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Letter to the Editor

To Be Continued

Will 2008 bring answers to questions left unanswered this year?

With another year quickly nearing an end, we see a number of issues and questions left unanswered for the collision industry. Here are the topics raised of late that we believe will likely be the issues most discussed – if not resolved – in the year ahead.

Shop risk of consumer privacy concerns

Just about any shop conducting much business electronically is doing so using what is called the “EMS extract.” Now before your eyes glaze over as they might do whenever the issue of electronic data standards or computer terminology start getting thrown around, this is a relatively simple but very important issue to watch in the year ahead.

The EMS extract is essentially a CIECA-adopted standard for pulling the information from an estimate or supplement in a standard format so that it can be dumped into your shop’s management system – or into other systems designed to accept it. The EMS extract contains all the information from the estimate or supplement - including your customer’s name, address, and other personal information, which state or federal privacy laws may require you to protect in certain ways.

So while there may be a third-party to which you have provided access to the EMS extract for certain reasons, they may be getting customer information they do not need. And you may have no idea what, if anything, they are doing with that data.

“We don’t have the ability to filter out customer-specific information,” said Aaron Clark of Collision Solutions, a 5-shop business in Indianapolis, Indiana. “It gives me a concern that there’s a violation of consumer privacy law when we are pushing information that cannot be edited before it’s pushed, especially if it’s coming out of the estimating system. It’s our data. It’s our estimate, and it’s not right for someone else to ask for that data.”

Clark is not alone in his concern. The Society of Collision Repair Specialists (on whose board of directors Clark serves) recently issued a statement opposing “any entity copying, downloading, or utilizing a collision repair facilities’ EMS extract without their knowledge, approval, and full disclosure as to which data fields will be used, how the data will be used or sold, and to whom the data will be sold.”

The SCRS statement says some companies are using shops’ EMS extract data without the full knowledge or approval of the shop – or have received approval to use the data in certain ways but are using it in others.

“Collision repairers need to know this information can be aggregated and reported upon to compare market labor rates and market practices, which may be sold to insurers and other interested parties,” SCRS said.

Watch for some heated discussion of this issue in 2008.

State Farm’s foray into parts procurement

Look for the latest on this topic inside this issue with our report on George Avery’s comments at the Collision Industry Conference (CIC). Although the procedure of OEM discounts and electronic parts ordering that State Farm has launched in San Diego and Indianapolis is being referred to as a “test,” Avery also admitted that he used to joke that a test at State Farm is just the first 30 days of any permanent new program.

Still, State Farm is likely to tweak the program before rolling it out nationwide, just as it made changes to Select Service following its initial tests. But how well it works for shops, dealers, automakers and State Farm will clearly be among the key questions for 2008.

And Avery carefully pointed out that the parts procurement program will have no bearing on whether State Farm returns to the non-OEM parts arena, something else that some in the industry believe should be watched very carefully in the coming year.

Used parts pricing structure

The OEM discounts to State Farm may not be the only parts pricing issue on the table in 2008. Auto recyclers at the most recent CIC meeting outlined the industry standard they have developed to describe the location and severity of damage and for “grading” a used part overall. Unfortunately, if shops find a recycler consistently mis-grading parts, it will still be up to the insurer whether to pull that recycler from its system.

But some of the more intriguing issues regarding use of used parts were raised by CIC participants following that presentation. If a shop negotiates the price of a used part because of damage, there is still the issue of reassigning some of the part’s cost into the labor column. The shop’s customer may be getting inaccurate information if the cost of the part shown actually includes labor time. And this pricing system can also make collecting sales tax more difficult or less accurate in states where parts but not labor are taxed.

These types of issues appear to be ones on the radar for CIC’s Parts Committee in 2008.

“That is something that is being discussed within the committee,” committee chairman Ken Weiss said. “Stay tuned is all I can say, because even within the committee we have some disagreement on what’s the right way to go.”

DRP reform

As repairer dissatisfaction with many aspects of direct repair programs heightens, there are increasing calls for some reforms to the programs. Whether any insurers decide to adopt in 2008 any of the variety of called-for changes seems unlikely but possible.

Scott Biggs of Assured Performance Network is just the latest to issue a list of suggested reforms. Among the changes he has called for:

• Insurers should not allow any one individual to have authority to make selection of shops to participate in a DRP. Such decisions should be placed in the hands of an independent board.
• Concessions required under the program should be published so that field staff cannot arbitrarily modify them.
• Any discounts should vary using objective measurements based on volume of work the shop receives through the DRP.
• Shops should not be required to buy any particular product or service in order to participate.
• The transfer of ownership of a shop should not automatically disqualify it from continued participation in a DRP.

Biggs’ suggestions, many of which echo other calls for DRP reforms in the past year or two, may not go anywhere in the coming year but the subject is likely to continue to spark discussion within the industry.

Real time, real rates?

It is hard to read those words and not think back to California shop owner Jack Caldwell’s address at NACE nearly 20 years ago calling for an end to “funny times and funny rates.” While there’s been no indication of a groundswell of support for such a change in this country, the industry here will probably want to keep an eye on things in Australia in the coming year.

There were protests in the streets by Australian shops in 2006 when one of the country’s two largest insurers (which combined have 90 percent market share) tried to implement a bid-for-jobs online system. This led to significant government intervention in the industry there. Indeed, government officials were baffled by the odd system of “funny times and funny rates,” and as part of a mandated reform package, called for the institution of “new times and rates” by 2009.

One insurer this fall started using the new system, with shops shifting from about $30 per book hour rates to between $60 and $94 (depending on established parameters) per actual clock hour.

How it works in Australia during the coming year may offer some clue as to whether it is a trend that could work its way into other countries. The launch of the DEG

As we have been reporting for some time, the three largest associations representing collision repairers have jointly created the Database Enhance-ment Gateway (DEG), which finally makes its debut this month. DEG’s initial goal is to provide a website, scheduled to go live this month, at which anyone in the industry can use one online form to submit requests for review (RFR) of labor times (or other estimating database issues) to any of the Big Three estimating database providers.

An off-shoot of a system developed by March Taylor, the Hawaiian shop owner who died earlier this year, the DEG will catalogue such requests at its site, following up with the database providers as necessary, and posting responses and any resulting changes online.

The three associations have jointly hired an administrator for DEG to do the necessary legwork that they believe will improve the accuracy of the databases.

Its launch this late in the year is sure to make the DEG, along with the other issues we have outlined here, among the key topics on the collision industry’s table in 2008.   o

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