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Letter to the Editor

CARSTAR Letter to the Industry

INSIGHT recently received the following open letter to the industry from CARSTAR:

Enjoying close relationships with over 370 shops across North America, we at CARSTAR recognize a heightened air of tension across our franchise system that we believe represents the emotional state of our entire industry these days.

Part of this angst, we believe, attributes to the materialization of new claims handling programs, which have been talked about for some time now, but only recently are coming into being. Other, we believe, has to do with the final realizations among many owners that the business conditions we are living with today are not likely to change, for the better for us, any time soon. And that there may be further room on the downside.

These latter realities are anchored in a fundamental law of economics. When excess of supply (collision shop capacity) exists, buyers (insurers) take advantage.

Today, with an estimated 40,000 shops in America vying for a flat-to-declining $26 billion demand for collision repair, insurers are having their way with independent shop owners --- offloading administrative costs, narrowing the definitions of what they will pay for, and demanding higher levels of service.

We believe that it is a mistake, therefore, for shops to read insurers’ recent experiments with claims management programs, like concierge and narrowing their supply channels, simply as schemes to squeeze our margins. Rather, it’s also a wake up call, and a call to action for our industry about consumer service.

If we as an industry cannot ensure consumer experiences that meet insurers’ expectations about how they want policy holders to be treated, then they or someone else will do it for us. And in our increasingly consumer-driven world, the delivery of that experience is even surpassing, in some peoples’ minds, the value we offer in repairing vehicles. If, on the other hand, that kind of experience were what we delivered --- every shop, every repair, every location across North America --- insurers even might be willing to pay us more for it.

None of this current situation is anybody’s fault. And the blaming needs to stop. It’s simply a truth about how economics and industries work. If the shoes were on the opposite feet, the tables would be turned toward our favor. But they are not, and they won’t be again for a long time.

What makes this a particularly tough bind for our industry, however, are two additional and exacerbating circumstances. The first is a mismatch of relevant scale. Insurers are a relatively small community who concentrate huge buying power in relatively few hands. Repair shops, in contrast, constitute a huge population of small units with effectively zero bargaining power on a shop-by-shop basis, and without the authority to dictate service levels across America.

There is, however, a faint light on the horizon for shop owners, and it doesn’t depend on our half of the side of the supply-demand equation throwing in the towel. But it does have to do with relevant scale.

While nearly every ownership roll-up in collision repair has proven challenging, and it remains highly unlikely that any future roll-up will ever accomplish a scale that will effectively balance the power of insurers, there is a different route for independent shops to bind together toward the same end.

That route has to do with fostering a collective consciousness in two regards. The first has to do with bringing our own standards for consumer experience into line with those of our insurance customers. The second part has to do with our no longer sitting passively by, absorbing the body blows from the supply-demand imbalance, with a smile on our faces so as not to offend our insurance partners.

Phrased differently, the first is about “pulling up our collective socks” with regard to consumer experiences. The second is about doing what we must do to survive for now, but taking every opportunity while doing so to respectfully communicate the injustice of our plight. This is not hotheaded or suicidal insurrection --- although this is exactly the cleansing that many of us feel we need from time-to-time. Rather, it is what we at CARSTAR have begun talking about as “responsible push-back.”

To us, “responsible push-back” means standing our ground on the basis of the facts of our work. It doesn’t mean threatening to give up relationships with insurers if we don’t get immediate relief. But it does mean letting our insurance partners know, for example, that a partial blend on a panel doesn’t reduce time and materials by 50 percent, and that many shops already deliver consumer experiences that meet and exceed their expectations --- and that those of us who meet those standards will not sit passively by and comply with new rules that are not grounded in the relevant facts of safe and responsible vehicle repair or customer care in our shops.

This kind of resistance isn’t necessarily confrontational. It isn’t personal. It recognizes the realities of the greater forces at work. But neither is it passive. At its best it is a continuous, fact-based countering of the other side that not only adds to, and eventually influences, their perspectives, but also, by its reasonableness, attracts support from the bystanders.

And how will this voice be heard?

First, by us, as individuals. Shop owners must take the time to communicate the facts of our work, without the edge of anger but with the pride and authority of our experience, at every possible opportunity, to every possible audience --- including insurers, consumers and particularly Mitchell, CCC and Audatex.

And second by us, with one voice, as an industry with relevant scale. Through our support and participation in CIC, SCRS, AASP and ASA we must expand and accelerate our own time-and-materials and consumer satisfaction studies. These findings need to be packaged and delivered widely in a highly coordinated, research-based, visible and compelling campaign to influence not only insurers and estimate data providers, but also consumers and their legislators to demand a fair future for our industry.

Great in theory, but there is a gaping flaw. It resides in aligning the fiercely independent lot that we repairers are, under the duress that we live with every day, behind any such movement. And this is exactly where our industry associations need to step in.

Under their coordinated leadership, the activists among us will arise. Behind the activists, others will step into line. And over the years, not months, we will have the opportunity to make a difference for ourselves. But it starts with the willingness among a few to “step up.”

We at CARSTAR will “step up.” Will you?

INSIGHT invites further discussion and debate.

©2007 Collision Repair Industry INSIGHT
All Rights Reserved

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