The insurance industry has its say on its relationship with the AGRR industry
by Les Shaver
Poll many glass shop owners about their relationship with the insurance industry and you’ll probably hear any combination of smirks, groans, laughs and downright unprintable words. But it seems there’s one constant: Shops think, as a rule, the insurers just don’t care.
“I would love it if the insurance companies opened some type of dialogue on a local or regional level but I haven’t experienced that,” said Linda McCabe-Oristano, president of American Patriot Glass in Islip, N.Y. “There’s really no outlet for me. If they had an open dialogue with local glass shops and they could get feedback, it would be good. It’s a tough thing to do because you’re dealing with national companies.”
After awhile, the complaints of people like McCabe-Oristano blend into a chorus of howls. And, they often lose their impact. So, in an effort to get the other side of the story, AGRR magazine went to the insurance industry to get some guidance about how they think glass shops should handle certain issues, such as deductible waiving and steering, and overall impressions of where the rocky insurance/auto glass relationship is heading. And, not surprisingly to people like McCabe, there was shaky response.
Stalwarts, like Bob Bischoff, auto glass manager at State Farm Insurance Co., and Hal Hare, corporate claims manager at State Auto, stepped up to the plate to talk to the industry. But for others, responding to a magazine serving the auto glass replacement industry was low on the list of priorities. Allstate replied through its corporate
communications office, while Progressive and The Hartford Group declined to comment. GEICO seemed to misplace AGRR’s inquiry and Farmer’s made no effort to respond. In other words, maybe McCabe has a point.
The insurers and industry watchers, such as Dennis Liphardt, publisher of the Lip Service Newsletter, an influential auto collision industry e-letter, who did chat with AGRR seemed to paint an interesting—and somewhat inconsistent—picture of where glass shops should go with problems and where the insurance business is going.
One issue Hare was quick to jump on was deductible-waiving. While the legality of the practice varies by state, Hare said it generally hurts insurers.
“Unfortunately, many times waiving the deductible for a vehicle owner simply results in a pass-through expense to the insurance carrier as the shop tries to hide the deductible within an inflated invoice,” Hare said. “This is improper, unethical, and could be illegal. It could be considered insurance fraud. Keep in mind the insurer has already given the insured a discounted insurance rate to assume a portion of their risk/loss.”
Then, he paused, and considered the other side.
“If the local state permits waiver of deductibles and a shop is willing to reduce its profit margin by waiving the deductible to secure a job, how could we object?” Hare asked.
But when states don’t permit deductible waiving all bets are off. In those states, Bischoff thinks shops should go directly to the powers that be.
“State Farm would certainly be concerned about any illegal activity involving a State Farm policyholder or an offer-and-acceptance glass company,” he said. “However, State Farm is not a policing body for illegal activity, and the proper authorities should be notified.”
After this, though, Bischoff said shop managers should contact the insurer.
“If someone has been made aware of a situation that alleges policyholders’ deductibles are being waived or allegations involving steering issues, they can contact State Farm glass claim services (800/291-8650). We take both of these situations very seriously and would investigate the situation and take appropriate actions to see that it is corrected,” he stated.
Allstate spokesman Mike Siemienas said his company is currently evaluating how it’s going to handle deductible waiving, but it would like to know about what’s going on.
“There are some measures that we’re still looking at that that I can’t get into,” Siemienas told AGRR. “We do investigate that [deductible waiving] in-house.”
Deductible waiving may not draw a unanimous rebuke from the insurance industry; but, on the surface, denying the customer’s right to choose does.
“Customers are supposed to be able to choose the shop they want to go to,” Siemienas said. “They have the option to go to our network shops, but, in the end, the customer still has the ultimate choice.”
If this is violated with State Auto insureds, Hare said shops should take necessary steps. “If steering is seen, it should be reported to the insurance company and perhaps the state’s department of insurance.” (For a related article on steering, see page 44.)
The issue: Are the things shop see and report as steering actually steering?
“There are a whole bunch of steering laws, supposedly,” Liphardt said. “I don’t think any of them work. They’re words on paper. It’s easy to get around. No insurance company is stupid enough to say to a customer that you must take your car to this shop. That’s real steering.”
Instead, insurance companies may go to what Liphardt thinks is a more subtle form of steering.
“What the networks may say is, ‘We’d like you to use shops in our organization. Here are some shops in your area that you can go to. I can help you chose which one you’d like to go to,’” Liphardt said. “They didn’t tell them to go a specific repair facility. That’s been a way around some of the steering legislation that’s been passed.”
With this uncertainty, Hare urged shops to be on top of the situation before they report a steering charge.
“I would encourage shop owners to be sure of their facts before a submission to the department of insurance,” he said. “Many times the perception of steering turns out to be no preference mentioned. Most cases I have investigated fall into this category. Typically the insured fails to mention your shop and indicates ‘no preference’ to the claim handler.”
In fact, insurers often write and, at least, read the scripts given to a network’s customer service representatives. Because of that, Hare is especially interested in hearing what’s being said in a script.
“Should you find something offensive in a script, I would like to know about it,” he said.
“The script is designed to get the claim moving towards resolution, and is not intended to drive anyone out of business. Likewise, if my TPA is not following my script, that is an issue I would appreciate hearing about.”
Before reporting steering, a shop also must know what an insurer’s definition of steering is.
Allstate, in fact, sees steering as something entirely different from what the glass industry seems to.
“We view that as the shop trying to persuade an agent or an employee to steer a customer to the shop in some way, shape or form,” Siemienas said. Allstate will then investigate those charges internally.
“If steering is charged, we do investigate to see if it is taking place,” he added. “If we determine it is taking place, it can lead to termination of the agreement with that shop.”
On the opposite end of the spectrum is Hare, who actually encourages glass shops to contact his agents. “There is nothing wrong with glass shops making sales calls to agents,” he said. “In fact, I encourage shops with competitive pricing to visit my agents. There is nothing wrong with keeping the money in the local economy.”
But this does mean that agents have to understand the glass business. “The challenge for me is to educate the agency staff so that they will recognize a fair price offer,” Hare added.
“Our agents are permitted to go outside our formal program if they desire.”
While items like steering and deductible-waiving dominate insurance discussion, there are other items that also popped up on the industry radar. One hot item is State Farm’s auditing process, which the insurer defends. Basically, the insurers ask for the best price from shops and reserve the right to audit to get that price.
“In our current offer-and-acceptance program, glass companies agree to invoice the price of the most competitively priced part that will return the damaged vehicle to pre-loss condition,” Bischoff explained. “We currently have an auditing process in place to ensure that our offer-and-acceptance agreement is being followed.”
Neither the collision nor glass industry likes this policy, but Liphardt wonders what the fuss is about in the collision industry he follows.
“I think it could be best thing that happens to them,” the publisher said. “State Farm is saying that it wants the lowest price of any other insured customer. If you’re giving a concession to another customer, you have to give that rate to State Farm. State Farm is the biggest customer. It wants the lowest price, but if shops don’t give anyone else a lower price, they will pay exactly what they have been.”
In fact, Liphardt thinks if insurers had their way, they would push for even more control.
“I really believe we will follow the medical industry and there will be HMO’s for auto insurance,” Liphardt said. “It’s possible to do that the way they assign so many customers to a specific repair facility and they pay the repair facility so much money up front to repair the vehicles for that fleet. That’s one of the possibilities.”
But Hare doesn’t see this happening.
“While an HMO menu might be attractive to an insurer and insured [receiving a discounted insurance rate for those who choose to participate], I have reservations that the concept would be accepted by state regulators,” Hare said. “Even benign direct repair auto programs are coming under fire for ‘steering.’”
Combine this sort of state to state discrepancy in laws and a volatile relationship between the auto repair and glass industry and insurers and you really only get one thing: uncertainty. That makes the future very hard to predict, according to Liphardt.
“I have no idea what they’re [the insurance companies] going to do,” Liphardt said. Of course, if the lines of communication would open up more between the groups, it may be a different story.
Les Shaver is a contributing editor to AGRR.
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