Negotiating a claim can be a frustrating experience for both collision repair shops and insurance adjusters, and the process can often become antagonistic. But there are negotiating approaches that can help both sides lower their stress levels while maintaining profitability.
In their Wednesday session, “Negotiating with Insurers in Both DRP and Non-DRP Environments,” Clark Plucinski, executive vice president with True2Form Collision, and Roger Wright, vice president of claims for AIG personal lines claims, walked attendees through both sides of a claim negotiation, and presented techniques to make the process more efficient and rewarding.
Plucinski and Wright opened the session by presenting the key drivers that affect profitability for both the insurance company and the repair shop.
Plucinski provided the key numbers and benchmarks that repairers should have on hand to help justify their charges. Repairers should be able to calculate gross profit, including parts, materials and labor, along with their overhead costs. They should also determine if their shop is competitive in these areas, and if not, what changes they can make to become competitive.
Wright then presented the insurance company perspective, and explained how they measure profitability and success. Insurance companies use a formula called combined ratio to relate premium income to claims, administration and dividend expenses, which helps them determine their own profitability.
Among the insurance company costs are the loss adjusting expenses (including the actual value of the loss), allocated claim expense, unallocated claim expenses (insurance company overhead), frequency and severity.
“Right away, from a business perspective, you anticipate friction in the process,” Wright says. “The insurer wants to pay as little as possible, while the shop wants to be reimbursed as much as possible. They both want to maintain profitability.”
Wright and Plucinski covered the various aspects of a successful negotiation, even role playing a number of scenarios.
First and foremost, Wright emphasized that negotiations should focus on the facts, not on the people involved. “You have to separate the people from the issue,” Wright says. “If the problem is with the paint, focus on the paint, not on whether or not you like the person you’re dealing with. You have to look at the substance, and deal with the substance. That’s critical.”
Plucinski warned against negotiating over position, and encouraged shop owners to negotiate with insurers based on objective standards. In position bargaining, each side takes a position, and then makes concessions to reach a compromise. However, clinging to these positions is inefficient, can derail negotiations, and possibly endanger the long-term relationship between the insurance company and the shop. Instead, negotiate using fair standards to develop options that are good for both sides.
“We don’t have standards in the industry for certain things, so you have to develop those,” Wright says. “There isn’t a standard for evaluating straightening times, for example. But you can break that process down into its component steps, and determine between the two of you how long each step might take. That’s much more accurate and effective than the appraiser saying it will take three hours, and the repairer saying it will take five hours, and then splitting the difference and agreeing to four hours. That number doesn’t reflect anything.”
Where there are standards in place, repairers should have that information on hand during negotiations so they can show the insurer the manufacturer recommendations and other data that can bolster their case.
That’s especially important when an adjuster tells a shop that one of their competitors doesn’t charge for a certain procedure or material.
“The discussion around that should be, is it a necessary operation to put the car back in pre-accident condition?” Wright says. “That’s what the repairer has to validate to the adjuster.”
It’s also important to know exactly what you want going into a negotiation, and know your bottom line. “If you can’t get what you want, you have to know what your next best choice is before you go into the negotiation,” Wright says. “If you don’t know what your bottom line is, all of a sudden you’re giving away something you just can’t give away.”
Plucinski and Wright recommended the book “Getting to Yes: Negotiating Agreement Without Giving In,” by Roger Fisher and William Ury, and gave away a copy to one member of the audience.
Repair shops should also maintain good relations with the decision makers in the process, including the reinspector, supervisor, regional manager and corporate office staff.
“You have to know who you are negotiating with, and whether or not they are able to make the decisions that need made,” Wright says. “If you’re talking to a reinspector, they probably have a different objective than the original appraiser, and are being measured against different performance goals.”
