Finding Common Ground

I had the opportunity to present an executive summary of the study at the Collision Industry Conference's 2009 NACE meeting, and the full report has been made available to all.

Study Methodology

Before addressing some of the highlights of the report, a few words about the study's methodology are in order. From the beginning, the study team realized that getting claim personnel to participate — much less speak freely about industry issues — would be a challenge. To that end, the study was designed to provide participants with a comfortable, non-threatening forum and a guarantee of anonymity.

The interviews were almost all held on the insurers' home office campuses, maximizing the potential for involvement of not only senior claim executives but also their respective staff. Participants were provided a list of 13 topics that would guide the interview process, but the actual agenda was driven entirely by the claim personnel in attendance. All comments were strictly off the cuff, with no prepared yes/no questions or other attempts to develop statistics around any particular topic or issue (the exception being a voluntary profile used to gauge repairable auto physical damage spend and DRP frequency). The meetings typically lasted between two and two-and-a-half hours and were facilitated by me and a primary contact at the participating insurer.

Nine insurers participated, representing varying distribution and APD business models and approximately $16 billion in repairable spend — arguably about half the dollars spent yearly on insurer-paid collision repair. All participants were top tier, and several of the top 10 were represented. DRP frequency ranged from 10 to over 50 percent, but most fell within the 25-35 percent range, indicating that the majority of their auto claims were handled outside their DRP network by staff appraisers, independents, or waiver processes.

This last measure, DRP frequency, is important to the scope of the study. While Commitment to Excellence in DRP focused on one method of inspection and the issues embedded in the DRP process, Finding Common Ground sought a more holistic perspective of industry issues that included the entire claim/repair process, regardless of inspection method. This scope provided the participants ample opportunity to discuss the industry itself, various industry segments, emerging trends, technology issues, industry relations and, yes, quite a bit about DRP.

Themes

While no one should assume that the nine participants speak for the entire claim industry, there were several recurring themes during the interviews that provide some insight into how claim personnel view the industry and the issues to be resolved in the coming decade.

First, there was a surprisingly consistent call (plea?) for process innovation, perhaps in recognition that the claim/repair process has failed to mature very much over the past decade. In fact, one could argue that the past decade was more about structural change—the development of multi-store operations (MSOs) and various insurers' forays into acquisition or concierge-type shop relationships—than any significant improvement in the process itself.

Second, there was a sincere recognition of the investment repairers must make to maintain a stable, highly trained, and productive workforce, which are key ingredients for a healthy repair industry over the coming years.

Finally, we heard disappointment and frustration relative to the failure of technology to deliver the type of business efficiencies enjoyed by other quasi-manufacturing and service industries.

Themes aside, the participants had plenty to say about the issues of the day and the industry in general. The typical Claims Magazine reader may want to compare his thinking about the industry to that of the participants, or simply read the sometimes funny, sometimes unnerving quotes that are part of the report's topical detail. Readers who represent companies that service or support the claim/repair process may find some clues as to what product strategies or service offerings would resonate well with claim leadership, in general. Additionally, the report's findings include a general framework for improving industry relations over the coming years.

In retrospect, the findings are a unique example of insurers reaching out to the industry and letting their hair down, which is certainly a positive development as we enter a new decade in need of much collaboration and cooperation.

The Findings

While the report speaks for itself, there are some areas of emphasis and nuance that warrant comment and thought.

First and foremost was an overriding concern about new structural materials and their repair. Participants were very vocal in their unease over the proper identification of the materials, the availability of training on new material repair, and the proper execution of the repair. This was not conveyed as solely a repairer issue, but one that repairers, suppliers, and technology providers need to address along with insurers. Interestingly, there was a fear that even with good information and identification, economic and budgetary issues might prevent estimators, appraisers, and insurance adjusters from getting access to the training.

A close second in the participants concerns was the lack of progress on the technology side of the business. Generally, the participants felt that the industry had not captured the efficiency and communication gains that today's technology has afforded other industries. The quotes about technology within the Technology segment of the report provide ample insight into the participants' levels of frustration.

Insurers seem pleased with the backbone of the industry: smaller, independent repairers that have built a strong local brand. In addition, the somewhat recent development of market-based, three-to-five location MSOs was called out as a very positive development for the health of the collision repair industry. Ownership's skin in the game, stability of personnel, and local reputation were keys to this positive image. The development of larger, multi-region MSOs was deemed important, but performance inconsistencies between stores continues to undermine the inherent value of scale, infrastructure, and capacity.

DRP was certainly discussed, more from the standpoint of a service offering than a substitute for staffing or efficiency improvement. Several mentioned the positive contribution that smart phone apps might play in helping customers who are involved in a collision (think real-time claim notification, scene and vehicle photos, and DRP program offerings/shop locations). Tools such as these might forever alter the steering debate—a debate all participants were willing to engage in to support what they believe is a key customer service offering.

Service value aside, DRP liaison turnover was repeatedly mentioned as a barrier to a quality business relationship, as was trust and a significant reduction in "billed but not performed" exceptions. Another common DRP-related thread was desire for their DRP members to "self manage" the program. Technology constraints and a lack of repairer-led estimate QA processes appear to be barriers to achieving this goal.

In terms of industry trends, the topic of lean repair processes was discussed in most meetings. Insurers are skeptical of this effort, as they have yet to see any improvement in what they believe is the key lean measure: cycle time. In an apparent contradiction to comments about larger MSO performance, the participants seem to have a love affair with the MSO-based call centers, continually touting their positive impact on capture ratios, communications, and customer service.

Common Ground

The report concludes with this writer's suggestions of issues where the various industry segments appear aligned and could likely reach strategic, political, or operational agreement. There are doubtless many others. As the facilitator, I was continually struck by how many concerns could be deemed common-ground issues. In addition, many are not even national in nature and could be nurtured at the local or regional level.

So where and how do we begin? I would argue that the insurer/repairer relationship is too immature and unstructured at this time for either to be the catalyst for significant change. More likely is that enlightened suppliers will need to step up and provide the impetus, structure, and forum necessary for the industry segments to find common ground in many of the areas discussed in the report.