Ever Wonder Why Insurance Companies Use Direct Repair Shops

Direct Repair ShopsLet’s face it. The goal of any good business is to make money whenever they can, and also save money too. This in particular is a delicate balancing act put on by insurance companies. But they do not do this with complete greed in mind, like so many of you would like to believe. Keeping their costs low is huge boon for you the insured as well, because it helps to keep premiums down.

One way insurance companies implement cost cutting measures is by recommending that the people they insure use the direct repair companies with which they are associated. These companies  are under contract with the insurance agencies, which allows the agency some perks that they don’t get from a non-contracted repair shop.

The first is the free storage. Let’s face it. Storing a car is expensive, whether it be for an individual or an insurance company. So one of the things in the contract with the direct repairs shops is free storage for the cars they are working on. You may not even realize this, but this storage fee gets worked into the cost you pay for repairs.

Next is another freebie, and it’s towing. If the direct repair shop ends up towing the car that they later get contracted to work on, the chances of the insurance company ending up paying for the tow truck virtually disappear.

You, as the consumer may not realize this, but it’s a good thing for you too. And I say this because somewhere along the line this fee would get buried right along with a bunch of other things that you would ultimately be paying for in the end anyway. So the insurance company’s deal with the direct repair shop saves you money in the end, which is why it’s truly in your best interest to use the repair shops recommended by your insurance provider. They really do have your best interest at heart.

And what’s the point of making a deal with direct repair shops if there are no pricing concessions involved. It would be kind of foolish, don’t you think?

These contracted repair shops offer discounts on parts and labor in some cases, keeping the costs to the insurance company down where in turn they are not required to pay out as much on their claims.

Right now you might be thinking “Wait a minute. Why is it a good thing for the insurance company to have to pay me less money on my claim?” The answer is very simple. They are only paying you less because the company that did the repairs charged must less than their competitor would have. Do you understand now?

The less the insurance company has to pay for repairs, the lower everyone’s premiums will be. This will always be the case, so it can be smart to work with your insurance company instead of against them. It’s just good business sense. So don’t use people outside of the network because you feel like your freedom is being taken away from you. You are only hurting yourself in the long run.

Are Direct Repair Shops Killing The Collision Repair Industry?

Direct Repair ShopOnce again, the old battle of good vs. evil rears its ugly head, but this time it’s in the collision repair industry. When you get into a car accident, and you need to repair your vehicle, who do you go to? Do you use your own “guy,” or do you go to one of the shops suggested by your insurance company, which is called a direct repair shop.

The reason this is such a hot topic is because the insurance companies have basically taken the freedom of choice away from the vehicle owner. If you use one of the direct repair shops recommended by the insurance company you will get perks that you will not receive from a non-contracted repair provider.

One major bonus is that the parts and repair you receive will have a warranty. It never hurts to get a warranty, in particular when dealing with a high dollar item such as car repairs.

And another perk, if you can call it one, is if enough people complain about one of the direct repair shops, the will receive bad marks and ultimately be cut from the program. This is a huge loss for the repair shop, because let’s face it, no shop wants to lose millions of dollars worth of business.

But here’s my question to you, and it’s a big one, so pay attention.

Why do you even care if a company gets removed as a DRP (direct repair program)?

Granted, this will only end up helping the people in your shoes that come after you. By getting a subpar repair shop removed, you save future accident victims that belong to the same insurance company as you the agony of dealing with an undeserving company that really doesn’t care about the people they work for.

While this is definitely a nice thing to do for others, this really is not helping you today or even years from now, unless of course you plan on making car accidents and repairs a regular part of your life. If that’s the case, then you are doing yourself a tremendous favor later on down the line.

Truth be told, direct repair programs are not designed with the consumer in mind. Their main function is to save the insurance companies truckloads of money, while they in turn set up a system where the insurance company doesn’t have to pay the insured the what they are truly owed on their claim.

There is a word for this in the English language. It’s called theft. And as usual in this country, a group of major players (the insurance industry) devised a system to legally steal from all of their customers. Because make no mistakes about it, they are stealing from you.

By making it so unbeneficial for you to use a repair shop outside of their network, they are legally forcing you to use companies that work with them to swindle you out of your hard earned cash.

Do you fight the system or conform to it? You be the judge. Anyone have any comments? Feel free to join the discussion.

IIHS Does Not Recommend Use of Aftermarket Structural Parts

Came across an interesting article the other day in Collision Week. They talked about how the IIHS doesn’t endorse the use of aftermarket parts. Read more below:

By Collision Week
The Insurance Institute for Highway Safety (IIHS) says it does not recommend the use of aftermarket structural parts because there is no system in place to guarantee that they would perform the same way the original parts would in a crash.

David Zuby, chief research officer for the IIHS, was quoted in Consumer Reports Thursday saying, “The vehicle structure is part of a complex system designed to protect people in crashes, as well as hold up the engine. There’s a lot of engineering that goes into making a crash protection system. You can’t willy nilly change those parts, because the system won’t work the way it was designed.”

The consumer Reports article was prompted by reports from Ford about possible safety problems with some aftermarket structural parts. Following its demonstration at the Collision Industry Conference on Wednesday condemning unsafe aftermarket parts (see related story below), Ford motor company released its findings to mainstream media outlets.

The IIHS told Consumer Reports that it has not crash-tested aftermarket bumpers, frame rails, or other safety related parts, however, “it does not advocate their use because there is no system in place to guarantee that they would perform the same way the original parts would in a crash.”

“There’s too much unknown to recommend them,” Zuby told Consumer Reports.

Read the full story in Consumer Reports

Who decides what shop repairs my vehicle?

You’ve had an accident and now you need to get your vehicle repaired. What do you do?

Whether you are a claimant or an insured, you need to report the accident to the insurance company.  When you speak to them, they will recommend one of their Direct Repair Shops.

Do you have to use a Direct Repair Shop?

No. In the end, the choice is yours. The insurance company may tell you that the shop of your choice is not on their “approved” list of shops and that they may not be able to efficiently handle your claim due to your selection of a certain shop, but do not be intimidated by this. It is your right to choose whatever shop you want to repair your vehicle.

However, if by chance you pick a bad shop (that is not a DRP), and they mess up your repairs, it is you against the body shop. The insurance company is only liable to pay for the original repair, it will not warranty how those repairs are made, whereas if you had gone to one of the insurance company’s direct repair facilities, then they would have to get involved.

In closing, always remember, you have to go with a shop that you feel comfortable dealing with. It is your vehicle being repaired and you have to be happy with the outcome.

Legislation to protect the consumer

From the other side of the tracks

Stumbled across a blog post on a great discussion board I’ve been participating on, much to either the delight or dismay of the other participants, as I apparently do not fit in. But that’s ok. I love a good debate. :)

Back to the blog post. AutoMuse® points out a recent news item up in Connecticut where the Attorney General, Richard Blumenthal, wants to pass legislation to make sure consumers cars are repaired correctly and safely and demands that insurance companies do not harass or push consumers to use their “DRPs” or preferred shops.

Consumers deserve to choose where a car is repaired. No insurer should straightjacket or corral consumers, forcing them to use a so-called preferred shop.

I actually agree with this statement, and although I outline what DRP’s are, and how they work, and how properly run ones will protect and help a consumer, I have always said it is the CUSTOMER’S choice as to where they get their car repaired. I think some of my naysayers miss that part of my discussions, posts and articles.

For the full blog post over at AutoMuse® click here.

And my question for those reading: If Lyn had taken her vehicle to a non-DRP shop and had the same problems with the repairs, who was going to back up her problems then?

Holding your vehicle hostage!

One situation many insureds find themselves in today is when they’ve taken their vehicle to a repair center that does not get along with the insurance company that is footing the bill for repairs. Many shops feel that they should not be told how to repair a car or how much they can charge for those repairs. The result is that both sides will take a firm line.

When you first choose a repair facility for your vehicle, the shop should tell you if they have problems working with a particular insurance company. However, what happens is, they start repairs and when they run into a problem with either a supplement, or overage on an estimate, they may tell you that the insurance company won’t meet all their demands.

The next call you will get is from your insurance company. The insurance company will tell you that the shop will not work with them and any charges the insurance company does not find valid, you will owe to the shop.

Obviously this is unacceptable, and the next move you may make is to move your car to a shop that the insurance company will work with. You call the shop that has your vehicle and tell them you want to move it. All of a sudden the shop is not as nice to you as when you first brought your vehicle to them. Now the shop wants to charge you tear down, storage and admin fees, and parts restocking fees. This could be hundreds to thousands of dollars over the original estimate.

Why should you be caught in the middle of a dispute between the insurance company and the body shop?

At the risk of being accused of taking one side or the other, please understand that each situation is different and there can be multiple factors involved. Some insurance companies do try to take advantage of the body shop, but I have seen body shops overinflate the value of repairs.

It has been my experience that shops overcharge to remove your vehicle to make up for the loss of income and hassle. They more than likely knew before they started repairs, that they could not work with the insurance company. They feel that they are punishing the insurance company by charging all the fees but it always comes back to the customer.

What happens all the time is the shop blames the insurance company, the insurance company blames the shop when both of them should have been able to sit down and repair the car per the manufacturer requirements without under or over inflating the estimate.

How do you prevent this scenario from happening?

If you do not use a Direct Repair Shop on the insurance company’s program, always talk to the shop manager of the shop you may want to use. Tell them which insurance company will be paying for the repairs and ask them if they work well with the insurance company or do they normally have issues with collecting full payment for repairs or argue about the repair process. Conversely, speak with your claims adjuster to verify that they have a good working relationship with the prospective shop. If either entity tells you they do not have a good track record, move your vehicle to another shop. Don’t wait until there are problems.

In closing, it is highly recommended to always do your homework when choosing a repair facility for your vehicle as well as on the insurance company itself. Do not be afraid to ask questions about a shop’s reputation with a particular insurance company. It is your right to get your vehicle repaired correctly, and to your satisfaction.

In other news: Florida and Allstate

Allstate is in the middle of a heap of trouble down in Florida about a proposed 42 percent rate hike on Property Insurance and other practices. The insurance commission wants their papers and Allstate is balking.

“Either you’re going to produce the documents we request or you’re not,’ said Florida Insurance Commissioner Kevin McCarty. “And if you’re not, we will use all means available under Florida law to enforce our authority over our subpoenas.”

This should be interesting to follow: State Suspends Allstate’s License

Houston area shops charge for repairs they never made

With the aid of John Fowler of the American Insurance Services, the Houston police department uncovered an insurance fraud operation of huge proportions.

“There is no regulation of the auto repair industry. The National Insurance Crime Bureau estimated that every family in the United States pays an extra $1,000 a year in insurance premiums to cover the cost of fraud.”

Read more

Direct Repair Programs Facts and Myths

Direct Repair Programs or DRP’s are commonplace in today’s world of vehicle repair. More and more shops have joined forces with insurance companies all over the United States in order to gain as many referrals as they can in an industry that can be very competitive. DRP’s facilitate the relationship between the body shop and the insurance company and the owner of the vehicle being repaired. Taking your vehicle to a DRP shop is supposed to save a lot of hassle and paperwork on everyone’s behalf.
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Who is responsible for rental fees…

If a Direct Repair Shop does not complete the repairs before the rental period approved by my insurance company, who is responsible for rental fees?

Always check with your insurance company as to who is responsible for rental fees in any unexpected circumstances. Usually, if you have taken your car to a Direct Repair Shop on your insurance company’s program, then either the insurance company or the repair facility is responsible for all rental fees. This is NOT the case if you have chosen to take your car to a shop off their “approved” list. Again, always speak with your insurance company and find out what their policy is.