On the horizon

Jan. 1, 2014
ABRN highlights what lies ahead for the collision repair industry in 2014.

Texas shop owner Bobby Johnson wasn’t pulling any punches.

“Many of the people who keep telling us how we can improve the claims process, parts ordering, productivity (and) turn-around time… don’t know the first thing about how our shops operate or half the steps required to properly repair a damaged vehicle,” Johnson wrote. “It seems that many insurance companies — and some shops — have bought into the premise that one or another computer system will solve many or all problems. There is always one direct repair program or another telling shop owners that something will greatly expedite the claims handling process.

“All these promises sound great on paper or in panel discussions,” he added, “but they don’t do the repair work.”

You might think Johnson wrote this last week, perhaps related to any one of the insurance companies now requiring direct repair shops to use a particular online parts procurement system.

But Johnson actually wrote that in 1993, 20 years ago. Reading that may make it feel like very little changes in the industry. But in fact, there are many shifts and evolutions each year. As 2014 begins, here’s our annual preview of what to look for in the coming year.

The PartsTrader rollout

State Farm’s mandated use of PartsTrader will arrive on the East Coast for the first time in 2014, starting with Florida and Georgia. The insurer has said the rollout will be nationwide by the end of the year.

In addition to at least one lawsuit and other forms of push-back from repairers, PartsTrader in 2014 also will have to see what response it receives from parts vendors who at some point this year will be told what participating in the program will cost them.

PartsTrader is currently free to shops, and the company’s Dale Sailer says he doesn’t “expect to ever charge a shop to use the system.” Sometime in 2014, however, suppliers will be given 60 days’ notice ahead of the start of a monthly fee for their participation; Sailer has said only that the fee would be “modest” and “less than you’re used to paying today for comparable products.”

The supplier also will pay a yet-to-be-determined fee per transaction, Sailer says. But because there will be no transaction fee charged on State Farm jobs, PartsTrader is counting on shops ordering parts through PartsTrader for all its jobs.

“Our success is dependent on shops finding value in using PartsTrader beyond State Farm,” Sailer says. “That is an absolute must for us.”

No relief on total losses

The percentage of wrecked vehicles declared to be total losses was trending up slightly as the end of 2013 approached — and, assuming there’s no major market disruptions, that will likely continue in 2014, according to Susanna Gotsch, lead analyst for CCC Information Services.

The biggest cause: the continued aging of the U.S. vehicle population. The average vehicle age is now 11.4 years, according to R.L. Polk. A decade ago, Gotsch said, 27 percent of all repairable appraisals were for vehicles aged 7 years or more; by mid-2013, this grew to 44.2 percent.

The rebound in new car sales will help slow the aging of the fleet. And high demand and prices for used vehicles have meant repair costs could be higher before a vehicle passed the total loss threshold. But those used car values were dropping though much of 2013, and until the inventory of older vehicles declines — which isn’t expected to happen in the next 12 to 18 months — don’t look for the percentage of vehicles being declared a total loss to decline.

The first 500-shop MSO

As reported in ABRN last fall, at least one investment banking firm representative is confident there were be at least one multi-shop operator (MSO) with more than 1,000 shops within five years. But could one reach the halfway mark to that in 2014?

Clearly, the closest to that milestone are two franchise operations, Maaco and Carstar, each with about 450 shops. Other chains are growing faster, but of those, only The Boyd Group (which also operates shops under the names True2Form and Gerber) is more than halfway to 500 shops. The next four biggest chains combined have about 500 shops.

But these large MSOs each added at least two to four dozen shops last year, with the pace of growth accelerating. And rumors of mergers between some of the Top 10 MSOs abound, which could catapult at least one of them much closer to that 500-shop mark.

The rebirth of NACE

Organizers of the International Autobody Congress and Exposition (NACE) are clearly looking at the 2014 event to put the show back into growth mode. They’ve shaken up the schedule by shifting the event to summer and to a location it’s never been held: Detroit.

Dan Risley, executive director of the Automotive Service Association (ASA), which sponsors NACE, says the Motor City location will mean the OEMs will play a pivotal part in what he called the “rebirth of NACE,” with more car companies exhibiting at the event and hosting factory tours.

Also helping draw attendees, Risley says, will be the Collision Industry Conference (CIC) and I-CAR annual conference, being held the two days prior to NACE in the same location.

“We think that’s a win for the industry,” Risley says. “One of the things ASA did a couple years ago was a split from some things. It caused a divide in the industry. It hurt us. It hurt the show. We recognize that. So we’re going in the opposite direction and doing everything we can to promote industry unity. We think it’s best for the industry and for the show as well.”

Risley says Detroit offers a refurbished convention center with a new headquarters hotel a block away. More so than in Las Vegas and New Orleans (the site of NACE in 2012), there is a large population of shops within an easy drive of Detroit. And Risley points to ancillary attractions like the Henry Ford Museum, Yankees vs. Tigers baseball games and tunnel access to the casinos and other attractions of Windsor, Canada, as added benefits.

“We want to make this show a different experience,” Risley says. “When we go to Detroit, we’re going to give you that. We’re going to give you something in Detroit that you will not be able to get anywhere else in this country.”

More on mandates

Shops and their associations really took aim at insurance company mandates in 2013, and the petition drives, lawsuits and calls for regulator or legislative involvement will likely continue in 2014.

Perhaps of particular interest for 2014 will be seeing what response ASA gets to its letter to state insurance regulators and attorneys general around the country, asking whether State Farm’s mandate to use PartsTrader violates state law.

“We believe this mandatory parts procurement program stifles competition and harms both the consumer and the small businessperson,” ASA’s Risley says.

States crack down on the uninsured

Insured cars are more likely to be repaired after an accident, so recent efforts in several state to crack down on drivers not carrying mandatory coverage could be good news for shops in 2014.

Missouri lawmakers, for example, overrode a veto by its governor to make that state the 11th in the country to enact a “no pay, no play” law, preventing uninsured drivers from collecting non-economic damages resulting from an accident, even if the accident wasn’t their fault.

Indiana lawmakers are considering several ways to go after the 321,000 drivers who owe the state $130 million in insurance-related fees they were charged over the last four years when they were cited for driving without insurance. The state is considering using liens or even confiscation of license plates, as was recently launched in Oklahoma.

The Michigan Department of Motor Vehicles recently conducted a one-day study in which it sought to verify every paper insurance document brought to the department that day by motorists renewing their vehicle registration. It found that 16 percent of all those documents were forged or fraudulent. In three counties, more than 46 percent of the documents were bogus. To crack down on the problem, insurers can now electronically notify the state when a motorist renews, and those found to have phony insurance documents can have their vehicle registration canceled as well.

Insurers may expand no-touch claim handling

The prevalence of smartphones has insurers trying out “self-service” or “no-touch” auto claims handling. Allstate, for example, now offers its “QuickFoto Claim” app in a number of states. On a case-by-case basis, customers reporting a minor claim (“dings, scratches, dents, fender benders”) are given the option of using the app to upload images of the vehicle to Allstate. An Allstate spokesman reports that turnaround time on these claims averages four hours.

If experiments like these pay off, look for more insurers to find ways to settle more claims before a vehicle ever enters a shop.

Will predictive estimating gain traction?

Toyota’s planned “predictive estimating” system made ABRN’s “what to watch for in 2013” preview a year ago, but perhaps 2014 is the year it will take off.

The system requires the user only to select the damaged portions of the vehicle (left front fender, for example), and all items related to that section of the vehicle are automatically listed, including all necessary parts and Toyota-recommended procedures, along with links to all related Toyota bulletins and published documentation.

“Everything you need to fix our cars correctly and to our standards is there,” Toyota’s Rick Leos says.

Many in the industry are looking forward to an update in 2014 on Toyota’s progress on the system. It is being incorporated in Mitchell International’s new mobile and online estimating tool this year, and it will be interesting to see whether other automakers will follow suit.

I-CAR’s portal to OEM info

Just getting its start as 2014 kicks off is I-CAR’s new “technical knowledge portal,” part of that organization’s effort to increase the accessibility of OEM repair information to the industry. Available via I-CAR’s website (www.i-car.com), the portal each week will offer new articles with OEM repair information, and a searchable database of technical inquiries I-CAR has received and answered using OEM resources.

It remains to be seen as to what I-CAR’s work with the automakers will mean for the industry — and to what degree repairers will use this new source of OEM information that many have said they want.

Stop chasing signatures

After a non-drivable car gets towed into your shop, how long do you generally have to wait to get a signed authorization from the customer to tear down or begin work on their vehicle? Would that customer be more apt to sign the form more quickly if they didn’t have to come to your shop to do so?

That’s the goal of a new system, recently tested by Pennsylvania-based MSO CollisionMax (which has 11 shops). It seems likely to get adopted by other repairers this year.

CollisionMax allows customers to authorize repairs by collecting an e-signature via the customer’s phone, computer or tablet. Over a three-month period and more than 300 non-drivable claims, CollisionMax compared the traditional method of obtaining customer signatures to the e-signature method. Using the traditional method, 62 percent of the needed signatures were obtained the same day, and 18 percent were obtained the next day. The balance took three days or more (in the longest case, nine days) and the overall average was 1.94 days.

By using e-signatures, however, CollisionMax obtained 97 percent of the signatures the same day and the other 3 percent the next day. The longest amount of time it took to obtain the authorization was just 26 hours, and the overall average length of time was just over one hour.

At an industry technology conference last fall, several attendees expressed surprise that an e-signature system hadn’t been integrated into the estimating or shop management systems. Perhaps 2014 will be the year that happens.

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