The State vs. Independents: You be the Judge

Steering continues to be a major topic of interest and source of frustration to independent auto glass shop operators. When it comes right down to it, steering related matters consume a considerable amount of a shop’s resources. Bills addressing steering at the state level continue to be introduced by legislators that agree that steering exists. Recently, the National Conference of Insurance Legislators (NCOIL) shelved model legislation that was intended to address steering.

I have always contended that state legislation, although well intended, will not address the issue of steering. Even well written legislation, accompanied by stiff penalties for violators, will not be effective in eradicating steering.

First and foremost, this legislation only deals with the issue after the shop becomes aware of a customer that wants to use its services. Therefore, this legislation addresses the “known” incidences of steering; the point at which the shop’s representatives become outraged that they lost a customer. But how many of those customers are diverted to other shops in which the “shop of choice” has no clue that the customer ever requested its services? It is at the point of contact with which the issue of steering must be dealt.

Let me explain. I put forth the argument that the majority of steering takes place at the initial contact point between policyholder and insurer. I believe that many vehicle owners, after incurring damage to their windshields, make the first call to their insurance companies or their agents to report the damage. It is at that point, even though the customer may have a “shop of choice,” that many potential customers are steered or diverted to a shop that is “preferred” by the third-party administrator and its insurance partner. We have heard it all before, the national warranty, they are not on “the list,” or “you may incur out of pocket expenses.” Therefore, the real culprit is the process of the claim reporting. It is the telephone number on the insurance identification card that takes the shop’s rightful customer directly into the call center of the third-party administrator. Until this process is changed, the issue of steering will never be addressed adequately.

The second problem that we have at the state level is that those wanting to protect the status quo have immense influence (particularly from a financial standpoint). In my opinion, the only opportunity for shops to counter that influence is through the organization of a strong grassroots effort. But again, the real issue is that legislation addressing steering will have minimal impact. As I pointed out, steering has to be stopped at the initial point of contact between the shop’s customer and the insurance company or its partner.

Does this mean that shops should not try to advance legislation to protect their business interests? Of course not, as shops must pursue every opportunity to safeguard the business that rightfully belongs to them. A major step would be to advance legislation that cleanses the entire industry. Third-party administrators must be pure, with no financial conflicts of interest. They should not be allowed to have any conflict, especially a conflict where the parent company can financially benefit from the ownership. But corrective measures must not stop there. All gifting, which in my opinion is nothing less than a bribe, has no place in the industry and should be outlawed across the entire industry. And only legitimate business operators should have the opportunity to offer auto glass replacement services. After all, auto glass repair and replacement is a service dealing with consumer safety. I think we can all agree that this critical service has transitioned to be treated like a commodity, a topic for another day.

Extraterrestrial Minds Want to Know …

Just the other day, I was reflecting on the auto glass repair and replacement (AGRR) industry, especially focusing on several issues that I believe to be unfair trade practices. I began my career in this industry in the year 2000 and it did not take me too long to realize that something was amiss. Actually, it was the first NAGS calculator in May 2000 and the stream of faxes that followed with insurance pricing revisions that encouraged me to get involved. I remember taking the faxes into the shop owner’s office and asking him what the deal was. Within days I was in our local state legislators’ offices educating them about the practices within the industry and I haven’t rested since.

That was ten years ago and things have gotten progressively worse. I continue to ask myself, “why?” But instead of offering my perspective, I would like you to contemplate the following. Imagine that the earth was recently visited by aliens and, one day, an alien reporter from the Saturn Sun Times, who also happened to be green, entered your shop looking for a story on your business and industry. He had heard that the practices in the industry were out of this world but had to hear straight from the earthling’s mouth. So he began the interview and asked the following questions.

Why do glass shop owners run their businesses according to the demands of insurers and their third-party administrators? Why do shop owners price the products and services that they provide in accordance with a standardized parts and pricing schemes? Do they do this purely to accommodate insurance billing? Is there something unique about your industry that makes it much different than any other? And why do shops have to accommodate third-party billing? Does serving a customer who happens to be paying for those services with an insurance claim require that shop owners must relinquish their rights to a third party? Who has liability in the event that a tragedy occurs because of your negligence?

What are networks? What are the advantages of being a network shop? Why are non-network shops expected to follow network rules? Why do non-network shops succumb to the likes of signature audits or allow unlicensed claims adjusters onto their property to do the inspection of a damaged windshield? Why do third-party administrators fight anti-steering legislation if they are not using coercive tactics and operating within the law?

I can continue, but I think you will agree that our alien friend is a pretty inquisitive fellow. I, for one, would be very interested in reading the alien’s article after publication to learn his perspective. But I think we can conclude that after learning about the AGRR industry in the United States, the entrepreneurs on his planet will not be green with envy.