Insurers might be attempting to combat claim severity by denying reimbursement for required repair operations, instead of address the problem where it can truly be solved, with different discussion at the July 15 Collision Industry Conference.
Effectively, insurers are lashing out at consumers and the body shops as opposed to the automakers and actuaries to blame for their predicament.
“OE procedures’re what’s changed the industry,” said Roger Wright, the founder of VectorSquared along with a CIC Industry Relations Committee session panelist.
Wright illustrated an insurer’s way of thinking by recalling as he first heard about a scanning position statement in 2021.
Body shops thought they fixed cars to OEM standards, yet then received a bulletin they hadn’t, Wright said. Counseled me those unscanned vehicles to become recalled? The concept caused “consternation” among insurers, who wondered, “‘Just how can that be?'” he explained.
Suddenly, a midsize insurer has $2.7 million daily average severity which hadn’t been taken into account, which is “real funny to them,” Wright said.
“They break the rules a bit,” Wright said: Perhaps not every car requires a scan and some subjectivity can be introduced.
Wright also described a “big manufacturer” of a vehicle whose owner’s manual specified replacing seatbelts after any accident. It had been an “OE requirement,” but “very seldom” did any shops he knew replace the seatbelts. It was a while ago, based on Wright — perhaps today, with more litigation, repairers would view this instruction differently, he said.
Unfortunately, the requirement for vehicle diagnostics might have already existed prior to those position statements — it could have just been unrealized by repairers and claims departments until automakers hit the industry within the head by using it. And simply because many repairers ignored or overlooked the seatbelt instruction didn’t mean these were to do so.
“Tide Pods didn’t always say, ‘do not eat’ on the packaging,” Society of Collision Repair Specialists Executive Director Executive Director Aaron Schulenburg said tongue-in-cheek in the audience. “It didn’t mean it had been to eat them before that.”
In this regard, the severity surprise these announcements generated or could have generated might reflect a failure to keep up for the underwriters around repairers and adjusters. Under “Right to Repair,” all service information open to a dealership was intended as distributed around the public dating back the 2002 model year.
Insurer inconsistency
Insurance’s role would be to give a consumer protection against an economic loss and spread out the risk to address that cost, Schulenburg said. “That’s an underwriting issue,” he said.
If the insurer hasn’t ready for that risk — i.e., the cost of repair — they can take it track of the automakers or their very own actuaries who underestimated the danger, Schulenburg said.
“Don’t argue using the shop following documented procedures,” Schulenburg said, calling such insurer behavior “one of the biggest issues we've available.”
In addition, the vehicle technology driving up repair costs stemmed from government and Insurance Institute for Highway Safety demand, Schulenburg said.
“The insurance industry asked for the technology in the vehicles,” Schulenburg said. Yet it fights the repair operations related to that tech, he explained.
“We can’t make use of the claims process as a way to mitigate things we asked for in the research process,” he said.
Database Enhancement Gateway Administrator Danny Gredinberg also pointed to a “disconnect” he sees in the role fielding inquiries from shops and insurers about estimating system processes.
Insurers treat the data providers as “a Bible,” yet they ignore clear P-Pages declarations of what’s included and never included, he explained.
Work with OEMs
Repairers should write good repair plans, and insurers should trust shops, Wright said.
But insurers need to “work with the OEs a little more” on the engineering behind such repair procedures. For instance, he explained, what’s the science behind an automaker’s decree to exchange a part on every vehicle within an accident. And just what will they define being an accident?
“It just creates issues for that insurer,” Wright said.
When insurers do speak with OEMs, it’s indeed easy to obtain severity-lowering engineering changes, according to Wright.
Wright observed that insurers got involved with the C6 Corvette, pushing Vehicle for bolt-on panels and sectionable front and rear rails to keep insurance costs down. He also recalled an original design for that Chevrolet Lumina van incorporated a fixed mirror molded into the SMC composite door.
After a large insurer stated how many simple mirror strikes resulted in the carrier having pay to exchange the whole door, GM redesigned the mirror, Wright said.
Another situation arose when Ford placed a horse design inside a rear bumper to defend against aftermarket versions from the part, based on Wright. “That car became very uninsurable,” he said.
Audi collision programs manager Mark Allen reported in the audience that Audi has openly invited insurers to talk with it about such matters, but only a small amount actually participate.
Industry Relations Committee Co-Chairman Jonathan Chase said he ‘very seldom” saw insurers and OEMs talking. He gave the example of a Ford mandate for OEM bumpers coming as a surprise and causing “consternation” among carriers, he said.
Wright noted that using virtual estimating to resolve the problem of rising severity due to vehicle complexity was a good example of what SCG Management Consultants President Sean Carey criticized as utilizing an economic solution to have an engineering problem.
Insurers unveil virtual estimating, save 5-6 percent on loss adjustment expense, and feel good about themselves, but “they’re type of not exploring the main issue,” he explained. Dealing with the shop while using some aspects of virtual estimating will be a better solution, he suggested.
Repairer still liable
The fact that an insurer blew their chance to speak with an OEM early or perhaps is in the process of pursuing a design change doesn’t affect the repairer’s responsibility to fix the automobile using the existing OEM procedures.
Session panelist Ron Reichen, owner of Precision Body and Paint, said that like a repairer, he must follow OEM procedures. Panelist DCR Systems CEO Michael Giarrizzo said it’s clear the body shop is liable for the repair.
He agreed some repair procedures seem like the OEM trying to cover itself, but he called that a discussion for that automaker and also the vehicle insurer.
As an appearance shop, “you have no choice” but to follow the OEM procedures, he said.
Reichen also stated the absurdity of attempting to barter OEM procedures, saying a repairer didn’t have the to achieve this with respect to the customer.
Otherwise, it produces an absurd situation for a repair shop: “‘What don’t you want me to complete about this?'” as Reichen place it: Would the insurer pick which procedures the shop shouldn’t follow? “Whose baby are you currently gonna kill?” he explained.
ProSight Specialty Insurance dealership and repairer program head David Willett, another panelist, observed that unfortunately, one doesn’t always encounter “instant accountability” for doing a correct or incorrect repair.
A repair shop which fixed an automobile the wrong manner might never be discovered if the car doesn’t get into a crash, Willett said. Also, he noted overall statistics might also result in a mistaken confidence in repairs — aggregate numbers mask the “blips” which go wrong.
