State farm approved auto repair shops

Insurers are starting to work with a smaller number of collision repair centres, so it’s imperative for repair shops to focus on collecting and supplying hard-core data and statistics that would justify cracking the line-up of an insurer’s preferred shops.

This was the central theme of the November 2007 PPG Canada/Certified First Network ‘Winning Through Performance’ conference held in Toronto. Yet, when push comes to shove, one insurer dropped a hint that performance may be only one of several factors that come into play when insurers deal with collision repair shops. Other factors, for example, could be loyalty and whether claims numbers support the number of shops participating in an insurer’s preferred networks.

Certainly, collecting and analyzing performance data ranked as the highest priority for collision repair shop owners attending the PPG conference. This is especially important as insurers shrink the number of shops participating in their collision repair shop networks, noted Nancy Ng, insurance services manager for PPG.

Ng observed in a seminar that insurers such as Aviva, State Farm, Wawanesa, ING Canada among others have sought to shrink the number of shops with which they work. Insurers say one benefit of such a move is to develop closer relationships with the shops with which they do business.

Insurers are increasingly interested in using numbers such as key performance indicators (KPIs) to justify their decisions, Ng said. KPIs include data on, for example, how long it takes to repair a car, how many cars can be repaired within a specific time frame, how much it costs to undertake specific repairs, the labour hours required to repair a car, etc.

“Insurance companies are now monitoring our performance numbers closely and on an ongoing basis,” Ng said at a seminar. “So knowing your numbers, and being able to have a discussion with that insurance company [about those numbers] when they come in to chat with you — you should never have a curveball thrown at you. If they’re coming at you with numbers, you need to know enough about your business that you can have a discussion about those numbers, versus a deer-in-the-headlights experience.”

George Avery, a claims consultant for State Farm, noted a small change in a repair shop’s numbers could mean a big difference for an insurer’s bottom line. Avery noted State Farm, which spends US$8 billion each year on auto body repairs, has reduced its pool of auto repair facilities from 20,000 Service First repair facilities to 11,200. The move was made because the huge number of facilities had simply become too difficult to mange, he said.

Even small numbers have huge financial implications for State Farm. If the collision facilities with which State Farm works were able to increase cycle times by even as little as 12 minutes a day, that would represent huge savings for the insurance company, Avery noted. The cost crunch for an insurer comes when policyholders rent cars while their own ones are in the shop being repaired.

“Our average company rental time is 11 days,” Avery observed. “Company- wide, if you do the math, the average cycle time, per day, is two hours a day. If we could improve the cycle time from two hours to 2.2 hours per day — I’m not talking about moving it from two to seven, but from two to 2.2 — that would move my rental average from 11 days to 10. Does anyone want to ask what one day of rental [costs] is worth to State Farm company-wide? [US]$43 million is what one day of rental time is worth.”

Canada is an extremely competitive environment for insurers, which makes performance numbers all the more important, observed Louis Heroux, claims manager for ING Insurance Company of Canada. He noted in Canada the top five property and casualty insurers represent 35 per cent of the market, whereas in the banking sector, for example, the top five banks control 90 per cent of the market. As a result of the competition in Canada, Heroux noted, if insurers can’t change performance figures on the service side, they won’t be able to succeed.

Like State Farm, ING has also moved towards working with fewer collision repair facilities. ING in 2006 spent close to $4.2 billion on claims-related repairs, Heroux said. The insurer’s Rely Network of collision centres, which started in Quebec in 1992, originally numbered 400; now it stands at 150 shops.

Given that insurers have been consolidating their pools of preferred shops into smaller numbers, “outperforming is key” for any shop to become part of an insurer’s stable of preferred shops, Heroux said. “The losers” will be “those that want to recreate the past,” in which insurers used to base the choice to work with a repair shop based mainly on proximity or a personal relationship with the shop’s principal, he added.

But in answering a question from a member of the audience, Heroux may have inadvertently raised some questions about the priority of performance numbers in the assessment of who belongs to its Rely Network.

Leading up to Heroux’s speech, the conference mantra was all about producing quality data to quantify performance, and disclosing these numbers to insurers to demonstrate superior performance.

For example, Ng and others suggested by knowing not only your own numbers, but those of a competing repair centre, a repair centre could be more strategic about going after the business of a smaller number of insurers.

“As a collision repair shop, you are either working hard to stay on a program or working hard to get onto a program,” Ng advised. “Our future goals [at PPG] in addressing that are to help you to understand your KPIs and your competitor’s ability to compete and win in your area.”

“You need to know what your competitors are doing. They [may be] working with certain insurance companies in a particular area because [the insurer has] ongoing, longtime relationships with two shops that are just around the corner,” she added. “And if you spend the time and energy and effort on that company, that may not be your best opportunity. The more you know — the more intelligence you have on what’s happening in the insurance community around you — will help you to target the low-lying fruit and put your effort where you want to put it.”

However, sometimes outperforming one’s competition in terms of key performance indicators still might not be enough for a repair shop to become an insurer’s preferred vendor, Heroux suggested in a dialogue with a delegate in the audience.

During a question period at the end of his speech, Heroux discussed ING’s move to go from 400 to 150 shops in its Rely Network. Heroux noted that the shops in the network were very loyal to the network and that “we don’t get a lot of shops leaving us.” Similarly, almost eight per cent of the shops that first started in ING’s Rely network are still there. ING demonstrates loyalty to the shops in its network by working out any issues through mutual cooperation and discussion. “We don’t stop doing business with a lot of shops [in the Rely Network],” he noted. “If something doesn’t work, we discuss.”

Heroux’s comments prompted a question from the audience, asking if there is much change or turnaround among the shops participating in the Rely Network. Heroux noted the purpose of reducing the number of shops was so that ING didn’t get into a situation in which the number of claims did not support the number of shops in the network.

“Even if my shop outperforms one of the shops already in the network?” the questioner asked.

Heroux hesitated before answering, “No.” He maintained the number of shops participating in the network “has to be about sustainable relationships.”
A jury recently found Texas-based John Eagle Collision Center liable for injuries sustained by Matthew and Marcia Seebachan following a 2013 crash because a repair was not done according to OEM specifications, according to the verdict.

Now, State Farm is in the spotlight for its alleged role in influencing that repair. The couple is suing for negligence and breach of warranty.

The lawsuit stems from a non-OEM roof repair, which used an adhesive instead of being welded as Honda’s specifications outlined. According to John Eagle’s director Boyce Willis, State Farm wouldn’t pay the shop unless the repair was done according to its specifications as opposed to Honda’s.

“No insurance company should ever dictate to a collision repair center or body shop how to repair a vehicle. To do so is extremely negligent, and shows a wanton disregard for human life and the safety of others,” said Todd Tracy, attorney for the plaintiffs. “John Eagle did not repair the subject 2010 Honda Fit to Honda’s body repair specifications due to State Farm’s instructions, threats and/or coercion.”

State Farm attorneys have responded to the allegations, denying the insurer had any influence over the repair.

“To the extent alleged, Defendant denies that it coerced or enticed any body shop to not follow vehicle manufacturer’s procedures, cut corners, take safety shortcuts, or do anything that jeopardizes members of the motoring public,” the response reads. “Defendant denies that it forced John Eagle to use deadly, dangerous, unproven, and untested adhesive rather than welds. Defendant also denies that it forced John Eagle to do anything in violation of OEM requirements.”

State Farm is motioned to have the lawsuits dismissed, claiming the defense of unconstitutionality. A scheduling order for the case has yet to be filed.