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Letter to the Editor

2008 Features in Review

From industry trends, crimes and scams against shops, and state steering legislation, here is an update on some of the topics we have covered in recent months.

Last year, just prior to NACE, INSIGHT offered an update on some of the features and issues it had covered in the previous few months. Once again this year, news and information we have acquired this Fall warrants some updating to our recent issues.

Mixed business news

Last month, for example, we wrote about how shops told us they were coping with the economic downturn. We heard from many INSIGHT readers who said they were happy to report they were not experiencing much, if any, of a slow-down, despite high gas prices and the tough economy. Some credited summer storms. Others believe their long-term and ongoing marketing efforts – something we suggested shops maintain even in a downturn – were paying off. Others said they were not sure why business had remained strong, but were knocking on wood that it would continue.

The topic of how business has been for shops made several news items that we came across in the last couple of weeks stand out.

First, the Insurance Information Institute published updated figures for 2007 that do not bode particularly well for collision repairers. The average physical damage severity – essentially what insurers spend on average for a vehicle repair – dropped last year after rising steadily throughout the preceding decade. The drop was not severe – from a 2006 average of $3,189 down 1.8 percent to $3,131 in 2007. But it is another sign the total dollars flowing to collision repairers is not keeping pace with inflation.

Those numbers do not look any better when placed next to the claims frequency numbers, which the Insurance Information Institute said rebounded slightly last year but continued to remain below what they were a decade ago. In 1999, claims frequency was 5.73 claims per 100 car years. (A car year is 365 days of insured coverage for a single vehicle.) Last year, it was 5.14 claims per 100 car years, a ten percent drop from 1999, although higher than the 4.88 claims per 100 car years in 2004 and 2006.

Those frequency numbers might drop further if an Insurance Institute for Highway Safety report issued last month gains much traction. That organization studied the percentage of teen drivers involved in auto accidents in states with an age 16 or lower requirement for drivers’ licenses versus states (and other countries) with higher age requirements. Not surprisingly, based on that research the Institute believes “licensing at later ages would substantially reduce crashes involving teen drivers.”

Shop scams and crimes

Although it was encouraging to hear from some shop owners not suffering from the economic slow-down, it was discouraging how many new frauds, scams, and rip-offs we have heard about since our August feature on the topic.

Out in Oregon last month, for example, a man called and then visited Nu-Way Body & Fender Works, claiming to be from the shop’s credit card processing firm. He said he needed to upgrade the shop’s card processing terminal because of new “Smart Cards” that include an imbedded computer chip. (While such cards exist, they are being used primarily only in Europe.)

Sally DeVinney, the shop’s office manager said she got suspicious when the man arrived in a Hummer, could provide her with no business card, and showed her a photocopy of what he said was an article from the local newspaper about the Smart Cards. The article was full of spelling and grammatical errors and “looked like it was written by a fifth grader,” DeVinney said.

She called her card processing firm and confirmed the man was not at the shop on their behalf. When she told him that, the man left quickly. Experts say access to the processing terminal could have allowed the man to obtain shop customers’ credit card information or even payments made to the shop.

Meanwhile, while the California shop owner we wrote about in August whose bookkeeper had embezzled more than $400,000 is still waiting to see what happens to that woman, another former shop bookkeeper in that state is doing hard time for a similar crime.

Christina Tapia was sentenced in late August to more than nine years in prison last week after pleading no contest to 24 felony charges related to embezzling $200,000 from a shop in Milpitas, California.

The district attorney’s office would not release the name of the shop, where Tapia worked for eleven months in 2005 and 2006. During that time, prosecutors said, she wrote unauthorized checks (in some instances forging other employees’ signatures) and transferred funds from business accounts to her personal credit card accounts to cover her rent, to lease vehicles, to purchase electronics, and to give money to family members.

She will serve the sentence concurrently to one she is currently serving, also for embezzlement, in another California county.

Though a far smaller dollar amount was involved, a Texas court in August convicted another woman of forging two dozen checks totaling about $4,600 while working as a bookkeeper at Classics Auto Paint & Body in Midland, Texas, for seven months in 2005 and 2006.

“I emphasized that she took advantage of the business owner, Larry Sims, when his father was ill and he had delegated a great deal of responsibility to her,” Midland County Assistant District Attorney Carolyn Thurmond said. “She would write the name of a vendor in the check registry and then write the check to herself and cash it. This was not all the money she stole. They were just the checks we felt were easiest to prove. She stole more than $11,000.”

Sims testified that he discovered the problem when companies he often dealt with reported their bills remained outstanding.

As in the similar cases we reported earlier this year, these situations provide another good reminder that pre-employment background checks and simple financial safeguards (such as reviewing bank statements and cancelled checks) can reduce or eliminate such losses.

States address steering

In July, INSIGHT offered a summary of the various state efforts this year to address the issue of steering. In the months since our feature on the topic, there has been some activity in a few areas.

In California, for example, the version of a much-amended bill that was finally approved in August by both chambers calls only for formation of a task force under the insurance commissioner to look into issues arising from changes to existing California anti-steering laws and to report back to the legislature by the end of 2009. That is a far cry from the original language of the bill, which would have required insurers to determine if a claimant had selected a shop prior to any discussion of repairs, and prohibited the insurer from discussing its DRP if the claimant had selected a shop.

Massachusetts is often thought of the state without DRPs, but its referral lists of shops lead to complaints of insurer steering there as well. At a late-night vote ending the formal Massachusetts legislative session the last week of July, the House unanimously approved sweeping legislation, backed by the Massachusetts Auto Body Association (MABA), addressing steering, shop equipment regulations, and supplement rules.

The legislation said no insurer may “require, suggest, request, or recommend that any appraisals or repairs should or should not be made in a specified registered repair facility or facilities,” nor “use coercion or intimidation to cause appraisals or repairs to be made or not made in any specified repair facility or facilities.”

Steve Regan of MABA called the House vote “an affirmation that the Legislature listened to repairers and believed them and now understands the severity of some of the problems in our industry with respect to steering and other issues.”

The association is asking shops to urge their state Senators to act on the bill prior to adjournment at the end of the year. Regan said he believes lawmakers and the Governor will see the bill as part of the Governor’s auto insurance reform package.

“It creates competition in the collision repair market by giving consumers the right to free choice…and getting the insurers out of the referral business,” he said.

OEM repair information

Back in May, we summarized the places and ways collision repairers can get access to OEM information without having to pay full-price at all of the automaker subscription websites.

The article, for example, discussed the body repair manuals, weld bonding publications and structural sectioning guides available from Chrysler for $2 each (plus shipping), but noted that although the price was right (compared to Chrysler’s $1,200-a-year subscription site), snail-mail does not exactly provide the information you need when you need it.

But this summer, Chrysler hinted it will unveil a new website this fall – most likely before NACE – that will give collision repairers free or low-cost access to Chrysler collision repair information. Doug Craig, collision repair manager for Chrysler, said the site will be linked to the Mopar.com website and will require only registration and log-in, but may have a one-time fee that he expected to be $50 or less.

With automakers in the past often offering free repair manuals or other information at NACE, anyone attending this year’s event may want to stop by the Chrysler booth to see about any deals on accessing the new site.

Also in that article, we noted that a handful of automakers were still not linked to the www.oem1stop.com site. That site itself does not offer any information, but provides a 1-click link to each of the automaker subscription websites. Since our article last spring, Audi and Subaru got onboard with the site, leaving BMW as the only automaker whose information website you cannot access through www.oem1stop.com.   o

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