Measuring auto physical damage estimating performance by benchmarking key performance indicators (KPI) has been in place since the advent of electronic estimating. Unfortunately, so too have misunderstood metrics and efforts by appraisers to 'game' the numbers. This seems especially true when it comes to measuring auto parts performance.

The 'industry standard' metric of measuring the percentage of parts dollars spent by part type has been used by many insurers as the sole way of judging this performance for years, despite having an inherent flaw. Anytime you measure the percentage of something, you have to watch not only the numerator of your equation, but also the denominator.

A simple example of this is taking a $1,000 parts spend. If you have a recycled part that is $200, then the percentage of parts dollars for recycled parts would be 20 percent. However, if we find a less expensive part—let's use $100—then we would change the numerator to 100. Then the denominator also changes to 900, meaning our percentage of parts dollars for recycled parts is now 11 percent.

Now this would lead appraisers who are being judged by this metric to find the most expensive alternate part to increase this metric. To offset this flaw, many carriers have also begun looking at the number of parts by part type as a secondary metric. Although this allows another look at parts performance, it has lead appraisers anxious to perform well to choose 'aftermarket' as the part type for sublet operations that include parts such as cover car, or recharge A/C or pin striping so as to bump up their alternate parts performance.

Worse still, I have found appraisers who simply change the part type from original equipment manufacturer (OEM) to “aftermarket” or “recycled” and leave the new OEM price the same, merely to increase their alternate parts performance.

The Solution

Most estimating platforms can provide a 'delta' metric, which measures the difference in price between the OEM and the alternative part chosen. This allows a way to uncover appraisers 'gaming the system' by the relabeling of parts to aftermarket. By looking at all three aspects of parts performance, a more complete picture of behavior can be observed.

Special Reports /

Auto Parts Performance: Numbers Don&rsquo;t Lie, But They Can Mislead

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Auto Parts Performance: Numbers Don’t Lie, But They Can Mislead