I believe it is time for change, and I would like to show you how we can do it. How to make more profit and also how to deal with insurers.
The items I will be covering today are:
My background and how it relates to all of you
An introduction to the current business model in our industry and why It needs to change.
ICOBS, which I am pretty sure most of you will not have heard of, I will fully explain what it is and how it affects you.
What is a customers loss? it is maybe not what you think it is.
What is “reasonable” as a cost?
What you all must do! if you want to change things.
How to be successful when dealing with insurers.
I have been in the motortrade 27 years, I started off as a yts mechanic, and as all you have served my time.
I worked hard on the tools in both mechanical and bodyshops.
I enjoyed the pride in doing a job right and the satisfaction of seeing happy customers, I am sure you do too.
I realised fairly soon that the industry does not pay that well, and thought I could use my skills and knowledge more effectively and followed the path of being an engineer.
This is why it is important bodyshops earn more money,make more profit so you can encourage young people into the trade, retain staff and invest for the future!otherwise the industry will die.
I have worked as an engineer for 18 years , I worked for RAC accident services, as an independent engineer,Directline as RBS and more recently AVIVA
Even though I gained qualifications with the IAEA the IMI as an engineer and have a thorough knowledge of the insurance industry(or at least I thought I did) working for insurance companies ultimately you will be doing as your told!
Now you may be wondering how all this relates to yourselves as bodyshops? this why I have turned from gamekeeper to poacher to help you.
The ‘old me’ along with every other insurance company engineer and most independents will ultimately be telling you what you can charge the insurance company.
I find this Bizarre? how many other industries are there where you get told by the party responsible for the bill what you can charge them?
Not only that, they want you to justify everything you do,provide proof of where you bought you parts from, at what price and want you to share the discounts you have secured?
Can you imagine going out for meal, asking for a copy of the invoice from the butcher for the meat, the
greengrocer for the veg, film or take photos of the chef preparing the food as it may be a microwave meal?
You then get the bill and you ask for a discount, and even though you have ate the meal , you are not going to pay them for 30/60/90 days?
Yet we accepts as the norm in our industry and we need to ask the question why?
The current model is a tri-partate agreement between the bodyshop , the customer and the insurance company acting as an “agent” on behalf of the customer.
The instant you have the insurance company action as an agent on behalf of the customer there is a conflict of interest.
You need to remember who the “customer” is! your customer is the consumer, not the insurer or accident management company.
You are there to service the customers needs, the insurance company is under contract with the customer to “indemnify” them and pay the bill.
The current model the industry works by in the uk clearly does not work?
Yourselves as bodyshops do not make enough money!
The average profit margin for repairers was 2-3%.
The repair industry has been massively affected by insurers , may bodyshops are either going bust or joining large networks and being consolidated. It may not be far ahead in the future where we will see 4 large networks, but this does not mean there is not potential for everyone else.
Even though I have worked in the industry for a long time, and thought I knew it inside out, I was not once ever made aware of ICOBS.
IN fact if you speak to pretty much anyone in an insurance company they will not know about it either!
ICOBS Is the regulatory framework from the Financial Conduct Authority that under the Financial service and markets act 2000, ALL insurers must abide by it.
ICOBS IS THE INSURANCE CONDUCT OF BUSINESS STANDARDS.
Imagine my surprise to find on reading the regulations that what I thought I knew and was lead to believe by insurance companies was actually incorrect!
insurers must treat customers fairly,
under icobs 8.3.3 where an insurer has sold a policy to a consumer it is the customers “agent” if the firm intends to be the insurers undertaking “agent” it needs to consider the risk of becoming unable to act without breaching its duty to either the contract or the customer making the claim and make the customer aware of this.
To do so would be a conflict of interest, what does this mean? it means insurer’s should not be negotiating with you.
You have the right the right to charge whatever you want as long as it is “reasonable” ( I will come to this later)And the customer has the legal right to their choice of repairer.
To deal with insurer’s you first need to understand the customers loss.
When dealing with insurance companies, what you have to remember is that is nothing to do with repairing vehicles.
It is all about financial loss, and the insurer will do everything it can to minimise settlement.
So what is the proper measure of the customers loss?
Quite helpfully this is covered by the case law of Coles v Hetherton.
The 3 main issues that were considered were.
What is the proper measure of a customers loss for damage under a chattel( customers loss for damage to their vehicle).
Does it make a difference if the repair was organised by the insurer as opposed to the person themselves?
If an insurer indemnifies an insured in respect of repairs, is it recoverable?which may include sundry incidental and administrative cost.
The courts advised that the proper measure of loss was the diminution in loss of the damaged chattel( the cost of repairs to the damaged vehicle).
That the loss happened at the time of the accident so could not have been mitigated by having repaired at a lower cost.
The reasonable cost of repairs was the cost the claimant could have got the vehicle repaired for in the open RETAIL market.It did not matter that the insurer could have been able to get a better rate through its industry connections provided the cost was “reasonable”.
What does this mean to you?
You have ICOBS showing the insurer should not be negotiating the consumers loss when it is the paymaster, and the case law saying that the consumers loss it at retail rates in the market place, not the preferential rates insurer’s ask.
Reasonable is your retail rate in the open market!
*not the preferential rate you give insurers*
The issue in the body repair industry are the lab rates you get and the discounts requested.
YOU SET THE RATES IN YOUR COMPANY NOT THE OTHER WAY AROUND!
Remember, this is your starting point not your finish point.
If you start at £28 per hour, you will not get more than that.
If you start at £50 per hour and an insurer advise’s they will not pay, if you gave them a “TEN PERCENT DISCOUNT” IS That not being “reasonable”?But that is only £5..and your rates is now £45 per hour…if you gvave them a 20% discount to an insurer, is that not being” very reasonable” it is an ten pound saving per hour for the insurance engineer, but you are still earning more than you did!
If you want a higher lab rate for the industry you need to charge more! simple as that!
Referring back to Coles V Hetherton, the court viewed the reasonable rates as one that is available in the open RETAIL market.
When insurance companies fight these cases in court they carry out research by ringing round bodyshops to found out the going rates in the area.
If you all advise that you charge £28 per hour THAT IS all you will get.
Should you want to work for an insurance company at that rate, by all means do “but” advise this is the “preferential rate” you are giving to them under the proviso of the contract you have entered into with them.
But publish and display your retail rate at the higher amount.
Cleary display your RETAIL RATES in the reception area, and on your website.
This is the probably the most important thing you can do! They have the power, they have the contract with the insurer.
Advise them they have the legal right to use you as their choice of repairer and cannot be denied this right.
They have the legal and contractural right to their full financial loss! the insurance must “indemnify them” as per their contract.
Make them aware the insurer may want to use secondhand parts or none original parts repairing their vehicle, and will try and steer them away from using you! Let them know by using you, they control how their car is repaired.
When you have the customer empowered and educated you have much more control.
This is why I primarily work with customers, as they have the power to change things.
Here is a recent article about one of my customers in the telegraph.
This shows how insurer’s try to bully customers.
This customer appointed me to act on her behalf.
The customer has an accident that was not her fault , she contacted her insurer, and they took her car away.
They did not bother taking her car to a repairer, they took her car straight the salvage.All the customer wanted was her car repaired, yet her insurer advised her the repair cost were over £7thousand pound and it was a total loss.
All the customer wanted was her car repairing at her choice of repairer.
When she advised her insurer of this, they remain steadfast and adamant her car was a total loss.When I spoke to the insurer and asked for a copy of the engineers report, they firstly advised they would not give me a copy, and then advised that they had not physically inspected the vehicle.When I made them aware that the
customer wanted to have the vehicle repaired as it was not a total loss,They refused, and advised that the owner could retain the salvage, or total loss.I advised we needed to know what had been damaged as she wanted to retain the salvage,they then advised they had not costed it?
So having lied and being caught out, they the informed they would take the customer out of hire if she did not make a decision and would charge her £150 to have her car returned.
When challenged on the cost,they arranged for the salvage agent to do an estimate, which then showed it to be repairable.
On sending the Chief executive of the company an email advising of the various FCA regulations, the car was suddenly agreed to be returned for free to her choice of repairer, and was authorised at retail rates.
Educate your customers and you will win.
A bodyshop I work with educates his customers in the way I have explained in my presentation.
Directline refused to authorise repairs at his rates.
An insurer has 3 options to settle a claim.
Total loss the vehicle
Provide a cash in lieu settlement to the customer for the cost of the repairs.
In this case, as the car was not a total loss, and they refused to authorise repairs, the insurer elected to provide a cash in lieu settlement to the customer.
The initially tried to settle for half the cost of the repairs, so the customer took them to the FOS.
Directline improved its offer, which was declined. The FOS heard the complaint and agreed with the customer, they forced Directline to pay the full cost at retail rates and also to pay compensation to the customer at 8% of the difference.Educate your customers,you will win.