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October 2010 Issue

The Association View

State and national groups help collision repairers address legislative, regulatory, and technical issues affecting their businesses.

For a look at what is happening throughout the collision industry, INSIGHT this month turned to associations representing repairers around the industry.

More than a dozen associations were represented at a gathering in Dallas, Texas, in late September, when the Society of Collision Repair Specialists (SCRS) held its fifth annual “Affiliate Leader-ship Conference.” SCRS Chairman Barry Dorn said the event was designed to help the national association gather input from its state affiliates on its direction and efforts, as well as to help those groups work with one another and with the national organization.

A number of the associations reported on efforts they are making to work with state regulators to address issues and concerns. James Brown of the Houston Auto Body Associ-ation, for example, said the association successfully pushed the Texas Department of Insurance to conduct a 4-page survey of five top insurers in that state, asking questions about labor rate determination, shop referrals to consumers, DRP agreements, reimbursement caps or thresholds, and other claims practices by the insurers.

The insurers were asked, for example, how many DRP shops they have in Texas (State Farm = 636, Allstate = 388, Progressive = 277, GEICO = 56, Farmers = 285), and what percentage of their claims in 2009 went through DRP facilities (State Farm = 50%, GEICO = 35%, Farmers = 32%, Allstate = 24% of 1st-party claims and 12% of 3rd-party claims; Progressive said it was providing this information to the Department in a supplemental response).

The insurers were asked, “Does your company set caps or limits on the reimbursement rates for certain labor, services, parts and/or materials, e.g., paint?” State Farm and Farmers said they do not. Allstate said thresholds and pricing guidelines are negotiated individually with its DRP shops. For non-DRP shops, the company said, thresholds may be used and “additional costs are negotiated with the shop to arrive at an agreed repair cost.” Progressive said it has a “local payment authority” for its claims reps on paint materials, but said it is not a “cap” and “does not represent the maximum we’ll pay on a per vehicle basis.” The amount is sufficient for most estimates, Progressive said, but if the requested amount exceeds it, the claims rep should ask for supporting documentation and also may reference Mitchell’s paint and materials calculator “to confirm or negotiate any differing amounts.” GEICO, too, said it has no caps, only an authorization level on materials “to alert the adjuster to review any repair facility charges that appear abnormal in order to determine the appropriateness of such charges.”

Brown said the survey was prompted by a petition circulated by a handful of Texas shops asking the Insurance Depart-ment to request claims processing procedures and information from the insurers. Larry Cernosek, owner of Deer Park Paint & Body in Pasadena, Texas, a member of the Houston association, presented the petition to the Insurance Department, and helped review drafts of the survey questions.

All five of the insurers prefaced their responses to the Department of Insurance by saying the information and documents should not be disseminated beyond the Department. But Cernosek filed an Open Records Act request with the Department to receive copies of the responses. The Department provided the documents only after the state’s Attorney General ruled it must do so (with the exemption of a limited amount of information it agreed were “trade secrets”) despite the Insurance Department’s view that the documents should be exempt from disclosure requirements because they included insurer’s proprietary information.

Also at the Dallas meeting, Montana shop owner Bruce Halcro, president of the Montana Collision Repair Specialists, said among that group’s activities is an effort to educate regulators about the issue of paint capping, and to change how shop estimators are categorized in terms of workers’ compensation insurance premiums. Halcro said premiums for insurance company estimators are 26 percent of those charged for shop estimators, and the association believes the risk of on-the-job injuries – and thus the rates – for both types of estimators should be comparable.

“How can my estimator be a higher risk doing the exact same thing as someone who is driving around town all day when my estimator spends all day in an office?” Halcro asked.

Associations address legislation

Legislation also continued to be a key focus for many of the associations meeting in Dallas in September. Janet Chaney of the Iowa Collision Repair Association said that group plans to take another run in 2011 at legislation addressing the issue of shops not being reimbursed for state sales tax paid on paint and materials purchases.

Judell Anderson of the Alliance of Automotive Service Providers (AASP) of Minnesota said her group would likely push similar sales tax legislation again in her state this coming year. She said the association was successful this year in getting language on the issue included in both the state House and Senate tax bills, but it was opposed by the Governor who viewed it as a new tax, something he had pledged not to allow. The association argued it was not a new tax. Shops currently pay tax on the wholesale cost of materials but cannot collect it at the retail level because they charge for materials on a per-labor-hour rather than itemized basis. But Anderson said she felt confident that this year’s effort has set the groundwork for success on the issue in 2011.

Jordan Hendler, executive director of the Washington Metropolitan Auto Body Association (WMABA), said the association is pleased with changes it helped craft to total loss regulations in Maryland. Repair costs related to paint, plastic parts, and other “cosmetic” aspects of repair no longer must be included in the salvage calculation under a new law that went into effect October 1. Two years ago, the state mandated branding of a vehicle’s title when repair costs exceeded 75 percent of the vehicle’s value. The new law passed earlier this year excluded the cost of towing, storage, or vehicle rental from the calculation, as well as a list of “cosmetic” items worked out by Maryland's department of motor vehicles, state police, insurers and the WMABA.

“It’s going to save a lot of cars from being totaled,” Hendler said.

Hendler said she expects the association will also have to fight (as it did successfully this year) an effort in Virginia next year to raise the threshold of damage requiring a flood-damaged vehicle to receive a branded title from $1,000 to $5,000.

Hawaii shop owner Madison Spotts, representing the Automotive Body Painting Association of Hawaii, said the group this year successfully defeated legislation introduced in that state related to the use of salvaged airbags. The bill, which was crafted based on model legislation approved by the National Conference of Insurance Legislators (NCOIL) in 2009, would have established criminal penalties for fraudulent installation of an airbag, and would have required shops to maintain detailed records of airbags they purchase, sell or install.

Spotts said the association was concerned that the legislation also set forth guidelines regulating – and some would say endorsing – the use of salvage airbags. Auto recyclers were also opposing an important clause in the bill that would have required anyone installing a salvage airbag to place a permanent label on the vehicle's dashboard indicating that a salvage airbag had been installed.

Spotts said she thinks proponents of the use of salvage airbags saw Hawaii as a potential “easy state” to get such legislation enacted in, so its defeat was particularly important, she said.

Discussion of data privacy

In addition to association reports like these, Aaron Schulenburg, executive director of SCRS, discussed in Dallas some of the association’s recent and future efforts on a national level. Privacy of a shop’s estimating and management data is becoming more of a concern, he said, as the information providers move toward “cloud computing,” in which that data is stored remotely on the provider’s computers rather than the shop’s. Schulenburg said the association is hearing from more and more shops concerned that the privacy agreements with vendors do not seem adequate to address this issue.

“In addition to protecting the shop’s customer data, we also have to be concerned about our own shop data being compiled and potentially used against us,” Schulenburg said.

Fred Iantorno, executive director of the Collision Industry Electronic Commerce Association (CIECA) and a guest speaker at the SCRS event, said implementation of CIECA’s “BMS” standard would give shops more control over which of its data it shares with other parties. Currently, he said, the major estimating system providers use a different standardized format (“EMS”) to transfer data from the estimating system to the shop management system, insurer or other vendors.

Under EMS, Iantorno said, virtually all of the information from an estimate is transferred. But the BMS standard would enable a shop, for example, to transfer only the parts data from an estimate to the parts vendor. It could also potentially save shops money by making possible true freedom-of-choice of estimating system, and potentially eliminating the need for rekeying data into other systems for CSI, paint, and parts ordering, etc.

Iantorno said the information providers say they have not moved to the BMS standard because they have not seen repairers asking for such a change. That’s an issue that SCRS and its state affiliate groups meeting in Dallas discussed trying to address in the coming months.   o

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