If you have been reading my newsletter for very long you know that I am totally against shops saving deductibles, paying for rental cars, paying off tow truck drivers, agents or any other form of payola that is designed to put more cars in a shop.

While involved in a recent conversation with a shop owner I have known for years, I began to rethink my position. I am still against shops that, as a matter of policy, advertise free loaners and "saving your deductible", but at times a shop might be forced to do something if for no other reason than to defend themselves against insurer practices.

Let's use what is going on right now with AAA Michigan as an example. If you are a DRS shop with AAA you must work for $34.00 per labor hour in the tri-county area surrounding Detroit (which is $2.00 off the prevailing rate. Okay, you guys from other areas and other states can stop laughing now!), plus give AAA a parts discount of 10% on domestic cars. When business was good, the DRS shop didn't complain too much because they were getting a fair amount of business. The last few years however, has seen a huge downturn in the number of claims while at the same time AAA has increased the number of their DRS shops thus spreading the available work even thinner. Now with AAA using their new "Concierge" type program, the shops are losing the drivable jobs yet they are still forced to either stop being a DRS or swallow the poison. AAA is selling the Concierge service at the call center and the cars are going immediately to the Hertz office in Livonia to have estimates written by AAA estimators.  Then all of these jobs are sent to Manheim for repair before being returned to the policyholder at the Hertz office.

If the customer accepts this new program, shops have no opportunity to repair any of these jobs. In fact, the shops don't even know what jobs they are missing. The facility owners I have talked to are miffed. They know their drivable AAA jobs are down, but it is almost impossible to determine how much of their reduced AAA work were drivables that never had a chance of crossing their doorway.

Trying to attract some of this work to their shops might only work by using distasteful tactics. If a DRS shop offers to pay all or portion of the insured's deductible, (which they would have to pay AAA anyway in the form of discounts) and they advertise that they are doing this for only AAA customers, they most likely will be able to sway some people away from Manheim. If the insured doesn't have a deductible, maybe a cash rebate might be the determining factor to obtain the work. I hate this, but what else is a shop owner going to do since they are no longer have an opportunity to sell their service. Desperate times call for desperate measures.

AAA probably doesn't like to read this, but what is the industry supposed to do, sit by and watch them take total control of your future?

I don't feel AAA will be satisfied just controlling the smaller drivable jobs. In my mind it won't be too long before, like Progressive, they will want all the work to go through their Express Claims service. AAA DRS shops today must have a real sinking feeling as they look towards their future relationship with this company.

It isn't only AAA that the repair industry must learn to defend themselves against. It is also companies like Progressive [although it will be interesting to find out how Progressive will follow up on it's recent declaration of trying to work closer with the repairers - see today’s Press time Update) and Allstate who don't seem to want to work with the repairers to resolve claims issues.

I hope that the collision industry is never forced to use payoff's and rebates as a way of doing business, but if insurers continue to push, push, and push, the dam is going to break. A wife will only take so much from a husband before she tells him to get lost. The same thing can probably be said for insurers. Everyone, no matter how weak they have been in the past, has a breaking point and it seems to me that some insurers are trying to find out exactly what that breaking point is for collision shops. I have the feeling that for most repairers that time is not far off.

Dennis Liphardt
Email denlip@mac.com
LIP SERVICE L.L.C .
Communication & Consulting
A Florida Limited Liability Company