For several months, the Independent Glass Association has been promoting the theme that the focus in this industry is on the low-cost provider, compromising consumer safety. Just recently, I was reminded that Mr. Gary Lubner of Belron in his presentation at the NGA Conference in Tucson in May 2006 said the following: “There is too much focus by insurance companies on cost and not on services.”
He continued, “As an industry, we deliver fantastic service and it’s just not fair that we are asked to do that without being fairly compensated.” On behalf of the shops that do deliver the fantastic service (many of which are IGA members) I say, thanks for the compliment. Yes, the majority of glass shops do provide a fantastic service and, yes, they are not being fairly compensated.
Mr. Lubner, I am in total agreement with your position. You were exactly right on and I will argue that this focus on cost is endangering the lives of consumers with inferior glass and shoddy workmanship. Your comments were delivered in 2006, and, in 2010, and your company, through its third-party administrator (TPA) and the other TPAs operating in this industry continue to be major contributors to this problem. The cost issue is getting much worse.
And regarding your comment about cash pricing, shops should not be concerned with who is ultimately paying the bill. Although I will argue that shops are justified in billing more for insurance claims (extensive overhead), the difference should be reasonable. Mr. Lubner, since your company owns the largest third-party administrator in the business, you have considerable influence over the insurance pricing in the marketplace. Yet the rates offered through your TPA are among the lowest. One example would be that when MetLife changed to the SGC Network from LYNX, the discount rate off NAGS list doubled—a total contradiction to your words in Tucson. What sudden change in the market place could justify that? I have argued for years that there is a huge disparity in what insurers pay across the country and they all have access to the same market pricing data. Is it because some want to be more generous?
Contrary to the scenario portrayed by a Belron senior corporate counsel member at the National Conference of Insurance Legislators a couple of weeks ago, third-party administrators are not good for the industry and especially the consumer. And their one-price-fits-all philosophy most certainly does not promote competition. Third-party administrators are pro-insurer and the defense of the TPA model is built on a mountain of sand. The third-party administrator model benefits the owner of the TPA and the client insurance company, period. Isn’t it ironic that a customer can walk into a glass shop off the street, contract to do business with the shop, and the TPA, who is not privy to the contract, receives an economic windfall because the shop’s customer uses their insurance policy to pay for the shop’s services? This is wrong, especially when the shop is a non-network shop. Thankfully, the courts are ruling against these shenanigans and ruling in favor of the shops and awarding short pays. TPAs should be independent and should not be allowed to own glass shops or have any other conflict of interest. Shops need to do more to wrestle control of their own businesses.
The arguments fixated on keeping insurance premiums low are nonsense; we all know that. The average consumer has his/her windshield replaced every five to seven years. If this statistic is accurate, and such an occurrence will cause a policyholder’s premium to increase, then the entire insurance industry is in need of intense scrutiny. I do not know about any of you, but my premium goes up every year. And while I have had one repair, I do not believe that I have had a windshield replaced in any vehicle that I have ever owned.
If we are to fix the auto glass repair and replacement industry, we must be rational in our approach and allow it to operate on the principles of a free market system, no matter who is ultimately paying the bill. The first step to achieve that end would be to eliminate the baseless arguments that support the status quo. The TPA model does not promote competition, it does not contain premiums and it certainly does not promote consumer safety. Unfortunately, our industry is being held hostage by deep pockets, healthier bottom lines for some, and arguments that cannot be supported by facts.
Wednesday, July 28, 2010
Wednesday, July 14, 2010
Attending NCOIL
This past Saturday, July 10, 2010, I had the opportunity to attend the Summer Conference of the National Conference of Insurance Legislators in Boston. Prior to May of this year, I did not know too much about NCOIL and their objectives. On the agenda was the “Model Act Regarding Insurer Auto-Body Steering,” which was subsequently amended to include auto glass, thanks to Rep. Barbara Byrum of Michigan.
The conference was well attended and I had the opportunity to discuss the auto glass industry with legislators from across the country. In those discussions, I explained that for years the contentions have been between independent auto glass shop owners and insurers and their third-party administrator partners. But I further pointed out that the consumers, the party in the middle of all of this contention, are nowhere to be heard. To that, some legislators replied that they are not hearing from constituents so they can only assume that all is well. To this, I replied that the Independent Glass Association (IGA) is in the process of changing that.
Over the past several months, IGA members and non-members alike have been recording phone calls and collecting steering reports, all authorized by their customers to release to the interested parties. So the IGA is doing something about this and, in doing so, there is no risk that a tape is lost or edited. I am of the opinion that when the state insurance departments across the land hear these tapes, they will have no choice but to act. In addition, I propose that we make these tapes/documents available to the insurers who must be able to make an informed decision as to whether the trade-off is worth it. We also must weigh heavily the fact that most consumers still believe that they are corresponding with employees of their insurance company and are intimidated, a very important consideration supporting adoption of the model act.
As I sat in the committee hearing, it was very difficult for me to hear two legislators from my own state defend the status quo, but I am accustomed to that line of thinking. Originally, when I began calling on legislators in New York State, some shared the same philosophy. But with a little education, they saw the light. We must always keep in mind that the insurance lobby is very powerful, but a well organized grass roots campaign sometimes can succeed.
We must keep in mind that our opposition keeps stressing the constitutional right for the insurers to “educate” their policyholders. So I must present this question to you: have you ever heard them tell their insureds, “I can refer you to a shop that emphasizes the safety of you and your family and employs certified technicians, uses only the best parts and has been in business for fifty years?” Now that would be education in the truest sense of the word. The call between the TPA and the consumer is predicated purely on securing a lower-cost provider. How many phone calls has your shop taken in which the CSR hangs up the phone after you tell him/her that you won’t accept the price and they say they will advise your customer on the other end of the line?
We are all well aware of the arguments provided by third-party administrators in defense of their operations. In my words to the committee, I emphasized that the entire industry needs to be “cleansed.” Not only do the tactics of the TPAs need eradicated, but gifting to agents, rebates to consumers and the waiving of deductibles should be illegal across the board. However, none of these should be eliminated until the TPAs are neutralized and the only way to neutralize the TPAs is to rid them of their conflicts—the serving of two masters.
Let’s set the facts straight. Third-party administrators do not benefit consumers and they most certainly do not promote competition. To even imply that they do is ludicrous. Let’s evaluate the concept of guaranteed average invoice. Should not the consumer be the sole beneficiary in any settlement paid by an insurer? So, therefore, a gimmick like guaranteed average invoice actually allows a third party to benefit from the insurance policy. And since when does fixed pricing, one size fits all, take it or leave it, promote competition? Perhaps in the economy of the old Soviet Union, but definitely not in the United States.
And then we have the implication that cannot help but raise eyebrows. As is the case in any industry, there are a few bad apples, but the majority of glass shop service providers are hard working men and women. To proclaim that a third-party administrator protects consumers from those “trying to take advantage of consumers” is nonsense and quite frankly an insult. That argument is up there with the famous quote, “it depends on what the meaning of the word ‘is’ is.” With the words I used to close my presentation this past Saturday to the NCOIL Committee, “anti-steering legislation is pro-consumer and pro-constituent.”
The conference was well attended and I had the opportunity to discuss the auto glass industry with legislators from across the country. In those discussions, I explained that for years the contentions have been between independent auto glass shop owners and insurers and their third-party administrator partners. But I further pointed out that the consumers, the party in the middle of all of this contention, are nowhere to be heard. To that, some legislators replied that they are not hearing from constituents so they can only assume that all is well. To this, I replied that the Independent Glass Association (IGA) is in the process of changing that.
Over the past several months, IGA members and non-members alike have been recording phone calls and collecting steering reports, all authorized by their customers to release to the interested parties. So the IGA is doing something about this and, in doing so, there is no risk that a tape is lost or edited. I am of the opinion that when the state insurance departments across the land hear these tapes, they will have no choice but to act. In addition, I propose that we make these tapes/documents available to the insurers who must be able to make an informed decision as to whether the trade-off is worth it. We also must weigh heavily the fact that most consumers still believe that they are corresponding with employees of their insurance company and are intimidated, a very important consideration supporting adoption of the model act.
As I sat in the committee hearing, it was very difficult for me to hear two legislators from my own state defend the status quo, but I am accustomed to that line of thinking. Originally, when I began calling on legislators in New York State, some shared the same philosophy. But with a little education, they saw the light. We must always keep in mind that the insurance lobby is very powerful, but a well organized grass roots campaign sometimes can succeed.
We must keep in mind that our opposition keeps stressing the constitutional right for the insurers to “educate” their policyholders. So I must present this question to you: have you ever heard them tell their insureds, “I can refer you to a shop that emphasizes the safety of you and your family and employs certified technicians, uses only the best parts and has been in business for fifty years?” Now that would be education in the truest sense of the word. The call between the TPA and the consumer is predicated purely on securing a lower-cost provider. How many phone calls has your shop taken in which the CSR hangs up the phone after you tell him/her that you won’t accept the price and they say they will advise your customer on the other end of the line?
We are all well aware of the arguments provided by third-party administrators in defense of their operations. In my words to the committee, I emphasized that the entire industry needs to be “cleansed.” Not only do the tactics of the TPAs need eradicated, but gifting to agents, rebates to consumers and the waiving of deductibles should be illegal across the board. However, none of these should be eliminated until the TPAs are neutralized and the only way to neutralize the TPAs is to rid them of their conflicts—the serving of two masters.
Let’s set the facts straight. Third-party administrators do not benefit consumers and they most certainly do not promote competition. To even imply that they do is ludicrous. Let’s evaluate the concept of guaranteed average invoice. Should not the consumer be the sole beneficiary in any settlement paid by an insurer? So, therefore, a gimmick like guaranteed average invoice actually allows a third party to benefit from the insurance policy. And since when does fixed pricing, one size fits all, take it or leave it, promote competition? Perhaps in the economy of the old Soviet Union, but definitely not in the United States.
And then we have the implication that cannot help but raise eyebrows. As is the case in any industry, there are a few bad apples, but the majority of glass shop service providers are hard working men and women. To proclaim that a third-party administrator protects consumers from those “trying to take advantage of consumers” is nonsense and quite frankly an insult. That argument is up there with the famous quote, “it depends on what the meaning of the word ‘is’ is.” With the words I used to close my presentation this past Saturday to the NCOIL Committee, “anti-steering legislation is pro-consumer and pro-constituent.”
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