Cost Shifting is Making a Comeback

April 22, 2004 by
Filed under: Uncategorized 

The origin of cost shifting actually evolved innocently. It is an adaptation of the interpretation of a language spoken by a select group of people and understood by almost no one. Yet this language, as confusing as it is, and as ambiguous as it can be, has served the collision repair industry well. It has gotten us where we are today. It has made many people rich; insurance companies and a few bodyshop owners have profited from this form of communication. And let’s not forget the customers. Millions of collision repair customers have driven away from repair shops as happy as can be because their cars are like new again.

Cost shifting serves one purpose and satisfies one group of people. Auto damage appraisers are the masters of this language–this form of communication. They have developed it as a defense mechanism, as a form of survival. Like a server in a computer network, they are the vital link between the three parties involved in the collision repair process. The appraisers have learned to take three separate languages and translate them into something everyone can understand.

The three parties have three distinct interests. The customer wants his or her car repaired to pre-accident condition (or better) with little or no out-of-pocket costs; The repair shop wants to make as much money as possible, while at the same time creating satisfied customers and building a great reputation; Insurance companies want to make as much money as possible by paying as little as possible for repairs, while at the same time creating satisfied customers and building a great reputation.

And then there?s the auto damage appraiser who has to make the dreams of these three parties reality. The customer expects the appraiser to settle the claim as quickly as possible, and in such a way that the customer’s car looks better than it did before the accident (you know, 4 new tires because replacing one just wouldn’t be prudent, and a complete paint job because, what the hell. it’s someone else’s money.). The insurance company expects its employee (the appraiser) to closely follow its rules and pay for only what the talking heads in the high-rises think the bodyshops need to perform the miracles their customers expect. The repair shops expect to be paid enough, or more than enough, to perform the miracles their customers expect.

This is a tall order to fill. If we consider the auto damage appraiser the server in this network of incompatible workstations–the customer, the insurance company and the repair shop–there has be some creative programming done to enable the appraiser to handle the communication between the three parties. Essentially, what the appraiser has to do is trick each party in this network into understanding one another. He has to keep the customer completely in the dark, lie to his company and convince the shop manager to play along in his little game. And once this programming has been put in place, he can walk away and move on to the next task. Once everything has been set in motion, balance is usually maintained and everyone is happy. This system has worked well for years.

Now all of a sudden new software is being developed. Suddenly the software is clever enough to go back and recheck its input and output, just to make sure no corrupted data gets into the system. Suddenly the systems begin to crash because this new software is checking the function of the old software and is finding lots of bad data. And instead of this bad data being allowed to bounce around the system harmlessly as it did in the past, this new software is recognizing it, and now we get “FATAL ERROR!.”

Well, that FATAL ERROR has hit us all and it’s time to reboot. The appraisers’ clever software no longer works well. The secret is out. Insurance companies are reinspecting many more vehicles than they did in the past, and worse than that, the consumer has gotten wind of these practices. Consumers are more savvy today, and with the encouragement of the greedy little lawyers, they are getting more involved and taking a closer look at the repairs, the repair process and the practices of our industry. We are being held accountable, and guess what? Lying and cheating and fraud are illegal.

If the insurance appraiser writes “Undercoating ??. .3” on his appraisal to pay for the .3 it will take to R&I a door handle because he’s “not allowed” to pay to remove door handles when blending a door, and you don’t undercoat, you’ve just lied to the insurance company, cheated the customer and put yourself in a dangerous position. All this because some bone head three thousand miles away decided it was unnecessary to remove a door handle when painting or blending a door. Of course, that same bone head has also decided that if the clear coat starts peeling around that door handle because it wasn’t removed, it’s your fault?.you must have done something wrong.

Or, and here’s a good one, the appraiser offers to give you 2 hours to straighten an apron that has no damage because he’s not allowed to pay to color sand and buff. He knows you nib and buff every car because you’re as much as a fanatic as are your customers. He sees you’ve hired someone whose only purpose in your shop is to buff every car that comes out of the paint booth. Yet he still insists that you call him after the car is painted so he can see that you really buffed the thing before he can pay you for it. Or he offers you some extra time somewhere else on the job so you won’t bother him about the buffing.

This is stupid. It’s moronic. It’s a lose, lose, lose situation. The appraiser, who, by the way, thinks he’s won, has really lost. He’s done something dishonest to please his boss, who would not be pleased if he did the honest thing. And if his boss catches the appraiser trying to please him, he won’t be pleased at all and the appraiser could get fired. Convoluted logic or what? The insurance company loses because, well, their own appraiser just screwed them. The bodyshop loses because even though it got what it needed to do the job correctly, it didn’t really. It got paid to do something else–something it didn’t do. And if the customer compares the insurance appraisal to what was done, or the insurance company sends someone out to reinspect, there’s gonna be hell to pay. Your customer will be on the phone to that lawyer with the three page spread in the Yellow Pages, and the insurance company will label you a crook when they’re the ones who framed you??set you up to look like an idiot.

Now, the only party who doesn’t actually lose from all this craziness is the customer. If this game has been played fairly and all the liars and cheats have been honorable, trustworthy and sportsman like, the customer’s car gets repaired to pre-accident condition. The customer doesn’t lose, but he doesn’t win either. Face it, he’s been flimflammed. The end does not justify the means when the means can get everyone involved into trouble if a customer decides to critique your work like some engineer from Consumer Reports. And you can bet, if he’s anal retentive enough to notice that the insurance appraiser paid you .3 to undercoat, and he can’t find any undercoat because, after all, you only fixed a ding in his hood, he’s probably got enough time on his hands to remedy the situation through the services of that lawyer with the three page spread in the Yellow Pages.

Cost shifting has infected our industry like a computer virus. But I do see things changing. It may not be changing yet in every area, but in my area it is. Unfortunately, after years of decline, cost shifting is now getting worse. As our labor rates rise, the pressure on appraisers to reach agreed repair prices with shops is causing many to brush up on their cost shifting skills. Also, many of the shops in my area are demanding to be paid for what they do, and are actually doing everything they get paid for. That’s the key, the most important part of this battle. If you get paid to do something, do it. If it doesn’t need to be done, don’t do it, but document that you didn’t do it and don’t charge the customer. Leave it up to the customer to decide what to do with the extra money.

If the appraiser tries to pay you for something you know you’re not going to do, like R&I a door handle when you know you won’t because you’d never get it back on the car without scratching the new paint, tell him you won’t remove it and you don’t want it on the estimate. You’ll get a reputation., Word will get back to the insurance companies from the appraisers about your honesty, and the next thing you know, you’ll be getting paid what you deserve (We can dream can?t we?). And if you have to deal with a company or appraiser who insists on playing the cost shifting game, cover your butt by writing your own appraisal reflecting how you repaired the vehicle. Make sure the customer knows exactly what you did and didn’t do. And write on the final invoice “Repaired per attached body shop estimate.” If there’s ever a reinspection, or someone questions what you actually did to the vehicle you’ll have documentation and a clear conscious.

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2 Comments on Cost Shifting is Making a Comeback

  1. Pete on Fri, 23rd Apr 2004 5:23 am
  2. Don’t leave the money on the table. In the case of the door handle not being removed, one should not get the R/I. However you are intitled to an appropiate masking labor amount.

  3. Brad Larsen on Fri, 23rd Apr 2004 6:20 pm
  4. John, the next step in the evolution will be to do like the wiseguys use to do and simply put a thousand dollars and a baseball bat on the table and say," Do you want to do business or play games?"
    At least they were doing it up front & over the table.

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