Thread: Serious question about insurance

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Originally posted by Swifster
Seriously, at $40 something an hour, is life really that bad?

Ha ha ha!! You're lucky you never came in my shop! I don't get as wound up about this as I once did, but that kind of remark shows that you've never had the responsibility to keep the doors open on a highly regulated business. And the fact that the shop owners let your company (and you by extension) get away with that kind of stuff shows that they are piss poor business people and deserve the grief they get. Or they cheat you and the vehicle owner trying to stay alive. I'm sure your bosses would be proud of that.

I never cheated (yes NEVER and I invited any insurance provider to audit any job any time) any insurance company. But the data bases and procedure pages are very specific about what is included and what is not. Any honest, knowledgable, appraiser, and his/her management, knew what procedures needed to be done. And I made sure we charged for every step of every procedure we were due. No more, no less. And yes, I was hated by a lot of insurance people because I was a "hard ass". But I challenged any one of them to show me where I was wrong about being paid what I was entitled to. Being respected is more important to me than being liked.

But then I also did business a bit different than most. I OWNED about 92% of my customers because of my advocacy on their behalf, and my commitment to doing the job right and on time. (this BTW is very much like what's gone wrong with health care and why no body is happy there, because the consumers and providers have given up their natural positions to a third party who has dispirate interests) For others reading this, the auto body business has a dimension that most businesses don't. Whenever most businesses sell a product or service it's a two party transaction. Buyer and seller, meet, agree, trade value, and both get what they agreed to. In auto body, mostly, it's a three party transaction, buyer, seller, and payer (insurance co). Makes the transaction somewhat more difficult. The buyer wants everything, and doesn't want to pay for it (except the deductible), the shop should want to do it right, and the insurance company wants to keep it's costs as low as possible. Now body shop operators are usually not the best of business people, many being former technicians who had the balls to go on their own. But lacking business savvy they are easily pushed around by the much more skillfull insurance reps, and they're intimidated by the potential withholding of payment (a hammer the ins boys are not afraid to exploit no matter how subtly). Hey, that's business. You win or lose based on your abilities. As a grown up you better know the rules when you get in the game. (Yes, this IS the less wound up version)

So Swif, don't take this as a personal attack, just the other point of view. When you ask that question about $40 dollars making it sound so generous answer me this. What's the labor rate for an automotive mechanical shop in that same market area? I'd bet it's somewhere between $60-100.00 per hour. And they go by a flat rate manual too. A well trained tech on the mechanical side really cost that much more than on the body side? The mechanical shop really have that much more invested in equipment? Can the body shop operator rent his building for half what the mech guy does? Is the city, county, state so generous to cut the body shops taxes in half? Do the utility companies charge the body shop half rate for electricity, gas, water,etc.? Do the insurance companies write garage keeper's policies at half rate for the body shop (yeah right!). Do you think the feds let the body shop guy only pay half as much social security tax, and medicare tax? There's more, but I said I don't get as wound up anymore. Paying half the rate of a mechanical shop, and then refusing to pay for valid procedures/materials on top of that is theft......................can't think of a nicer way to put it.

Bob, I understand the different point of views and I don't take it personally. I also understand different areas have different customs for lack of a better term.

There are a couple of things to point out. Detroit has the largest amount of collision shops per square mile in the entire United States. This means competition in a big way. This is the largest reason labor rates are as depressed in this area. Labor rates in the St. Louis area was $38 in MO, and $41 in IL, and this was in '95/'96. I'm sure labor rates are at least $6 an hour higher now than then.

I would also bet that repair labor in your area is more tightly controlled. 2.0 hours to repair in real time, is 2.0 hours on the estimate (and this was true in St. Louis as well). In the Detroit area I could never sell a repair on this concept. Taking the steps of repair into consideration (rough, bump, finish), and looking at this tightly, then double it. It may take the body man 2.0 real hours to repair a door or quarter, the estimate reads 4.0. So I guess the reality is that repairs are at $68 per hour compared to what you may be getting in WA. Of course, the shops get paid $34 on everything else.

As for shops demanding anything, the insurance company has three options. 1) Pay the shop what he wants. While it does happen, it's not the norm. 2) Advise the insured he'll have to pay the difference. As you mentioned, customers don't want to pay any more than the deductible. This can lead to... 3) The car going to another shop. I can present this option because I can direct traffic to those shops I trust and that are cooperative (see competition mention above). Every other shop down the street will do the job off my estimate. Why should I pay one more than another? Most don't want to lose the business.

I 100% agree about the inequity between service department labor rates vs body shop rates. The appearance of the car can do more to increase or decrease the value of a car/truck than it's mechanical condition. Personally, I think the body guys are far more deserving of $75-$80 per hour the the techs. But, service does this because the volume of traffic thru the service department is far higher than thru the body shop. Most mechanical repair facilities do more business in one day than the typical body shop does in a week.

This, and that body shop labor rates are pretty much price controlled by the insurance companies. Because the larger insurance companies here in Michigan are paying between $30-$34 an hour (the variance is taking direct repair programs into account) keeps the price down for the smaller companies. I would not have a hard time getting cars fixed at $32 Hr.

But other than labor rate differences, St. Louis, Central Michigan, Northwest Ohio and Northeastern Indiana have been the same. It's state law in Ohio to pay hazardous waste. I wasn't aware of this when I first stated writting claims in the Toledo area (I actually found this out on the Ohio website), but to this date, not one shop has even asked for it or brought it up. And yes, I would pay if asked.

As for business practices, I don't think most shops are THAT poorly run. In some cases the squeakier wheel gets greased. Some appraisers pay because they don't want the headache. It depends on the cost factor. Is it worth it to argue over $10? Most times the answer is no.

I've run my own appraisal business the last five years. I have six very loyal customers, and because of the work I do, I actually get a premium for my services as compared to most companies. The first company I started with in '85 had three rules. 1) Treat the insured (customer) fairly 2) Treat the repair facility (shop) fairly 3) Treat the (insurance) company fairly . Do all three of these and there are no problems. I still adhere to these principles.

Originally posted by Streets
[font=lucida sans]The laws here in NY say that the insurance co. cannot tell you where to have the work done...

Streets, as far as I know, that's pretty standard throughout the country. The thing to remember is that the insurance company doesn't have to pay the body shop whatever they want. It's going to be whatever is reasonable and customary for a given area. NY has some funky rules that only apply to NY. I think my brain would fry trying to adjust to the differences there!

Well Streets, it's virtually identical here. By state law the insurance company can't "force" a customer to go to any shop, but again, the insurance companies are very skilled at what they do. They use subtle intimidation very well. Remember, most people don't have a claims experience very often, so they don't know the rules. Many are fearfull that if they don't do what the insurance companies tell them, they won't get paid. The companies know this and leverage it to their own advantage as much as possible. A few years ago an Allstate manager told me they were able to "steer" (not the word he used) 78% of their claims. That business about getting three estimates is also a falsehood. Popular belief yes, but not accurate. And again, if the claimant set themselves up for a low ball pay out, the insurance company would happily let them do it. Many times a prospect would come to our store and we would have to disabuse them of that notion. It was part of how we gained their confidence as being their advocate in an unfamiliar situation. In spite of their fear of the insurance company, many people were also distrustfull of them (imagine that!). Once we showed them a printed copy of the state code they felt more confident to stand up for their own rights. And we were there to help. Another reason some of the less "honorable" insurance companies disliked me. They hated informed consumers. Generally, the insurance companies would write their own estimate of repairs. Another serious part of our education process was to teach the customer that the word estimate meant ESTIMATE, not firm bid. Just because the company estimated an amount doesn't mean that's what the real costs would be. The actual repair dictates the actual costs. Again, because of unfamiliarity, the consumer often thought that the check they got from the Insurance company based on the estimate was all they were going to get. Again, we had to train them about "supplemental payments". That's where, in the course of the repair, as we found additional damage, or parts costs were higher than estimated, or the original estimate was purposely under estimated (would they do that? well yes, and it's good business for the insurance folks, because a certain percentage of claimants, some estimate 20%, just take the money and forego the repair) we would contact the insurance company and alert them of the additioanals. The more "honorable" companies developed a relationship with us wherein we would photo the additional work, or supply documentation, sometimes both, for the additionals, and we would proceed. The less honorable ones (based on bad experiences) I wouldn't trust their word on anything. Those, I'd stop the job, and require the rep to come back and reinspect and then sign off on agreeing to pay the additional. I'd also notify the customer so that the onus was back on the insurance company for any delivery delays. Again, the insurance guys didn't like me for that because most shops didn't keep the customer in the loop. In the end, the customer got mad at the shop, even though it was partly the insurance folks fault. With my way, I was always the customers advocate, and the insurance company was on the dime for delays.

There's lot's more but what it almost always boils down to is a consumer who's unfamiliar with the process, a shop that doesn't know how to work it's position, and a very skilled/experienced insurance company working for it's benefit primarily. Like I said before. Pretty much the same mix that's messed up our medical system. That's why I get so frustrated with the popular belief that "the government" will fix medical care by getting more involved..............................as Einstein said......."doing the same thing over and over expecting a different result is the definition of insanity."

Originally posted by arkk
Hey Everyone,
I am serioulsy looking in to a 71 vette at the moment. When I inquired about an insurance quote for the vehicle I got a response saying that most people dont get comprehensive/collision when the premium dosent meet the value of the car. I live in Louisiana and have Geico as my carrier. Would it be considered illegal to take a personal loan out for the amount of the car to buy it outright from the seller, and put just liability on the vehicle? I was told from word of mouth that your only supposed to do that if your vehicle is totally paid off, but all my previous loans have been used car loans through banks. This would be a personal loan. Please Help

Much Appreciation, Paul

arkk,

Speaking from experience, I would probably never do this again. I thought that I was being crafty one time to save on the insurance costs as well and did exactly what you suggested, ie. got a signature loan to pay for the car and then put liability on it.

It worked great for 6 months, then the little SOB burned to the ground (yes this was the Honda I have mentioned on CHR before) and I still owed money on it. I continued to pay on that loan for a little over another year...and had no car to drive at the same time.

You can do what you want but like I said, if it were me, I'd probably never do it again. I realize that in many cases you won't get what the car is worth, but if it will help pay off at least most of the loan, you'd probably be better off.

Good luck with the 'Vette,
Firechicken

Bob, let's be real. Hasn't being an advocate put money in your pocket? I begrudge no one from making a living. But I don't have to pay the body shop more than any other shop. And from my end, I let competition work for me.

As for the request for 3 estimates, this varies by company. Many companies do not have they're own appraisal staff in every state. Many companies will cut a check without having the car looked at by an appraiser if the damage does not exceed a certain amount (for the sake of this discussion, we'll say $1500 is the limit). Many shops are aware of this and intentionally low ball the estimate to either get the job in the door or to get around having an actual appraiser inspect the vehicle. Shop writes estimate for $1200 when the actual damage is more like $1800. Car comes in the shop and the shop now asks for the other $600 from the insurance company. Of course the other two estimates might have been around the $1800 mark. I personally think this is poor, but an insurance company gets what it deserves if it doesn't have the car looked at. All of my companies have me look at every claim. There is no requirement for them to seek estimates and they are advised of this.

When I look at a car, I tell the customer how the check is being issued. I let them know if the deductible has been waived (we're a no-fault state) or the deductible amount. How to handle payment with the shop (I encourage them to simply sign the check over to the shop even if the check is a single party check), advise them of the possiblity of supplement/additionals, give them two copies of the estimate, with one going to the shop of their choice. They get my card with my cell phone with a free invitation to call whenever they have questions. I also try to give them a realistic idea of the time the repairs should take. If it can and should be done within a week, I let them know. If it will take two months, I'll let them know that too.

I don't BS the customers or the shops. I have no problem with letting a shop know what I will not pay for, and at the same time, I also let them plead their case and will make changes as necessary. Not all of us are rubes. And in the home of the Big 3, as well as VW of America, Isuzu America and Hyandai America, I probably get more training and corporate insight than 95% of the body shops in the country. I also handle quite a few vintage car claims, and again, no problems.

And as far as "less honorable" insurance companies, I've never seen one. I've seen less experienced adjusters (this is Progressives problem) or those who may lack at certain mechanical understanding, but I've never met an adjuster who said, "Who can I screw today?" There may be individual appraisers that handle their paperwork poorly, or may not be timely in returning their calls, but this is usually limited to a specific adjuster. The insurance policy is the insurance policy. Claims are based off the policy. Some may not do the full explaination due to time constraints. Many are overloaded due to understaffing. Saying that insurance companies want uninformed customers couldn't be further from the truth. An informed customer saves a lot of phone time answering a lot of questions that could be handled at the time of the appraisal.

As for directing traffic, I can do that all day. I have no problem giving an honest opinion on a shop. I have what I refer to as Tom's Direct Repair Program. I usually can find three extremely good shops in a given area (based on quality of repair and how they handle business - no kickbacks or discounts required) so when the insured's asks, "Where do I take my car?", I can direct them to shops that will treat them right, do the repair right, and handle business right (this keeps my phone quiet - my payoff).

I'm not taking this personally, and I hope you don't either, but this street (Street's?) has two sides to it.

Getting back to the real issue here, Hagerty Insurance out of Traverse City, MI is the best valued insurance for a classic car that is NOT an everyday driver. Check them out if this is the case. Everyone I know that has a classic auto uses them.

Streets, stop using your car to poach. Buy a tag and rifle like everyone else. The walk in the woods will do you good!

Swif, if there's one thing I am..............it's real. But also pragmatic. Of course it put money in my pocket, that's the whole point. When you invest half a million bucks in equipment (over time) you have a right to expect a return. No real business (including the ins co.) operates just for the fun of it. But there are degrees of business performance, and that usually depends on the operator's skill. And while we're on the notion of who makes money, I'd point out that most insurance companies live in multiples of very tall, glass buildings. Most body shops are small, local, single story. Who's making the real dough? David or Goliath?

I'm not sure the rest of the folks here find this as engaging as you and I, so I'm not going to go into the whole dynamic, but you're right about it being a point of view thing. It's business. And business, by it's nature, can tend toward the predatory. A lot of people don't see it that way. They are often the ones that end up contributing to that oft repeated statistic about 80% of small businesses failing in the first 5 years of existance.

All one need do is read your earlier post about justifying paying half the rate of the comparable mechanical shop. Does this mean you're a rotten SOB. I don't think so. In fact, based on the tone of many of your remarks, you're probably one of the better independants to work with. But you're still a product of the culture that's developed in the industry. I didn't grow up in the auto body business, so I don't have ingrained beliefs that those who have bring to the equation. I approached it strictly as a business proposition. What is the market? What are the "rules" of the game? What parts of the operation can I maximize, what pitfalls can I minimize? What can I control, and not control? My overall objective was to create an entity that I could be proud of, build employment opportunities for skilled people (who are often looked down upon by their peers as "those dumb guys who could only end up working on cars"), and build some equity for the future (yeah, money in my pocket............I'm a filthy capitalist). I succeeded on all counts in spite of what might appear to some to be a bad working environment. But I did so by not buying into the culture that exists. That being that the big dog (ins cos) makes all the rules and that I need to cave to their every dictate.

One of the "rules" I learned early on was that the industry had a loose agreement (gentleman's understanding?) that the Procedure Pages (mostly now computer based) were a neutral arbiter of what was fair and reasonable as far as defining the scope of work required to accomplish any facit of collision repair. I also learned that too many of my competitors were often clueless about what was in the P pages. They knew of them, and the ins guys certainly used them to win an argument when it was in their favor, but the shop guys vastly underutilized them. I didn't. I learned them front and back. I made sure my employees knew them too. And I made sure early on that I got an agreement (whatever form that took, mostly verbal) from appraisers that that was the bible, along with the usual estimating databases. This worked great because most of the ins guys figured I wasn't any better informed than the other shops. Once that was established, we almost always came to an agreement, which meant I got paid more than some of the other shops because I called them on the use of P pages.

Here's where I'll make the point about "honorable" vs other. When in the shop environment you get to see the whole spectrum of insurance company behavior. And yes, you are accurate that the individual appraiser can sometimes be the culprit. A bad rep from a good company doesn't mean the company is bad. It also works the other way. I've known several appraisers who left a company because they didn't like the tactics they were instructed to use. Corporations have cultures, some shadier than others. These are smart people, so they don't do anything outright illegal, but they do play "games" to try to take advantage of the claimants inexperience. The fact that Allstate tracks how many people they "steer" (again, not a term they'd get caught using because of legal issues) to selected shops tells you how precise they are about leveraging their position. Steering is illegal, and they would deny they do it, but still, they track their success at doing it!! They know what they're doing! This is only one example. Again, I don't condemn that behavior as illegal, or unethical, or anything else perjoritive you want to call it. It's a Darwinian business thing. But there are many who would bristle at what could easily be construed as the Insurance companies taking advantage of the consumer with the objective of retaining as much of the premium dollar as they can. That's why each state has an insurance commissioner, to make sure the ins cos don't push their business envelope too far.

Just to put my shop in perspective. I would hire independent survey companies to randomly contact my customer base to determine satisfaction with our service. I also wanted to know how loyal to my business they were. Considering that collision repair is an adverse purchase (read, not something as enjoyable as buying a new home theater system), I think we did reasonably well. Our average customer satisfaction, would do repeat business, would refer others, was 92.5%. The industry average is a shade below 33%! This was several years ago, so the numbers could be different today. I would guess they are lower for the average. Why? Because, unlike your experience, I say most body shops under serve their customer needs. Because they are afraid to stand up for themselves and their customers, they let the balance of power shift too much to the insurance companie's side. Again, the tone of some of your remarks indicates that you see this unequal balance as the norm. And you're right! But that doesn't mean that it's how things should be. Because I worked for my customer first, and the insurance company second, I benefited from it. Which created an interesting result from time to time.

Earlier of my comments would imply that I didn't get along with most of the ins folks most of the time. In reality, I got along with the fair ones quite well. It was not unusual for us to repair the cars of insurance company employees, appraisers and managers included. A number of companies brought us vehicles to re-repair that other shops couldn't seem to get right. I had a few discussions with some ins managers about how they felt it cost more to fix a car in our shop than the average. But the conversation would usually ended with their agreeing that they never had to put out any customer fires because of our handling of the repair or the process. They ultimately would recognize the value in that, and that if it were their own insured, they also had a better potential to retain that insured for future income.

Only once did I have to throw an appraiser out of the shop. He decided we'd have an alpha male contest. He lost! He tried that play you mentioned earlier about pulling a car out of our shop because he wanted to stiff me on reasonable charges. I guess it surprised him when I walked back into the office and dialed the customers cell phone and handed him the receiver after explaining the situation to the customer. The car stayed because the customer was informed enough to support my fixing his car correctly and being paid fairly for it. Again, by our state law, the customer chooses the shop. This guy was used to being able to push around the shop and the customer to suit his companies needs. Everything I was charging for was both legitimate, and documentable. His bluff didn't work.

You are correct in your assertion that you only have to pay "normal and customary" charges. But again, once we established the databases as the criteria, what the guy down the street does almost becomes moot. Here's the other "trick" your explanation doesn't make clear for our viewing audience. How are these customary charges determined? Fair and reasonable insurance companies do it by survey. Less than honorable companies do it by dictate, and are usually below what the reasonable ones are. Now how can that happen in a fair transaction? State Farm was the only company in our market that actually did a 100% market survey each and every year. I made sure I got a copy of that. Safeco and Pemco would do something similar about every three years with adjustments annually, probably based on the results of seeing what happened with State Farm estimates. Geico and Progressive, and sometimes Allsnake, would drag their feet as long as possible to not move up. Now I understand that from their point of view, but if the rules are, "market comparison", then once faced with a legitimate survey by another insurance company, where's the argument? That excessive reluctance to be "fair" is what I mean by less "honorable". Along with those companies being overly coy with the claimants about using aftermarket or salvage parts.

(continued)

One last point since we've probably lost everyone's attention by now. Shady insurance practices in the form of indirectly encouraging shoddy repair is a reality. If not, why else would we be looking at "Diminished Value"? This is where the vehicle owner loses money when they ultimately sell or trade their vehicle because the quality of repair is poor enough that it scares the market place into devaluing that vehicle. The difficulty is, of course, determining the amount of diminished value until the sale transaction occurs. Denials aside, the Insurance industry is very scared of this concept. Attorneys are licking their chops. Most consumers don't even know of the concept. And the insurance industry would be tickled if they never learned of it. In the end, the Ins cos will come out on top because they hold the purse, but there will probably be some blood letting along the way. The unfortunate reality is a huge majority of the vehicle owners out there don't really know the difference between a good repair and a bad one. To most of those folks their car is just another appliance in their life (yeah, kinda hard to believe huh?). They just want it under their butt again, don't confuse them with the facts. And THAT is why insurance companies can do what they do to underpay for repairs, and why shops can get away with doing inferior work. There's just not enough "push back" from the consumer because they don't know any better, or they believe they're powerless. Either way, it's a self fulfilling prophecy. Think I'm wrong? Oh well!!

I don't think you're entirely wrong at all. I think we're on the same wave. If I direct (and as an independent, this is far easier), it's solely based on getting a good job done. Bad company practice can usually be traced to one manager or vice-president thinking he'll save the company big money. That's a joke. The direct repair program is a perfect example of this.

As for deminshed value, this is the reason insured's are allowed to choose their own shop (pick their own poison as it were). I don't think salvage parts lower the value of a car at all. Guidelines in different states vary, but usually it's that the part has to be the same year or newer. Aftermarket parts depend on the supplier/manufacturer of the part. Some are very good and others should never have seen the light of day (I keep a listing of bad pieces and don't reuse them if they're bad). I think that most shops don't like the use of these parts more from the mark-up point of view than the quality point of view. Again, as a business owner I understand this.

90% of what's in the P-Pages I include. Every adjuster has his own way of trying to be "fair". Others may not understand the idea of give-and-take. I run my materials slightly higher because this is where I think the shops in my area get short changed. Again, I don't pay hazardous waste as my feelings are that this is the business chosen (again, this is strickly MY philosophy). One chain of shops constantly hammers me for caulk (and in my mind this is part of materials). Every shop has their way of try to make more money. I don't have a problem with that and never take it personally. I have what I consider to be my own set of give-backs.

Bob, I don't think we would have argued too much if we were in the same neighborhood. We may start on different sides of the same street, but I'm sure we'd find common ground.

Originally posted by Streets
Well at least it was the Honda and not a real car.. J/K FC hehehe I solly BRO... I just couldn't resist that.. wuz it "Flied Lice"??

You know, what's great is that I can look back at it now and laugh, and you're right, I never really cared about that car anyway, just the payment I had to make once it wuz gone. At that time I felt really stupid cuz not only wuz I payin fer a honda; but, I wuz payin fer one that wuz already in the jaws of the crusher. Oh well, like I said, I have insurance on all my rides now, and none of them are rice. So, I guess I have come to the light, and salvation has called my name...heheh

Unfortunately, not every adjuster has ethics. Allstate insured a '93 Mustang GT that the owner had installed a supercharger on. The supercharger alone was $5000. The car had been hit in the "A" pillar on the driver's side. The adjuster comes out and totaled the car. He tried settling the car for $6500, take it or leave it. He also hooked up a friend with the salvage and moved the car. While it's not uncommon to to move a car without a title, there should be an understanding with the owner. This adjuster wouldn't let the owner keep the salvage, because he already had the car pre-sold. After working this up the chain of command at Allstate, the car was fixed as supervision figuired the car was worth $11,500. It gives the rest of the business a bad name even when the rest of us play by the rules.