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

The 'industry standard' metric of measuring the percentage ofparts dollars spent by part type has been used by many insurers asthe sole way of judging this performance for years, despitehaving an inherent flaw. Anytime you measure the percentage ofsomething, you have to watch not only the numerator of yourequation, but also the denominator.

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

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

Worse still, I have found appraisers who simply change thepart 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, whichmeasures the difference in price between the OEM and thealternative part chosen. This allows a way to uncoverappraisers 'gaming the system' by the relabeling of parts toaftermarket. By looking at all three aspects ofparts performance, a more complete picture of behavior can beobserved.