Volume 9, Issue 4 - August/September 2007

Canada Dry
Once Booming Insurance Market Slow North of the Border
by Les Shaver

Ford Lake, owner of Barrie Glass and Mirror in Barrie, Ontario, used to get lots of insurance business. Unfortunately, those days have passed.“We do one or two insurance jobs a month,” Lake says. “When I bought this company nine years ago, insurance work was steady. But now, volume is way down.”

Unfortunately, Lake isn’t alone. In the Eastern Canadian provinces, insurance business is almost non-existent for independent shops. That’s left a market in many provinces with a few independents, like Ford, fighting for cash customers.

Fundamental Problem
Ten years ago Canadian independent glass shops competed freely for insurance customers. But over the past ten years, the climate for small, independent auto glass shops has changed. At least, it’s changed in the bulk of the Canadian provinces, causing many to wonder if similar circumstances are in the future for independent shops in other countries.

To understand the Canadian auto glass climate and why people like Lake are losing their work, you first must know about the insurance situation. In the majority of the provinces, it’s like the United States: a few dominant carriers divvy up the jobs.

In Manitoba, British Columbia and Saskatchewan, the provincial governments control insurance. In the provinces such as Ontario where private companies dominate, small shops aren’t getting the business they once enjoyed. Why? Many shop owners say the issue is London-based auto glass goliath Belron.

Over the past decade, Belron acquired the major players in the Canadian market, such as Speedy Glass, Standard Auto Glass and Apple Auto Glass. 

Serge LaPorte, vice president of sales and marketing for Belron Canada, says the auto glass climate in Canada, of which his company is now a large part, is just like that of any other service business. “The auto glass sector is challenged as any other service and retail sector in Canada,” he says. “Consumers are more and more demanding and their needs for quality and professional service is increasing and they expect more out of the auto glass industry.”

While impressive, though, Belron's auto glass offerings might not even be its biggest pawn in the insurance game. Belron’s purchase of claims administrator TCG International gave it the biggest boost in the competition for claims administration business.

Many glass shop owners contend that, by having control of claims administration, Belron can funnel business to itself in provinces where private insurance companies dominate. For instance, in Alberta, Belron companies get much of the insurance business, according to Ivan Mayer, president of Crack Master Distributors in St. Albert, Alberta. His company used to get about 35 percent of its business from insurance channels. Now he says that number totals about 10 percent. 

These stats don’t surprise Donald Deane, owner of Mother’s Totally Mobile Auto Glass in Hamilton, Ontario, another province with private insurance. “They [Belron] have control of the network and the insurance work,” Deane says. “Most insurance work goes through them now.”

That’s bad news for Deane. “If anybody calls for insurance work and I have to send them off to the network,” Deane says, “that’s the last I ever hear of them. That’s the Belron people. They control everything in Canada. Unless I can nail them down right then and get them to say they’re coming here, we never get a call back. My insurance work has pretty well dropped off.”

Deane isn’t alone in this assessment. “Belron has the insurance industry sewed up,” says Warren Bennewies, owner of Warren Auto Glass in Seaforth, Ontario.

Lake says this Belron dominance is a big reason his business has fallen off, as well. “Belron is directing the work to authorized dealers,” Lake says.

However, LaPorte says the company values customer choice. “It is up to the consumer to select his glass shop,” he says.

Government Control in the West
What Lake and Deane experience in Ontario is far different than what Rose Desousa, owner of Chase Auto and Window Glass in Chase, British Columbia, sees. That’s little surprise considering the companies are almost on opposite ends of Canada—the second largest country in the world.

Still, the differences between the two shops reveal a lot about how the business climate for independents varies from the eastern to western ends of Canada. Desousa has been in business for four years and owns the only auto glass business in Chase. She doesn’t compete with what she calls the “big names” in the Canadian auto glass market.

This lack of real competition is only one of the advantages that Chase Auto and Window Glass sees. It also gets a steady diet of insurance work from The Insurance Corp. of British Columbia (ICBC). The governmental organization, which was established in 1973, provides universal auto insurance to motorists in British Columbia. 

Doug Peters, the general manager of operations for All-West Glass, a 25-shop chain based in Smithers, British Columbia, also benefits from the way ICBC hands out work to auto glass shops (and a marked lack of local competition). “We get a lot of insurance work,” he says. “We get it because it [insurance] is government-run. The bulk of our work is ICBC. Belron doesn’t do processing for it.”

But even in the areas where it doesn’t administer claims, Belron has an effect on the provinces with government insurance. A few years ago, Speedy was kicked off of ICBC’s network for a short time (see the May/June 2004 issue of AGRR, page 16) and its small competitors felt the ramifications.

“When they lost the ICBC work, they flooded the market with cash on windshields,” says Gordon Harris, owner of Econo Glass in Williams Lake, British Columbia. “Some were going for as little as 20 percent off of NAGS.”

Harris wasn’t the only one feeling the pain. “They dumped pricing to a dollar below people’s deductibles,” he says. “That messed up things for awhile.”

That move forced other shops to make changes. “All the vendors in the province matched up with them [on price],” Peters says. “It had some impact, but it wasn’t dramatic.”

Now that Speedy has been reinstated (by ICBC), prices are going up. “Now things are definitely picking up,” Harris says. “Now it’s about 8 percent off of NAGS. That’s better than cash.”

LaPorte notes that Belron acquired Speedy after this time period. “We are not in a position to comment [on] the strategies taken at that time,” he says.

Cash Cow
So once Belron takes control of an insurance market, what happens next? If independents can secure jobs, their pricing goes up. “They actually give me better pricing than what I was working with for years,” Deane says.

Peters is a fan of Belron’s pricing as well. In fact, he’s much happier his competitor is administering jobs than TCGI. “It’s been a good change,” Peters says. “We’re getting a little more business. Belron is helping the market because they’re bringing the prices up.”

LaPorte says this is no coincidence. “Auto glass specialists [technicians] work hard at doing what they need to do,” he says, “so they deserve a fair price that takes this into account.”

But without a large number of insurance jobs, independents in provinces where Belron is strong have been forced to fight over the remaining cash customers. That’s created lower prices. “The margins have narrowed a lot,” Mayer says.

To stay in business, independents say they must adjust. “I liked the insurance work because it paid more,” Deane says. 

“That was always nicer, but things change. It’s not going to do me any good to complain. I’m going to try to adjust to it and go back to cash customers.”

So far, this strategy has worked. “My retail sales have gone up,” Deane says.

But cash business has both its good and bad points. “Since I’m doing less insurance and dealer work, I’m doing more cash work,” Deane says. “Cash flow has improved considerably. I’m not getting the insurance rates. I’m getting more for my retail jobs.”

Then there’s Bennewies. His story is slightly different than his competitors in the eastern provinces. Despite losing insurance work, cash sales are propelling his company to new heights in volume. “We’re busier than ever before,” Bennewies says. “I’ve been in business 12 years and we’ve never been this busy.”

Even Mayer, who lost a large portion of his insurance business, contends there’s enough work to go around, though Crack Master, which does both repair and replacement, isn’t exactly an independent with 75 locations. “The market is brisk up here,” Mayer says. “There’s still a lot of independents out there.” 

No NAGS:
The Declining Use of Benchmarks in Canada

It used to be that insurance companies all over Canada used NAGS not only for part numbers, but also for pricing. However, as Belron’s influence has grown over the industry in the country, the use of NAGS has diminished. “Currently, only four or five Canadian insurance companies utilize the NAGS benchmark as the primary mechanism for determining their price point[s] for settling glass claims,” says James Patterson, director of glass product management for the Specialty Business Unit of Mitchell International, which is the parent company of NAGS. “In the late 1990s, not only were there more carriers utilizing the benchmark, but there were substantially more retailers in the market competing for that insurance business.” There is a school of thought that NAGS makes it easier for independents to do work with insurers because it provides a centralized pricing and parts mechanism. Without that common language, it’s difficult for insurers to work out agreements with a wide range of independent shops. That makes them more likely to work with the bigger chains. “The value we bring with a benchmark is that you can have several hundred insurance companies negotiating with 15,000 retailers,” says Patterson. “For everyone to have to negotiate without a benchmark, it’s a mess. How does a shop tell an insurance company how they price? Without a benchmark, it becomes really time-consuming.”

Les Shaver is a contributing editor for AGRR magazine.

 


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