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This article originally appeared in the October 2000 Issue of INSIGHT
©2000 Collision Repair Industry INSIGHT All Rights Reserved
Mitchell Launches Internet Hub for Auto Collision Repair Supply Chain
Property/Casualty Insurance Industry's Underwriting Performance Worsened in First Half of 2000
ADP Collision Repair Services Introduces SystemLink
DuPont and PPG Warn Earnings Will Fall Below Forecasts
Caliber Collision Centers Acquires Chapparone Autobody with Seven San Diego Locations
National Survey Reveals that Most Customers Fail to Shop Around for Auto Insurance
CCC Introduces Recycled Parts Services
PPG's J. Earl Burrell Dead at Age 80
INDUSTRY UPDATE
Mitchell International announced on September 18 its e-business single access point strategy to provide an open and interactive Internet workspace and marketplace hub for all parties in the automotive collision repair supply chain, with a suite of existing and future on-line applications. Mitchell's portal site is up and running, and entry to the Hub can be gained via the portal site residing at http://www.emitchell.com/.
"Continuing our 54 years of industry leadership, the Mitchell Hub will provide the electronic infrastructure necessary to drive a fundamental process and business redesign throughout the entire industry," said Jim Lindner, Mitchell's president and chief executive officer. "Hub participants including collision repair shops, insurance companies, car rental agencies, tow companies, parts, paint and equipment vendors will realize new and growing partnering opportunities, shared efficiencies, and enormous cost savings while delivering a more pleasant experience to their customers."
"The industry trusts Mitchell to first offer substance and then to back up its promises," said Lindner. "Our Hub has real applications and value-adding content. Last year, we introduced iNTOTAL.com, the industry's first on-line total loss settlement solution. Recently, we completed the successful beta testing of FirstEstimate.com, the industry's first on-line estimating system. Both are available on the Hub."
In the coming months, Mitchell will add more hub functionality such as user-personalized "virtual desktops" with all the information and online applications needed to seamlessly integrate their information, work and business collaboration needs. Over 35 new strategically targeted business functions are planned, including online imaging, vehicle status tracking, productivity tools and online review processes
Mitchell's Hub features a central server for storing and forwarding data among all parties involved in collision repair, and will interface to insurance company legacy systems. Its open infrastructure will allow any authorized user to access information with only a Web browser -- no special hardware or software is required. This open participation is consistent with Mitchell's philosophy to conform to the industry's CIECA standards and the XML Internet standard.
Mitchell plans to announce several strategic partners to the Hub in the coming months. There are currently more than 90 people dedicated to the Hub's development and management.
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The industry’s average combined ratio, an important measure of underwriting performance, rose to 111.2 for the second quarter of 2000, from 107.3 in the second quarter of 1999. This caused the first-half combined ratio to deteriorate more than four points, to 109.2 in 2000 from 105.1 at June 30, 1999.
A combined ratio of less than 100 indicates an underwriting profit, and a ratio higher than 100 indicates an underwriting loss. The first-half figure is nearly a full point higher than A.M. Best’s original full-year forecast of 108.5. A.M. Best expects further deterioration as insurers complete their year-end loss-reserve reviews and, accordingly, has revised its full-year combined ratio projection to 110.0.
Unfavorable commercial reserve development and rapid erosion in personal auto results were blamed. Price increases in commercial lines are expected to be offset by continued medical cost inflation, with personal auto margins remaining poor. Property/casualty price firming is unlikely to help the numbers significantly in 2000,with results probably not bottoming out until early 2001.
A.M. Best anticipated the downturn in underwriting results in January. However, the level of deterioration in the California workers’ compensation market and rapid downturn of the personal auto market, evidenced by State Farm’s eye-opening combined ratio of 121.3, up 13 points over the prior year were worse than expected. State Farm and other leading personal lines carriers have suffered increased overall loss-cost trends and adverse reserve development amid flat to declining personal auto rates.
A.M. Best’s data show that net premiums written rose 4.6 percent during the first half, a more rapid increase than the industry has experienced since 1993, while underwriting results deteriorated by 4.1 despite lower catastrophe losses.
These weak results affected each of the industry's three major segments, personal, commercial and reinsurance, but they were most pronounced in reinsurance because of increased global catastrophe losses, adverse loss development and continued soft pricing. Reinsurers reported a combined ratio of 112.8 for the half.
The personal lines segment reported a combined ratio of 109.9 in the first six months of 2000, six points greater than reported in the comparable period of 1999. The underwriting deterioration was primarily influenced by increased losses from higher medical cost inflation, increasing auto repair costs and more severe accidents associated with sport utility vehicles. Heightened severity in bodily injury claims, combined with widespread premium rate decreases in 1999, also constrained underwriting margins.
ADP Collision Repair Services, an information services provider for the collision repair industry, has introduced SystemLink(TM), a turnkey program that bundles hardware with pre-installed estimating, imaging and business management software to eliminate the hassles and inefficiencies of separately purchasing new information systems and software.
As part of its ongoing commitment to bring a total automated solution to the collision repair industry, the company will initially sell stand-alone systems, including Dell® PCs and monitors and Hewlett-Packard® printers. In the next phase, scheduled for this fall, ADP will sell network systems as well, featuring Dell's PowerEdge(TM) servers.
"Listening to our customers, we discovered that there is a strong desire to eliminate the hassle of acquiring the right computing hardware and software," said James Boswell, vice president and general manager of ADP Collision Repair Services. "Our goal with SystemLink is to become a single source for all information system requirements for the operation of a collision repair facility. With SystemLink, we are now positioned to provide turnkey computer system solutions to any body shop, regardless of its size or location."
According to Boswell, ADP will sell three different Dell desktop PC options. All will arrive with the appropriate ADP software products already pre-installed. In addition, the customer will receive the Microsoft Office(TM) Small Business Edition on the Windows 98 desktop.
This means that a collision repair facility will only need to make one purchase from one sales representative in order to have their entire computer system arrive in a ready-to-use condition. Each PC includes a comprehensive, three-year, next-day, on-site warranty.
"The challenge with buying systems for body shops is meeting the client's total requirements," said Boswell. "These requirements go beyond the application and include hardware, software, service, support and training. In order to meet these needs, body shops need a strong partner, which is why we have partnered with Dell Computers."
ADP also offers free telephone, fax and Web-based support. On-site installation is also available, in addition to on-site training or computer-based training. Other services will be released this winter.
Shares in DuPont Co., the biggest U.S. chemical company, fell in pre-opening trade on September 7 after DuPont said its 2000 earnings per share (EPS) would fall short of Wall Street forecasts.
DuPont, a component of the Dow Jones industrial average, was down at $43 from a previous closing price of $47.
DuPont said it cut its 2000 EPS estimate to $2.85 to $2.95 before items. Wall Street analysts had forecast earnings of $3.01 a share, according to research firm First Call/Thomson Financial.
Earnings of PPG Industries for the third quarter are forecast to be between 85 cents and 90 cents a share, excluding a previously announced one-time charge of two to three cents a share to rationalize the company's new PPG Auto Glass venture, according to Raymond W. LeBoeuf, board chairman and chief executive.
"Although sales and earnings for the quarter continue to benefit from recent acquisitions, a slowdown in automotive, construction and some industrial markets have reduced demand for our products. Also, earnings continue to be pressured by ongoing increases in energy and raw material costs," LeBoeuf said.
"Several price increases have been implemented, and additional increases will be implemented in the fourth quarter. While we expect to improve our earnings substantially from last year, if current trends continue we are unlikely to exceed our record earnings per share from operations of $4.13," he said. PPG had sales in 1999 of US$7.8 billion.
California consolidator Caliber Collision Centers has acquired Chapparone Autobody, based in San Diego, California. The well-established operation, founded in 1975, with corporate offices and seven repair facilities, gives Caliber a total of nine locations in the San Diego market.
Chapparone Auto Body was in the news in December, 1998, when company president Mark Chapparone signed a partnership agreement with CCC Information Systems to implement CCC's collision management system, Pathways Enterprise Solution, developed by Ian McIntosh of Kirmac Information Technologies and Kirmac, the Canadian collision repair consolidator in Vancouver.
While most Americans believe it's smart to shop around when purchasing high-ticket items, few actually do so when it comes to auto insurance, one of the leading annual expenses in most household budgets, according to a national survey recently conducted by the American Express Property Casualty companies, the auto and home insurance division of American Express. Most Americans are also surprised to learn that with a little comparison shopping, they could save thousands of dollars over a lifetime just by shopping around for car insurance providers.
According to the survey, only 32 percent, or roughly one-third, of the population comparison-shops for auto insurance when their premiums come due. Yet, 64 percent of Americans surveyed said they shop around when purchasing a new car, 61 percent when buying an electronic item like a cell phone or DVD player, and 42 percent when they're in the market for a new household appliance, like a lawn mower or a microwave oven.
"The average annual cost of car insurance is higher than a lot of other major purchases regularly made by consumers," says Marc Weiner of the Marketing Risk Management Group, Inc., the Chicago-based research firm that conducted the survey. "Considering the savings that can be realized over a year and the thousands of dollars that can be saved over a lifetime by shopping around, it's surprising that consumers don't exhibit the same type of shopping habits when it comes to auto insurance."
According to Vanessa Vanderveren Marin, Vice President of Marketing for the American Express Property Casualty companies, most people don't stop to think about the savings they may be missing. "A lot of people are paying more than they need to for car insurance," Vanderveren Marin says. "Those people who do shop around are literally amazed at the difference in rates from one insurer to the next."
"In theory, the greater the possible savings, the more time consumers typically dedicate to shopping around," says Weiner. "For some reason, that theory goes right out the window when it comes to car insurance." Weiner says that consumer buying habits regarding car insurance are even more extraordinary when you take into account that it's a major purchase made every year, not every five to ten years like some purchases. "By not shopping around, a lot of consumers are missing the opportunity to save significant dollars each and every year," Weiner says.
The American Express Property Casualty companies provide auto and homeowners insurance for qualified customers in 35 different states. The company employs approximately 500 employees at its Green Bay insurance division headquarters.
RPS, which is optionally integrated into CCC's Pathways® Appraisal Solution, provides access to detailed, market-specific recycled part price and location information from a database of over 1,000 parts suppliers. Information may be requested according to the Vehicle Identification Number (VIN), or by specifying a year, make, and/or model of a desired vehicle, allowing an appraiser to locate a recycled part in a specific zip code, or to retrieve information from a customized list of suppliers approved by his or her corporate office.
With RPS, CCC is aiming for faster and more accurate parts locating, by eliminating the need to manually search and document the location and price of parts and, since RPS part information is catalogued by the VIN, finding the right part for the right vehicle. This combination ultimately facilitates more timely return of cars to customers, improving customer satisfaction.
"RPS serves as a valuable and effective addition to our Pathways Appraisal Solution,'' said Mary Jo Prigge, President, CCC U.S. "By combining the power of our appraisal software with the convenience of daily updated parts information, we are providing the opportunity for greater efficiencies to our customers."
J. Earl Burrell, who retired from PPG Industries in 1984 as president and chief operating officer, died on Aug. 28 at his home in Naples, Fla. He would have observed his 81st birthday on September 7.
Burrell joined PPG's chemicals research department in 1941 at Barberton, Ohio, after earning a chemical engineering degree from the University of Michigan. He transferred to the operating department at Barberton in 1946. He moved to the chemicals complex at Natrium, W.Va., in 1952 as operations superintendent and became assistant works manager there in 1955.
In 1956 he was named assistant to the vice president of chemicals operations at PPG's Pittsburgh headquarters, became general manager of chemical operations in 1958, and was elected vice president of chemical operations in 1961.
Burrell was elected chemicals vice president and general manager in 1966, corporate executive vice president of operations in 1975, and president and chief operating officer in 1976.
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