Cost vs. Safety

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.