The auto glass repair and replacement industry begins the New Year, 2010, just as it ended 2009. But I believe that we begin 2010 with a renewed hope and expectation that change is coming. As many have done so many times before, let’s dissect our industry and identify just what the problems are and what suppresses independents in their ability to service their customers and compete freely.
Independent auto glass shops provide a service of replacing or repairing automobile/truck glass to the general public. Like other entrepreneurs, they promote their services through a variety of marketing channels such as the Internet, radio and TV ads, yellow pages and direct marketing. How a consumer chooses a particular shop may depend on reputation, advertising or referral. Regardless of how the consumer reaches the decision as to with whom to do business, the selection process and their ability to make a choice should be no different than in any other decision to purchase a product or service.
We can all agree that this is not the case in the auto glass repair and replacement industry. But why is our industry so unique? Why does the fact that many of our customers use an insurance claim to pay for our services inhibit our ability to service our customers and charge a fair price for those services? (That is, a fair price as decided by the seller of the service and not as dictated by an external source that has no vested interest other than to enhance their profits.) If a shop installs quality glass, employs certified technicians and adheres to safety standards, should they be paid the same amount as the guy operating out of the back of a pickup truck and not doing these things? So why does a third-party payer have the ability to change the economics of a contractual transaction between a buyer (the consumer) and the seller (independent glass shops). This is even more perplexing, when you consider the importance of replacing a windshield in a safe and proper manner. Obviously, the federal government, under the realm of standards, agrees.
Understand that I hold (and never have held) any animosity against the insurance industry or the TPAs. Simply, I view them as entrepreneurs taking advantage of the absence of enforcement of federal laws protecting fair competition within our industry. But in reality, independents should be allowed to survive or fail on the basis of true market forces at work within our industry, not because of artificial pricing or the influence of third-party administrators with blatant conflicts. Our industry should be no different than any other industry, simply because our customer is using a non-traditional method of paying for our services.
In actuality, if you just took five minutes to reflect on our industry and contemplate how it actually works versus how it should work, you would find it to be bizarre—just as Mr. Ralph Nader labeled it. On the eleventh of this month, we just implemented another standardized pricing update. Once again, we witnessed a weighted average decrease of .81 percent on all parts. Whether or not this holds true for your shop, should this be a factor in how we conduct our business in a free market economy? Of course it should not be.
The fact that “fair and reasonable” pricing, as determined and dictated by the insurance companies, varies should be a “red flag” to regulators. Why does one insurer view a “fair and reasonable” price to be more than another? And in some instances that price determined and dictated by one insurance company is significantly higher than that price determined and dictated by another. Do not all insurers have accessibility to prices being charged within a particular market? And why should this matter in a “free market” economy?
The fact of the matter is that the contract to consume the service and to provide the service is, and should be, an exclusive right between the consumer and the shop. No third party should be privy to this inherent right, no matter who is ultimately paying the bill. Most of the 50 states in the union have laws that protect a consumer’s right to choose a glass shop. A law to protect a consumer’s right to choose is indicative that something is amiss. But yet, in my opinion, insurance companies, many under the guise of a third-party administrator, have the ability to circumvent these laws. And they have been getting away with it. All independents should be allowed to survive or fail on their own merits.
In the end, the role of the insurance industry, the TPAs, concepts like the Guaranteed Average Invoice, the fact that insurance companies do not contract the services of the glass shops, unilateral contracts, artificial pricing and all of the other issues that make our industry unique and exclude independents from participating in a free market economy will come under scrutiny. The fact that a third party is paying for our services should not deny independents the right to compete freely and fairly in what should be a free market economy. As I said, I believe changes are coming. Unfortunately, these changes, no matter when they occur, will not compensate those who have gone out of business, not through any fault of their own, but because of their inability to compete in an industry that is plagued by injustices, illegal or otherwise.
Always remember, “Life may be unfair, but competition should not be.”
