With the pace of change in the collision repair industry, it can be sometimes be a challenge for shop owners to stay up-to-date on what’s happening in their own market and country, let alone on what shop owners in other countries are facing. Yet there is often value in keeping an ear on the collision industry outside the United States.
Why? Russell Thrall, the editor of the online CollisionWeek news website, said PartsTrader is just one example. Though it made plenty of headlines here in 2013 and 2014, PartsTrader got its start in New Zealand years before setting up shop here.
“No one here really knew about it, but all of a sudden it became very important to us here in the U.S.,” Thrall said.
So what are some of the trends and technologies happening within the collision industry elsewhere. Fasten your seatbelt for a quick worldwide tour.
Parts handled differently elsewhere
While vehicle repairs themselves may not vary widely from country to country, insurer practices certainly do. And just as widespread use of PartsTrader was brought into both the New Zealand and U.S. markets by an insurance company, other insurer practices elsewhere sometimes make their way to our shores. This is becoming increasingly likely as more insurance companies become global enterprises.
Joe Funk is vice president of global personal auto claims for just one such insurer, AIG Property and Casualty. He has his finger on the pulse of the ways insurers and repairers interact in many markets outside North America.
In Latin America, Russia and some other markets, for example, insurers source and buy all parts for the repairers, Funk said. Why are shops in those markets willing — and in some cases, eager — to give up that profit source? In poorer countries, Funk said, the shops don’t have the capital to pay for the parts upfront, in particular where insurance payment can be 60 to 75 days out.
Parts are also harder to source in many of these countries, he said; in Argentina, for example, average part delivery time can be three or four weeks. In such instances, insurers are able to use volume purchases to improve the supply chain, requiring parts suppliers, for example, to provide delivery guarantees.
In some countries using such systems, shops receive some minor commission on parts, Funk said, usually just 1 or 2 percent. But they also can forego the expenses associated with parts managers, parts tracking and parts invoicing.
Insurers using such a system, Funk said, obviously reduce parts costs through volume discounts. But they also reduce fraud, and have found shops are more willing to repair parts they previously would have just replaced. In Greece, he said, repair versus replace jumped from 50 percent to 63 percent after insurers began buying parts.
Repairers as agents
Parts practices aren’t the only thing that sets other markets apart from the U.S. In a growing number of Asian and Latin American countries, Funk said, a repair facility (frequently a dealership) has a contract to not only perform collision repairs for an insurer but also to be the sales agent for that insurer’s policies. Dealers, for example, may sell an insurance policy with a new car, and the buyer “may not even know who his insurance carrier is,” Funk said. The customer just knows insurance is included in his monthly payment, and if he is in an accident, he brings his car back to the dealership.
Karen Fierst, an industry consultant who has had clients in several Asian markets, said insurance is sold through dealerships in China as well. She said many people in China may be just getting their driver’s license and buying their first car all at the same time and “don’t have a clue about how to buy insurance, so buying it at the dealership is actually a value-added” service. Fierst said the dealership may sell several different policies, but in any case, “the insurers have much less market leverage than they do here.”
Like Fierst, Funk said independent shops selling policies often have both insurance sales agents and estimators in their front offices. This offers customers one point of contact, and offers the dealership or shop commissions (sometimes 25 or 30 percent) on policy sales.
Funk acknowledged the arrangement gives a shop or dealership more leverage in repair negotiations.
“When I send my field guys into a repair facility and they say [the shop] should be repairing this part, not replacing it, [the shop] simply says, ‘No,’” Funk said. “The body shop manager contacts the general manager of the dealerships who contacts AIG and says, ‘Keep your guys out of my shop or I’m pulling my book of business and going with this other insurance carrier.’ So you have to walk a fine line.”
Could such an arrangement ever make its way into the United States?
“We’ve actually gone exploring: Are there any roadblocks, are there any regulatory issues, or any collusion issues [related to] the dealership selling the policy,” Funk said. “So far we haven’t found any. It’s just not something that’s traditionally been done.”
Government calls for changes
As some shops here push forward with lawsuits, legislation and calls for regulatory action to curb what they see as unwanted involvement in the industry from repairers, the government in Australia is already paying close attention to the industry there.
Last summer, seven months after a government-created committee was formed to investigate the relationship among Australian shops, auto insurers and consumers, the committee issued a sweeping 166-page report recommending some dramatic changes.
The committee, for example, said it “found that a significant number of vehicles are subject to poor quality repair work.” This highlights the need, the report states, for better accountability for adjustors and the country’s 12,000 licensed repairers, a better balance of power between shops and insurers, more transparency for consumers, and more enforcement of existing regulations.
Specifically, the committee recommended licensing of “loss assessors” and a requirement that they provide details of all structural or safety-related repairs to a national database for random audits of repair quality. It recommended that only OEM parts be used for a vehicle still under manufacturer’s warranty, or notification from the insurer to the consumer if non-OEM parts are to be used on a vehicle still under warranty (in which case it is the assessor’s job “to ensure the part is fit for purpose”). And it called for a mandate for vehicle manufacturers to supply repair specifications to repairers.
Although the committee found that the rate of poor-quality repairs was higher at shops with some insurer ownership, it did not call for a ban on such ownership, believing the other recommendations in the report will adequately address those issues.
Similarly, it found that DRP-like agreements between shops and insurers offer some benefits for consumers, so rather than a ban, it suggests more requirements for consumer disclosure of the agreements and tougher penalties for practices that prevent consumers from exercising their right to choose a shop.
But the committee also found that insurers “exert price pressure on repairers which has [resulting] effects for the quality of repairs,” and recommended that Australia’s “Small Business Commissioner” assist repairers “in negotiating contract terms with insurers.”
It also recommended improving transparency for consumers by giving them more access to digital images of repairs, and the creation of a rating system and “name and shame” registry for shops and assessors.
One market difference between Australia and the United States is that two insurers in Australia hold a combined 60 percent market share there; that’s more market share than the top six insurers here in the U.S. have, combined.
Associations speaking together
Collision repairers and their plethora of state, regional and national associations may have something to learn from their counterparts in the United Kingdom: the power of working together.
Earlier this year there, two associations, the National Association of Bodyshops (NAB) and the Vehicle Builders and Repairers Association Limited (VBRA), announced they will stand united, using “a single authoritative voice,” to take on what they called the “ever increasing challenges faced by the collision repair sector.”
“We will each maintain a distinctive approach whilst establishing a unified voice,” Frank Harvey, who leads the NAB, said.
“We have always worked together when necessary and expedient,” Malcolm Tagg, director of the VBRA, said. “VBRA and NAB working alongside each other more frequently will present a more cohesive and authoritative approach to many of the issues and challenges affecting sustainability in the sector.”
One of those challenges is a U.K. government that, similar to that in Australia, is very interested in seeing changes in the auto insurance and collision repair markets. One key proposal of concern to the collision repair and insurance industry was one to establish some level of mandatory quality inspection process; that proposal, however, was left out of the final set of remedies proposed by the “Competition and Markets Authority” (CMA). Although the CMA said it has concerns about repair quality and the lack of a process to assure consumers get quality repairs, it found that such concerns did not directly impact competition, which was the mandated focus for its investigation, and thus declined to include those initial proposals in its final recommendations.
Buy a brick to help training
The last stop on this global tour of the collision industry may be unexpected: Haiti. Located less than 700 miles from the southern tip of Florida, Haiti was already among one of the poorest countries in the world even before a 2010 earthquake and tsunami killed more than 100,000 people and destroyed 280,000 buildings.
Some of those destroyed buildings included those operated by Haiti Arise, a non-profit organization working to bring services and education — including technical career training — to young people in Haiti. (Seventy percent of the population there is between the ages of 8 and 25.) Haiti Arise was founded by a Haitian native who as a child, after being abandoned by his family, ended up in an orphanage, thanks to a sponsorship by a family in Canada. He eventually moved to Canada for college, then later returned to his native country to help others through the Haiti Arise organization he formed.
The technical school the organization is now building will include a collision repair training facility — and the industry in North America has launched an effort to help raise donations for that project.
The Collision Industry Conference and its sister organization in Canada are seeking donations of new or nearly-new tools and equipment. Tax-deductible financial donations are also sought for bricks inscribed with the donor’s name that will be incorporated into the new facility.
It’s a way to impact the global collision repair industry — and a country very much in need — without leaving your shop. For more information, visit http://ccif.ca/Haiti_Arise_Project.html
