to have a discussion with the detailers make extra sure everything’s clean. If they bought it for the color, boy, we’re doing that spray-out right up front and discussing that proactively. It just builds trust, and it shows that you care.”
In the afternoon, Frank Cote, recently retired chief deputy insurance commissioner in Montana, shared insights on consumer protection, the challenges regulators face, and the gaps in today’s conversations that, if addressed, could strengthen accountability and better safeguard consumer interests in collision repair and insurance.
John Yoswick