The Wonderful World of Claim Handling Companies.

February 19, 2007 by
Filed under: Collision Repair Industry 

You gotta love these independent claims handling companies. They all claim to save the insurer money by streamlining the claims process and negotiating with body shops. If I were an insurer being solicited by one of these companies, the first question I would ask is, “Just what will you be doing that is so remarkable and revolutionary to handle our claims that we, as a multi-billion dollar insurance company that’s been in business for more than 100 years, hasn’t already done? Who the hell are you?”

But then, who the hell am I to tell an insurance company how to operate either?

Akzo Nobel, my paint supplier has decided it can make money handling claims for some of the smaller insurance companies. Someone from Nobilas, as their new claims handling division is called, contacted me about a year ago trying to get me to join their “network” of shops. All I had to do was fork over 8% of the gross invoice amount. I laughed at the clown on the other end of the phone and told him that, as an employee of Akzo Nobel, one of the pioneers in body shop management training and benchmarking, he should know that 8% is more than the net profit for the average collision repair shop. How was I supposed to afford that? Why should I work for free?

Like I have been told by other claim handling companies in the past, this numb nuts told me I could charge whatever I wanted for a labor rate and could build the 8% into the estimate. That way I could make money, Nobilas could make money and everyone would be happy. Explaining that I don’t engage in defrauding insurance companies just so Nobilas could have a reason for existing, I declined the fantastic opportunity to be part of their network. I gave him the names of a couple of shops that I knew would gladly jump at the opportunity to add another pimp provider to their long list of DRP’s.

Fast forward to two weeks ago. I get a call from some yahoo at Nobilas wanting to negotiate an estimate I wrote. I could tell in an instant who, or what, I was dealing with. The raspy voice and arrogant attitude just screamed primadonna-body-repair-tech-know-it-all-turned-appraiser. Thirty years of smoking and sucking in dust and fumes left him sounding like a drill sargeant.

First thing out of his mouth was, “I can only pay $46 per hour labor rate.” I laughed at him and asked him what decade he was in. I then explained the conversation I had with the other guy from Nobilas about a year ago. He told me I could charge whatever I wanted for a labor rate. The drill sargeant just played dumb. Needless to say, they had to send an appraiser to look at the vehicle and negotiate with me. I fixed the vehicle for about $14 dollars an hour more than the guy from Nobilas said he could pay.

Apparently, as long as Nobilas is getting their 8% cut of the total invoice, I can charge whatever I want. Otherwise, their going to be hard asses. I’ll let you decide if that sounds ethical or not.

Speaking of independent claims handlers, today I received an estimate written by some goomba in New York City. He had a copy of my estimate and called me as he was looking at the car in some parking garage in the city. We went over the claim on the phone very briefly and he promised to fax me a copy of his estimate.

In the estimate notes he wrote that the vehicle was in a dark garage and there would probably be a supplement. He also cut my $4300 estimate, written out in the bright daylight, by more than $700. Doesn’t that make sense?

I never did get that FAX but the customer had a copy of his estimate when she dropped her vehicle off. Not only did she have a copy of the estimate, but for some reason the appraiser gave her copies of all the internal paperwork. This includes the estimate assignment, the notes and the invoice for the estimate. You know how much I love to get my hands on internal documents like this. They reveal so much about the inner workings of the insurance industry. In this case the inner workings are a cluster f*&#. Check this out.

The insurance company hires a claims handling company called Scene Access. Scene Access hires a claims handling company called Complete Claims Service, LLC. Now get this, Complete Claims Service charged Scene Access $105.00 to write the estimate. That should really piss you off. $105 for about one hours work. You can’t get half of that from the same insurance company for skilled labor, repairing the vehicle, but they’ll pay some flunkies $105 per hour for clerical work. How do you feel now? Like a cheap crack whore? How’s the treatment for those anal warts and gonorrhea coming along?

At the bottom of their invoice is the declaration that entitles Complete Claims Service to $105 per hour. Click here for a full view of the invoice, but I will spell it out here also.

The shop estimated damage at $4318.59. We appraised the damage at $3614.19. A savings of $704.40!

Whoopee! But what about the $105 estimate fee. And how much is Scene Access charging to hire Complete Claims Service? Now, figure in my supplement. Now figure in the calls to the insurance company explaining this mess, and the time and paper work the insurance company will have invested by the time I finish repairing the vehicle. This big savings is all an illusion. The insurance company would have been better off just sending me a check for my entire estimate. They will be paying that amount anyway.

But that is just in this particular case. The sad and unfortunate reality is that many shops would take what the appraiser wrote and then thank him for being so damn generous. How many shops? Who knows. I would hope fewer now than five years ago. But it must be enough to justify this three ring circus they call claims handling. Insurance companies are smart. They aren’t going to waste money (not for too long any way) hiring a claims handling service if that service isn’t going to save them money. And that right there is proof of the spineless core that makes up our industry. Like a wet noodle, we bend to the whims of our masters. It’s just a whole lot easier than thinking for ourselves.

Sometimes slavery is so much easier than freedom. Freedom requires risk. Most people aren’t willing to take those risks. They aren’t willing to accept freedom. They’d rather be taken care of, even if it means giving up self determination. It really is pathetic.

Just a quick footnote. My latest Software, called BodyShop Office, is ready for beta testing. I apologize to those who volunteered and left me their email addresses. Those messages fell victim to some email house cleaning. So if anyone is interested in downloading my new software and trying it out, while at the same time, helping me shake the last few bugs out, send me an email: sales@bodyshopsolutions.com and I will send you a link to the download. I will soon post detailed information about the software and all of its features. For now, let me just leave you with something to think about. BodyShop Office includes C. I. A. technology. In this case CIA stands for Counter Insurer Abuse. It is no coincidence that I chose the CIA acronym. The CIA is sneaky and covert.

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Comments

9 Comments on The Wonderful World of Claim Handling Companies.

  1. Jim Herman on Mon, 19th Feb 2007 8:40 pm
  2. John,

    While it may or may not differ, I read most all of your input.

    On occasion, you may state something I don’t agree with, but you put it out there, with no fear of reprisal, and I respect that, for few can do that.

    I think if more would, we would have less of a problem.

    regards,

    Jim

  3. Charlie Barone on Tue, 20th Feb 2007 8:16 am
  4. John,

    I did an article for Body Shop Business a few years ago on these blind claims auditing companies. In that story I came to the conclusion that shop operators should simply refuse to discuss the claim with these bottom feeders. What’s more, when an independent shop is approached by a blind claims auditor, it’s important to realize that no duty exists for the shop to renegotiate the claim settlement in terms of prices. John Junk, of SCA Appraisals, a leading provider of the blind claims audits, acknowledges that “the guy is not legally bound to me.”

    My advice is to simply hang up on these people, but call your customer immediately after to counteract the BS the auditor may send their way.

  5. Michael Santarsiero on Tue, 20th Feb 2007 9:51 am
  6. I own a small shop in northeast Pa. My father started the business back in 1959. He built a reputation for the best work around. He always had the best equipment and he knew how to use it. I grew up in this business. I have 2 college degrees, but I chose to follow in my father’s footsteps. I loved working with my hands as well as my brain.
    But over the decades we watched people who did substandard work come out of the woodwork and prosper as drp shops while our customer base diminished over time. Now there are almost as many body shops as there are churches and bars, and if you are familiar with this area, that’s a lot of body shops. My dad wrote 10 estimates a day. I write less than 10 a week. People know us. We’ve been here forever. They talk about how good our work is and how we have the most convenient location around. They say that they think my TV commercials are great. Actually, I’m the only independent shop who does TV commercials. Then they come and tell me how unhappy they are with some of the work they got elsewhere. I asked them why they didn’t come here and the answer is always the same: My company said you aren’t on their list; my company said you weren’t an approved shop; my company said I won’t get the same warranty as using their shop; etc. The point is that these people are being coersed into using another shop. The steering is being accomplished by underhandedly applying any negative connotation possible without actually saying “you can’t use that shop.” And people, being the sheep that they are, would rather go along with the program than stick up for their rights. “Well, ya know, I didn’t want to rock the boat. I figured I was in enough trouble with my insurance and I didn’t want to give them any more reason to drop me.”
    I spend about $1500 a week on TV commercials. I tell my customers that the law says they can choose any shop they want and their company can’t retaliate against them. I tell them I give a lifetime warranty on all my work, which meets or exceeds the requirements of all drp agreements. I guarantee the quality of my work to be the best, I guarantee that I’ll do it faster (we can work 2 shifts per day) and I guarantee that I’ll do it cheaper (we kick the hell out of the book time & we have a lower overhead) than the dealers who have most of the drps tied up around here. What more can a customer want? My own aunt went to another shop because she caved in to the wishes of the insurance company and did nothing but bitch about the job afterward. I heard she wrecked her car again last week and was having it towed. It’s not here. My owm employee’s step father used another shop 5 miles out of the way because he didn’t want any problems with his insurance company. I swear to God, the only time I see some of my old customers is when they are willing to pay out of their pocket to get work corrected that they had done elsewhere.
    It’s not like I’m one of the sheep. I fight the insurance companies tooth and nail. I spend my own money to get on TV and tell my customers what their rights are. And when I do get the opportunity, I get my customers every dime they have coming to them. I even go to court with them to make sure they get every dime whether they actually plan on spending it all on the repair or not. Then in many cases, I can actually charge them less than they collected and still deliver an undetectable repair without defrauding anybody. I’m doing all a human can do without giving away the store. I could maintain a minimum of 15% profit level and actually give most people their deductible back. That’s how efficient we are. Everyone here is an expert with years of experience. But I didn’t get one job from this last blizzard. Not one! And the parking lots of some of my competitors are full of drp cars that they will have to short cut and rush out to make any money. And most of those customers will not complain to their insurance company about a single problem! SHEEP!
    I’m at the end of my rope. The only thing I can do now to maintain any profitability is to downsize to a smaller location with a much smaller overhead. I will never compromise on the quality of the labor or materials. My father’s shop is 10 bays and a custom built, oversized paint booth that allows me to base and clear 4 different jobs at the same time. Now I utilize only three of those bays on a regular basis, and I could put in a much smaller booth, but I don’t want to. It would feel like retreating.
    I put up with this crap on a daily basis. It’s just not worth it anymore. I made far more money doing far easier jobs. I am not paid fairly for the incredible skill level required to be the expert I am. The framers and carpenters and trim guys that screwed up my new house make more than expert bodymen and they don’t have anyone regulating their business or breathing down their necks about quality and efficiency like we do. Our product has to go down the road 100 mph without any shakes, shimmies, water leaks or wind noise. Those bastards who built my house couldn’t do the same. Hell, they can’t even keep it from leaking in a 5 mph cross wind. And now some failed body man is going to tell me over the phone that he audited my estimate and he’s cutting it? You know what I do then? I get on the phone and explain the whole scenario in detail to my customer. Then I have my customer call his agent and tell him if he has to pay one single penny out of his own pocket above and beyond his deductible to get the job done properly at my shop, he will be going to court and switching insurance companies. Then we call the insurance commissioner and log a complaint. Then we call the consumer protection bureau at the local A.G. office. Then I do a little steering of my own. They wind up being insured by the companies I do business with (which are a select few). It doesn’t happen often, but when it does, the sense of accomplishment keeps me open just a little longer.
    I realize now that I’m no longer in it for the money or the love of this business. I HATE this business. But I hate the insurance companies even more and I refuse to watch my father’s legacy slip quietly into the night. I know now that I only stay here to be a thorn in their side and to occasionally feel the incredible sense of victory when I rip a job out of their drp shops and get it here. Then I make them look bad, every chance I get. It’s like getting the chance to squash that little green lizard right in front of everybody and there’s not a damned thing they can do about it.
    Excuse me, but I think I need to get back to plotting my revenge.

    Thanks for letting me vent,
    Mike S.

  7. Joyce Arndt on Tue, 20th Feb 2007 12:44 pm
  8. The State of Virginia has a law regarding the "desk reviews".  In short it says they are aginst the law. If you can not physically see the vehicle you cannot judge.When they call us for "an agreed price" I can tell them to take their review and cut prices and put them where the sun doesnt shine. This should be a law in all states as it is protecting the business person and the consumer.
    Joyce Arndt, Ray’s Auto Body, Inc.
     

  9. terry blevins on Wed, 21st Feb 2007 2:58 pm
  10. I too have had the "desk reviewer" call and attempt to negotiate a lower price for repairs.   The simple answers to most of the questions is simply:  Do you not want me to do that operation?  …   they usually want you to do the operation, but for free.   The art of negotiation is that if you are doing the operations listed in your estimate… then charge for it.   If they say they won’t pay for it, simply pass that cost on to your customer..  with a full explanation as to why.   Give the customer daily updates as to the status of his repairs along with excerts of your communications with adjusters, file reviewers, examiners… etc..  and give the customer the phone numbers of those folks.  The customer chewing on the backside of any of those reps usually produces results.  
    I recently had a "desk reviewer" refuse to pay for "featheredge, prime and block".  after well documenting the file with names and numbers of him, his boss and the boss above him all stated they wouldn’t pay for the operation—  i proceded with the repair and didn’t featheredge prime or block the areas repaired… (the customer was well aware of everything that was happening)…  and you can imagine the finished result.   VERY MAD customer …  and after a state board complaint against the insurance company, they ended up paying to "re-do" the work and a rent car, and way more than they would have if they would have simply paid what was due in the first place.  The insurance company basically forced me to skip a step in the repair process and it cost them.  It would be like the insurance company not paying for a front end alignment that was oviously needed because of the collision.   later, they would be paying for tires….  if the customer (and bodyshop) persued it.  Now that insurance company pays for featheredge, prime and block without question…  and I do it.
    Point is…  I stood my ground.  I had my customer in my corner.  The insurance companies will pay what is fair and reasonable if you charge for it.     Don’t make the mistake of charging for something you don’t do tho…  thats part of the problem.

  11. AutoMuse » Auto-Motive News on Thu, 1st Mar 2007 11:33 am
  12. […] the Oscar closer comes from John Shortell of BodyShopSolutions for The Wonderful World of Claim Handling Companies.  As only John can write it, at least one insurance company out there is paying $105 for an […]

  13. Jim C on Tue, 27th Mar 2007 8:02 pm
  14. Here is the way it’s supposed to work and doesn’t. The average automobile insurance policy is an “Actual Cash Value Policy”. I like to use a trip to the grocery store as an example of actual cash value. When you go to the grocery store, you place items in your cart. You then go to the cashier, who runs all of your items over a bar code reader. When this task has been completed, a dollar amount appears on the screen in front of you. The actual cash value for the contents of your cart has now been established. At that point, you pay the bill, are given a receipt, and then you can take your groceries home. You can’t negotiate with the cashier or demand copies of invoices from the wholesalers that supplied the store. You can’t go to the store manager and promise to refer all of your friends and relatives if discounts are given. Now, let’s look at how this is done in our business. We have the party responsible for paying the actual cash value of damages, establishing that actual cash value, through independent appraisers, auditing companies, and there own adjusters. This, to me, shows every appearance of a conflict of interest. You should not have the party responsible for a payment, establishing the amount of that payment. The last time I looked, the party providing the goods and services is entitled to establish the value of said goods and services. I can’t go into a new car dealership and tell them “I want this brand new truck and you will sell it to me for this amount. It won’t work and they will laugh you right off the lot. Now let’s look at the typical repair in the collision industry. You have a car. You have an insurance policy, which may or may not be a third party, and you have the repairs. The car has been paid for and is owned by your customer. The insurance policy has been paid for and is owned by the insured. The repair work, parts and materials have been paid for and are owned by the repair facility. I see no place in this equation for the insurance companies. They own nothing and are only responsible, by contract, through the policy that they wrote and sent through their underwriting and legal departments, for the actual cash value of the claim. That would be the repair facility’s final bill. I have been in this business for thirty years. During that time I have occupied & been certified in every position in a shop, from detailer to “A” tech to shop manager. I have also owned and operated an independent appraisal company. When I sold the appraisal company, I went to work for an insurance company. While at the insurance company I went from a field & total loss adjuster to direct repair manager. I also took advantage of every claims law class that was made available. I left because I like sleeping at night. I can tell you from experience, that the only way the current situation can be corrected is to get involved with your local, state and federal government representatives. It’s like putting a mouse in front of an elephant. They run & hide when they see the state’s attorney general’s office the state’s finance and department of revenue coming. Good luck to all, and let’s promote our integrity and keep it tact.

  15. Chris Arena on Mon, 21st Sep 2009 4:35 pm
  16. As an independent bottom feeding material damage appraiser. I feel your pain!
    I have seen my share of heavy damaged vehicles out in a field in the mud and tried to write an estimate. Right! I write it for the visible damage and tell the insurance company that upon teardown in shop we will do a rienspection. Most shops are honest and give me a call once torn down and we go over the damage. If the damage is there, no problem. I am bound by the flat rate Mitchell, ADP or CCC labor guides. I have been around before computers and understand da p-pages. However. Most of my business is total loss, heavy equipment and specialty vehicles. As I feel the whole insurance company treatment of appraisers is just not really worth it.

    Now, I know that you shop owners love to vent on us evil insurance co. appraisers and the like. But I could tell you just as many tales of crooked shops and greedy commisioned estimators too. However, like life, most people in this business try to remain honest.

    What really pisses me off is how I, as an insurance appraiser is treated. Insurance companies raise thier rates, body shops raise thier rates. But do you know that the rates for an auto damage appraiser has acually gone down over the past few years? I blame this on the computerization and the elimination of the appraiser that actually has trade experience. We are lucky to make $100.00 on an auto appraisal. SCA rips thier appraisers off by micromanaging the padoodle out of them and paying them $45.00 per appraisal. (Imagine driving 100 miles of so per day writting 4 appraisals, then going home and writting supplements till 10 pm at night at that rate)! That’s SCA, the worst of the bunch, when it comes to treatment of thier vendors. It’s sad. Most independents have to work with third party administrators and the most they can make is about $75.00 tops for the good ones. Most insurance companies want young shiny faced college girls and boys to do this work and will avoid an experienced old school appraiser like the plague!

    I only have a few years to go before I hang it up. I don’t see much future. However, Although it is easy to knock the inusrance compaines. Think how life would be without em….. Earl Shive $99.00 paint jobs and the vehicle owner with the only option to fix what he could afford. Dr’s and Lawyers taking chickens and goats for payment and competing for the few rich clients. The complete elilmination of the neuvo-rich american royalty class. But we still complain….. Funny though, I don’t see too many body shops going out of business. Thanks to insurance, we have created a monster second only to the Federal Reserve. Billions of dollars and I can only see $75.00 per appraisal…… Bullpucky!
    Chris

  17. Auto-Motive News | AutoMuse ® on Sat, 28th Dec 2013 12:52 pm
  18. […] the Oscar closer comes from John Shortell of BodyShopSolutions for The Wonderful World of Claim Handling Companies.  As only John can write it, at least one insurance company out there is paying $105 for an […]

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