Allstate Revises Pricing Agreement; Repair Techs and Replacement Companies Feel The Effects
by Penny Beverage
Almost a year after Allstate Insurance of Northbrook, Ill., shocked the industry with the institution of its Customized Offers™ program, it has rocked repair and replacement shops across the nation again with the revisions to its Allstate Glass Service Provider Agreement.
(See September/October 2000 AGRR, page 20, for related story). According to a letter sent to Glass Claims Express Participants on September 10 by Sherri Beaver, manager, national glass program for Allstate, the following discounts were applied, effective
|A||56 percent**||56 percent|
|B||56 percent||56 percent|
|C||45 percent||37 percent|
|D||38 percent||49 percent|
*these territories are in accordance with those set forth at the institution of the
Customized Offers program. **all percentage discounts reflect percentages off National Auto Glass Specifications (NAGS) list prices.
For each replacement, Allstate will pay $39 for labor. Previously, Allstate’s pricing guidelines for replacement were as follows:
|A||56 percent||56 percent|
|B||56 percent||56 percent|
|C||35 percent||44 percent|
|D||21 percent||35 percent|
In addition, windshield repair pricing has been revised so that the company will now pay $50 for the first repair for each customer; $10 for each additional repair; and a maximum of $70 per customer. Prior to September 20, the company paid $60 for the first repair for each policyholder; $10 for each additional repair; and a maximum of $70 per customer.
According to Beaver, any additional discounts offered via Customized Offers will remain in effect unless revised by the shop-owner in accordance with established procedures. For example, if a replacement technician currently offers five additional percentage points off the NAGS list price in Territory C, as of September 20, he will be offering a total discount of 50 percent (unless he revises his own Customized Offer).
In addition to these pricing revisions, “Allstate is changing the rotation availability to participants with a competitive customized offer,” according to Beaver’s letter. She continues, “When an Allstate customer expresses no preference of glass service provider, LYNX Services [which manages Allstate’s Glass Claims Express program] will continue to present the names of three participants to the customer. The change is in those areas where there are customized offers in effect from three or more participants; only participants with a customized offer will be presented.”
Finally, Beaver adds, “Customer choice of service provider has been and will always be honored in the Allstate Glass Claim Express process.”
Beaver was not available for comment at press time.
Allstate’s move is not without controversy. The insurer has already received several complaints from some of its glass service providers, including a letter from the National Windshield Repair Association’s board of directors, which has seen extreme effects on its members already in the few days since the revisions took effect. The association has taken its own action in sending a letter to Allstate questioning these price revisions and urging it to return to the previous agreement (see sidebar below).
|NWRA Takes Action
While many independent shops are at a loss for how to handle these price decreases, the National Windshield Repair Association sent the following letter to Northbrook, Ill.-based Allstate Insurance Co. on September 26 in an attempt to reverse the pricing revisions:
The National Windshield Repair Association is dismayed at Allstate’s recent decision to devalue windshield repair by reducing reimbursement rates. Windshield repair offers Allstate its most effective tool to reduce windshield claim severity. Reducing windshield repairers’ compensation will certainly result in reduced windshield repair ratios at Allstate and that will result in increased cost of glass claims. This decision is particularly surprising since we have recently become aware that Allstate/Lynx has contacted many of its larger vendors and pressured them to improve their repair ratios. Reduced compensation is unlikely to produce increased repairs.
Windshield repair specialists have the ability to produce a high volume of windshield repairs because they are willing and able to invest in the people, equipment and training necessary to provide large numbers of windshield repairs. Reduced revenue per repair will impair windshield repair specialists’ ability to make such investments. Indeed, it will impair the ability of the repair-only specialist to continue to provide claims resolution to Allstate. Since more gross dollar profits are available to a service provider when they replace rather than repair a windshield, your reduced rate of compensation actually encourages companies who have both capabilities to replace.
Reducing compensation combined with Allstate’s job assignment policies has created a situation that will remove from the competitive arena the small repair-only companies. The loss of these companies from the market place will reduce the pressure on the market to provide the maximum repair numbers possible and result in reduced repair ratios.
We strongly request that you revisit both your pricing and job assignment policies. We are amazed, and, frankly, somewhat puzzled, that you would change your policy in such a manner as to create an incentive for replacement rather than repair. We are concerned about your network provider’s ability to objectively evaluate windshield repair issues.
The National Windshield Repair Association stands prepared to provide a different view of repair, its severity-reducing potential and its related issues.
David Taylor, NWRA President
NWRA Board of Directors: Bill Batley, Novus Windshield Repair Co; Dee Berge-Morse, Dee’s Windshield Repair; Leo Cyr, Novus Windshield Repair; Richard Campfield, Ultra-Bond; David Casey, SuperGlass Windshield Repair; Greg Goree, OIL@WORK; Walt Gorman, A-1 Windshield Doctor; Paul Gross, Gross Enterprises; Jackie Newman, Mobil Glas 2000 APS; Joyce Newsome, Tri Glass; David Schuh, WSR Manufacturing; David Shores, Glas-Weld Systems; and Jim Pottorff, Liquid Resins.
Feeling the Heat
In an industry already marred by low pricing and profits, both replacement and repair technicians are feeling the toll of the new discounts. Mel Neulander, president of Mr. Chips Windshield Repair in Hackensack, N.J., a repair-only business, attributes the price decreases to a trend in the insurance industry. He said that in the six years he has worked in the windshield repair industry, he has noticed the shift and that all of the companies drop their prices—almost annually—for what they will pay for windshield repair.
“It used to be $60, $10 and $10. Now it’s $50, $10 and $10, which is the same price State Farm has,” Neulander said. “I work with about 16 insurance companies and one by one I feel the whole industry is becoming price-fixed. When I started six years ago, I had the freedom to charge what I felt was fair, but that has changed … All of the insurance companies are getting on the bandwagon of setting windshield repair prices.”
Allstate Price Changes
|Territory A Replacements*||56 percent||56 percent|
|Territory B Replacements*||56 percent||56 percent|
|Territory C Replacements*||35 percent||45 percent|
|Territory D Replacements*||21 percent||21 percent|
With a $10 decrease on every repair, a repair technician who does 75 jobs a month for Allstate will lose $7,500 a year. “In a business like ours, there’s not a way to make up for that much of a loss,” Neulander said.
Michael Dollbaum, owner of Touch of Glass in Williamston, N.C., attributes the continual price drops to the insurance company’s policy of working with a third-party glass claims processing unit. “I would think it’s just a cost-saving measure to offset the costs of their third-party handler,” he said.
However, he added, the drop will make him think twice about taking on mobile repairs for Allstate—or other insurance companies that raise their prices—at such a cost to him. “What this will do is decrease my overall radius that I’m willing to drive for them to 45 or 50 miles,” Dollbaum said.
Neither Dollbaum nor Neulander participates in Allstate’s Customized Offers program, on the basis that it would cause their businesses more harm than good. “I can’t see lowering my prices, when repair is the only thing I offer,” Dollbaum said.
Neulander agreed. “I’d never in a million years participate [in the Customized Offers program]. I’m a free independent business,” he said.
Both also agreed that this is not the end of the price decreases. “I’m sure this isn’t the end of it. I can’t detect what causes it when, but I know, that given enough time, they will drop prices again,” Neulander said.
While repair and replacement companies across the board are feeling the effects of these decreases already, most feel there is little they can do to stop the prices from falling further.
Stewart Weatherman, who does both repair and replacement at his shop, Diamond Auto Glass in Phoenix, is also feeling the effects in both areas, but like his fellow shop owners, suspects there is little action that would help.
“There’s not a lot we can do, other than look at different billing procedures,” Weatherman said.
Neulander agreed. “There is very little a small industry like ours can do about it,” Neulander said. “There may be some sort of class action suit we could file, or some remedy, because it’s not an even playing field. But because we’re all independent, small businesses, no one’s going to do anything.” n
Penny Beverage is the editor of AGRR magazine.
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