Shop owner writes about unequal treatment

Editor’s note: The Portland shop owner, who has been in the collision repair industry for 20 years, chooses to remain anonymous. Excerpts from his letter are below.
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Dear Collision Standard:

Since I opened my store and collision repair became my job, I have discovered things about the industry that are not obvious to the rest of the world . . . Crashed cars just don’t roll through your doors. My first year in business was extremely rough. I spent thousands on print advertising, yellow pages ads, sponsored events, radio; you name it . . . only to get a rude awakening when no significantly damaged vehicles showed up.

We would get lightly damaged vehicles needing trivial repairs but certainly not big collision repairs which are my employees’ and my expertise. The revenue from these small jobs certainly wasn’t enough to pay the large overhead that comes with owning such a store. . .

Although we still advertise extensively, with the cost and effectiveness of advertising versus the return in vehicle repair jobs, we began looking for other solutions.

Toward the beginning of this century, I began calling all auto insurance companies to ask if my store could be on their network list. I understand the insurers require shops in their referral systems to give discounts, which we were willing to do to survive. To this day I keep trying. If only one insurer would refer jobs my way, it would ease the financial pressure. But to my horror, every one of them turned me down.

Although insurance agents claim they can only recommend network shops, I did get a few to break their insurers’ rules and refer damaged vehicles to us, but that didn’t last long. When insurance companies found out, they threatened the agents with consequences for recommending non-network shops.

I then heard that tow truck drivers could refer customers to shops. This system finally tipped the scale to where my store was not going to plunge into total financial destruction. To this day, my shop relies on tow truck drivers, and I really appreciate their efforts and support.

After establishing a system of tow truck driver referrals, I discovered that I am not in competition with other body shops; we all are in a battle with insurance carriers.

From the scene of the accident to the agents to the claims handlers, the insurers have a systematic approach to funnel customers to network body shops and explicitly exclude any independent stores.

ORS 746.280 [OSAR’s SB 523 that became law in 2007] enables the customers to have their vehicles repaired at any store they choose, but the law does not protect consumers or businesses from insurers creating systems that make it uncomfortable or even impractical for a consumer to choose a store of their choice. This is very serious because there is next to no regulations currently, which curtail the ability of insurers from monopolizing the industry that they are required to pay claim losses to in Oregon.

The initial claims call

I have discovered that there is almost never a situation where insurers don’t try to steal my customers while they’re sitting at my desk.

I could write a book about the approaches the carriers take. Some of the more common standardized statements made by insurers when talking to claimants:

“That shop isn’t on our list.”
“We can’t warranty the repairs if you leave your car there.”
“You are not utilizing all of the benefits of your policy if you choose that body shop.”
“Did you know if you leave your car there, we have to send an appraiser to that location?
It could take awhile. If you take your car to our recommended body shop, there is no wait at all.”
“We’ll tow your car there for free.”
The worse lines are when the agent says outright, “You can’t leave your car at that store if it’s drivable.”

Insurers commonly state that all drivable vehicles must go through their drive-in estimating service at the network body shop. This gives the network store first crack at every drivable vehicle in the city.

I have to do a lot of fast-talking to save all my customers from leaving my store after the insurer’s debacle of setting up the claim numbers every day.

I’m in a relentless battle with the insurers to keep my customers. Yes, I do lose many customers because of how insurance agents make the customer feel during their undermine-my-store sales pitches. We seem to lose creditability when the insurers aren’t backing my up store.

The “I can’t warranty them” statement

The “I can’t warranty them” statement gets many customers to leave my store for the insurer’s recommended store. Many customers seem to be in fear of not having an insurance company’s warranty. It is a basic part of sales marketing 101 for insurers that is a very effective and well thought out approach to “just letting consumers know their options” sales pitch.

When did it become the insurance company’s right to crush competitive business in the collision repair industry or to even be in competition with body shops at all? Progressive has claimants drop vehicles at their service centers and handles the repairs completely. They are acting as a body shop and competitors to all other body shops.

If the insurance companies are aiming for the 100% mark with the referral system, where will that leave the Oregon consumers when the only shop to choose from is the insurance network stores?

The Auto Roadside Assistance Program’s referral system

Another big part of the insurers’ grasp on the industry is the major auto roadside assistance program’s referral system. If you go to this auto roadside assistance program’s website and search for approved body shops, you will find a list of 28 shops for the Portland metro area. 65% of this list consists of body shops that are apart of two prominent body shop chains. All but one or two of the rest of the shops listed are insurance network stores.

And it’s not for free. The nationwide auto roadside assistance program charges these shops thousands of dollars a year for referrals. But it’s worth it due to the volume of referrals received.

Again, body shops need to be part of an exclusive insurance group to participate. This requirement is important to insurers because a good 30-50% of the time when a person is in a crash, the auto roadside assistance program is called to the scene of the accident to tow the car. If a customer doesn’t offhand know a body shop, which is usually the case; the insurers with their systematic barrage of referrals quickly exploit that fact. It is a systematic approach to controlling a large section of daily collision claims.

Some tow drivers that do tows for the auto roadside assistance program, liked my store and recommends us at times and I really appreciated it.

Last year Farmers and Allstate reps put a stop to that. They called the auto roadside assistance program reps and filed formal and informal complaints, stating that cars were being taken to my shop and claimed that we overcharged them, as well as being in collusion with tow companies.

That’s a bold statement.

The auto roadside assistance program coordinators threatened to take program contracts away from any tow companies that are caught recommending any auto roadside assistance program dispatched calls to non-approved stores.

First of all, we never overcharged anyone. My rates are exactly the same, if not lower than my competitor’s rates for the same services. I can supply all my files to be audited.

Insurers have full control of the damaged vehicle referral system – they track the tow truck drivers with tracking devices.

Of course, I filled out the auto roadside assistance program approved application to become part of the program but wasn’t approved. The approved auto repair coordinator for the auto roadside assistance program wrote, “We feel that our program needs have been adequately met in the Portland metro area and are not adding more shops to the program.”

When customers are selecting auto roadside assistance program services, this automotive club does not make clear to their customers that it is limiting the number qualified repair shops available for selection and has weighted the list in favor of the insurance industry. Most consumers assume the auto roadside assistance program did their homework and found next to all the qualified stores available. And the average consumer is unaware that the repair stores must pay for the auto roadside assistance program referrals. It is important to know that the insurance companies figured out how to use auto roadside assistance program as a method of controlling collision claims.

Next let’s talk about the other 50% of the tows done by the Portland Police Department (PPD). It has gotten back to me that Farmers and Allstate reps have called the City of Portland’s Towing Coordinator to say that my shop is in collusion with tow companies.

Who’s practicing collusion?

Let’s see. Is the auto roadside assistance program colluding with insurance preferred body shops for their recommendations?

A tow driver recommends my shop instead one of the prominent local body shop chains. Is that collusion? But to make a long story short, the City of Portland is threatening to cancel any PPD towing contract if my shop is recommend by a tow driver.

The City of Portland put out a statement to all tow drivers about eight months ago, “Do not recommend any body shops. Just take the cars back to the tow lots and let insurance companies deal with the vehicles.”

In essence, with this statement the City expressed its support for the insurance referral system by stating, “Let insurance companies deal with the vehicles.”

With all this said, and all these mechanisms in place by the insurers, how can it not be seen that they are crushing the competition? Soon there will only be a handful of monstrous insurance controlled body shops left for the Oregon Consumer to choose from. Why should Oregonians and state officials allow these devastating systems to exist? Consumer protection in the collision repair industry is imperative.

One of the local tow truck companies tows primarily for one of the prominent local DRP body shop chains. It has gotten back to me by tow drivers that if the tow drivers drop any vehicle at my store – customer request or not – the drivers will be instantly terminated by management from this tow company.

I guess that’s why I barely ever have customers towed in from that company despite my radio commercials and newspaper ads. The sales manager of this tow company is on the city tow board as a tow industry rep.

Finding out that one independent tow company was referring customers to my store from time to time, this rep – using his city tow board clout – vowed to take away the city towing contract from the independent tow company.

Unfortunately, this rep made good on that threat. The independent tow company has lost its towing contract. The City of Portland letter stating some of the reasons for the contract termination includes false allegations made by Farmers and Allstate representatives about my store pertaining to collusion and price gouging.

The insurance reps called the City of Portland and road coordinators to accuse me of colluding, having a secret agreement, with tow drivers because they recommended my store.

Completely, completely fake accusations.

The City of Portland Towing Coordinator wrote the allegations, but through a lawsuit I filed against Allstate for the alleged charges, the allegations can be interpreted (by reading the depositions) that Allstate reps completely denied ever saying any such thing.

So who is lying here, the City Tow Coordinator or Allstate? Personally I believe the City Official would have no reason to make that up.

Regardless of who said what, the damage has been done. The independent tow company’s contract is scheduled for termination.

I may be crazy here, but it sounds to me like the contracts between insurance companies and their preferred body shops are acts of collusion, from the rate price fixing to the referral system to the control of emergency service infrastructure to the malicious backroom conversations among city agencies, auto roadside assistance programs and insurers in efforts to control the market of crashed car referrals.

The current insurance companies’ practices of contracts and referral systems should be stopped immediately. Lawmakers should not allow this to go on any longer.

It can also be seen as injurious to consumers by limiting their options by crushing the competition that ensures balance of a consistent quality product.

If the competition were eliminated, the insurers would be free to set the rates, since they tell the contracted shops what to charge, as well as setting the quality repair standards. It’s a take it or leave it option for shops. That violates 746.160(1).

I did file a lawsuit against Allstate for their statements and accusations. The arbitrator called it a draw with no damages found. But the deposition of an Allstate Regional Manager includes a lot of comments pertaining to the insurance referral system.

Page 7 The Allstate Regional Manager admits that the insurance company offers economic advantages to consumers who choose an Allstate network store over a non-network one.

Page 17, he states that a referral from a tow company and an insurance company to a particular body shop are the same with regards to legal and ethical standards and is viewed as being acceptable business practices by Allstate and is not to be considered collusion.

Page 18, he denies the network system is in competition with other body shops.

Page 18, he states the benefits of choosing a network store over a non-network store, which are communicated to all claimants during the time of dealing with an accident damaged vehicle.

Page 20, the Regional Manager admits that Allstate receives discounts from body shops in exchange for customer referrals.

Page 24, he refused to answer the question, “Are you aware that customers frequently have to pay some of their rental car bills due to the delays of waiting for insurance adjusters at the non-contracted collision repair stores?”

All the power struggles and turmoil my store experiences daily in dealing with insurance companies are similar to what other non-network stores currently experience in Oregon. From directing cheap accusations at my shop to cutting my work-flow communications with city officials and auto roadside assistance program coordinators to directly communicating with tow companies and insurance agents, all with the efforts of controlling the flow of crashed cars into the network stores.

The clear solution is to simply not allow insurers to contract with collision repair stores. This move will eliminate this entire ridiculous battle and will ensure the Oregon consumers a consistent quality product and maintain a financial balance for collision repair stores willing to build their stores on reputation, quality, and customer service, instead of an insurance referral system.

Thank you.