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Letter to the Editor

Insurer Allstate Approved for Full-Service Banking

ADP’S Jim Boswell and Mitchell International’s Jim Linder Address Annual CARSTAR Conference OVERLAND PARK, KS -- James Boswell, Vice President and General Manager, Collision Repair Services for ADP’s Claims Solution Group, and Jim Linder, President, Chief Executive Officer, and Chairman of Mitchell International told attendees at the 11th annual CARSTAR conference that the key to future growth and profitability in collision repair will combine integrated eBusiness solutions, standard processes and procedures, customer loyalty, and a continued focus on cost reduction.

CARSTAR, the largest collision repair network in North America, held its annual meeting for company and franchise members in Las Vegas, NV from July 9-12, 2001. During the three-day conference, attendees celebrated CARSTAR’s recent achievements, discussed company and industry topics, and reviewed plans for CARSTAR’s continued growth.

"The collision repair industry is on the forefront of a paradigm shift," Boswell told the CARSTAR conference. "In many ways, the shift is similar to that which has occurred in a number of other industries such as banking, airlines, and telecommunications. The types of changes that we are beginning to see are those that rock the very foundations by which goods and services are produced and consumed."

During his presentation, Boswell discussed the collision repair "value chain" that includes repair shops, insurance companies, information providers, manufacturers, paint companies and related vendors.

"Contrary to what some might want you to believe," Boswell said, "collision repair owners and managers are in the lead role. They are the focal point where almost all of the goods and services are produced and consumed. And they are also in the key position that directly interfaces with the vast majority of all of the participants in the process of effecting repair of the consumer’s vehicle after it has been damaged. Collision repair shops are the strongest link in the value chain.

"Critical in managing the value chain will be the automation of many of interfaces with the respective participants," Boswell added. "Whether you’re handling a settlement, receiving a repair order, or ordering parts from an OE or salvage yard, managing these activities requires a fully integrated body shop management system. The system not only administers day-to-day operations, but is fully integrated and connected to the shop's electronic trading partners."

Regarding insurance companies, Boswell addressed the increasing move to cost reduction. "Anything an insurance company can do to lower these costs they will do up to and including moving the adjustment expense/process to the shop, eliminating DRP’s through certified repair programs, capitation on estimates and RO’s, as well as full claims outsourcing."

Boswell provided his assessment of two key components in the current value chain:

Insurance Companies:

"Insurance companies must and will reduce overhead costs to improve margins as they continue to be pressured from all avenues," said Boswell. "The bottom line here isn’t so much expense reduction, as much as it is the movement of the expense to other participants."

Information Providers:

"Information providers face not only financial pressure but significant technical issues as well," Boswell told conference attendees. "Many have legacy systems still in place that they are aggressively trying to convert to an Internet-based model. Applications integration is also paramount to their success. Information Providers must integrate estimating, imaging, and management systems along with the entire claims process to be effective in the future."

According to Boswell, the area of claims processing calls for "an industry-wide claims clearinghouse that would allow any consumer to use any collision repair facility who in turn would have access to provide repairs for any insurance companies. There is also a need for an industry certified quality repair process that would ensure that regardless of where the consumer chose to take their vehicle the repair would be completed to a specific level of quality and service."

Mitchell International’s Jim Linder discussed the "Hub" eBusiness solution that he envisions will provide significant benefits for collision repair industry. Linder, President, Chief Executive Officer, and Chairman of Mitchell International, told conference attendees that the key to growth and profitability in the collision repair industry is implementation of integrated eBusiness solutions.

"eBusiness will become a major driving force in how collision repair centers interact with insurers, parts manufacturers, and consumers," Linder told the CARSTAR conference. "The shops that embrace eBusiness applications will clearly prosper."

"Several key trends in the collision repair industry have evolved in the past three or four decades," Linder said. "Insurers are facing rising costs, flat premiums, and combined loss ratios in excess of 108 percent on average. Shops are facing additional responsibility for estimate and supplement generation, increased administrative burden and increased costs due to mandated use of specific products. In addition, labor rate increases are barely matching inflation, and we continue to see recruiting and workforce retention challenges."

Linder described eBusiness models that utilize a "hub" system as efficient, economic solutions for the collision repair industry. "Utilizing the Internet to transmit data, all trading partners will connect via a common hub," Linder explained. "The hub will be run by a vendor, such as Mitchell, CARSTAR or an insurance company. The hub vendor will provide data translation, functional tools, management information and connectivity. Everyone will be on one network to gain information and get information to where they need it when it’s needed."

According to Linder, the hub will deliver as much as $13 billion in savings to the collision repair industry and related businesses. "We believe there is approximately $5 billion of saving potential just on the improved claims handling side and another $8 billion on loss expense side."

In addition to a substantial economic impact, Linder predicted that the hub system would deliver significant benefits for consumers, repair shops, and insurance companies. "Consumers will experience improved visibility to the repair process, and improved communication from providers. They’ll be able to select repair shops, schedule rental cars, and monitor vehicle repair status on the Internet," Linder said.

"Shops will be able to truly automate dispatching and volume control," added Linder. "They’ll also be able to reduce training costs, satisfy estimating and imaging requirements for lower volume insurers, and have instant access to real time CSI measurement. For insurers, the hub system will mean improved DRP management, cycle time reduction and improved CSI."

While eBusiness solutions will become increasingly influential, Linder stressed that the basics of quality, service and convenience will continue to be most critical to the industry. "A continued focus on high quality repairs and customer satisfaction will be basic requirements for any shop wishing to participate in the new industry," Linder explained. "It will always be a fundamental requirement that shops repair the vehicles well, as economically as possible, and to the customer’s satisfaction. Technology without service behind it is useless and meaningless."

With nearly 300 locations across the United States and Canada, the CARSTAR family of franchise and company facilities generates annual revenue in excess of $300 million.

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