How to Negotiate with Insurance Companies

by Keith Manich, ATI VP of Collision

Auto body shop owners wear several hats every day – and most would agree that negotiating with insurance companies is their least favorite. When an insurance adjuster comes in demanding unreasonably low prices or removal of repair operations, it’s easy to fall into the trap of sending them away when business is good or grudgingly accepting a bad offer when you need the money.

Establish a Relationship
The kind of relationships you have with insurance companies can make or break your auto body business.

Building amicable relationships may seem impossible when you have opposing goals: Insurance companies want to minimize costs, and you want to maximize profits. But the reality is more nuanced than just dollars and cents.

Insurance companies want accurate estimates where they can minimize the repair cost. 

Always Come Prepared
Insurance adjusters are busy people as are collision repair shop employees, so part of building a relationship is being professional, polite, and respectful of their time. When you receive an estimate from the insurer, begin to look at the estimate quality by running it through the estimate scrubber. This will identify the areas that have been omitted on the estimate. 

Developing a conversation may be difficult at times since the insurance adjusting staff is typically not as well trained as the shop estimators resulting in many inconsistencies and missed items in their estimates. Next, when you meet with the adjuster, try to establish some ground rules at the onset to avoid conflicts down the road. For instance, you might agree to look at whether the line item is on P-pages, and if not, look to follow OEM procedures and agree upon a fair price for uncovered but necessary operations. That way, there's a template for the process.

Finally, you should prepare for possibilities like the insurer identifying Like Kind and Quality (LKQ) parts and assemblies and prepare to defend your labor costs.

Participate in the ProcessActive participation is key: Never leave an insurance adjuster alone with the vehicle. 

You or your lead estimator should accompany the adjuster, validate any damages, and discuss the best repair procedures. By going over every single line item on the estimate, the adjuster will find it difficult to make changes to the estimate after they leave the shop. On the other hand, renegotiating supplements after they leave is always more difficult.

If the adjuster wants to change the estimate, you can immediately challenge the change and make the case for a repair if you're walking with them. If you cannot agree, consider diagnostic tests to resolve differences of opinion. Be prepared to get the customer involved if there are areas of the estimate that go against the OEM repair processes. You will want to be well versed in the policy language so that you can help the customer navigate the potential denial or partial denial of the required repair operations. 

Listen to the Adjuster
Insurance negotiations can quickly become heated.

As a shop owner, it’s easy to take negotiations personally since the decision directly impacts your pocketbook. But it’s also essential to understand that adjusters must answer to their own bosses at the insurance company.

So, rather than treating the process as a hard-headed negotiation, try to arm them with what they need. Show them that you're making only the necessary repairs (cutting down on the overall claim cost) while justifying every line item on your estimate. Repairing the vehicle to the OEM specifications is the key to the repair shop's success. 

If you find the adjuster getting upset or argumentative, try taking a break and grabbing a coffee before returning to the issue. Refocus on areas you agree on before moving back to the area of disagreement and working toward a mutual solution.

Offer Options if Possible
Insurance adjusters may want to see different options when determining the best course of action for a repair. And providing them can also help you justify your initial estimates.

For example, you might provide the cost for a replacement part and the cost for a repair that involves paying fair labor times for things like bumper covers, accessing labor to facilitate repairs, and extra time for testing and diagnostics. That way, a seemingly high repair cost suddenly doesn’t look as expensive as a replacement part. Or maybe a used part suddenly becomes more costly than an OEM part after adding necessary operations.

Over time, you may find that some insurance adjusters prefer specific options. In that case, consider recording their preferences and factoring them into future estimates. These small changes can help streamline claims in the future.

Know When to Escalate
Of course, it’s not always practical to build strong relationships with insurance adjusters. 

If you feel short-changed, you should always know when to escalate the matter to someone higher up the chain. You might also advise the customer to contact their insurance company representative to make their case. After all, you work for the customer, not the insurance company—and so does the insurance company!

DRPs & Certifications
Direct Repair Programs, or DRPs, provide a streamlined claims process at pre-negotiated rates. Depending on these rates, DRPs may be a good option for auto body shops that don’t want to spend the time and effort negotiating every job. DRPs also tend to process claims and make payments faster, resulting in faster cash flow.

DRPs may be especially helpful for new auto body shops without an established brand name. While the jobs aren’t as profitable as non-DRP, they can provide a steady source of business and help reduce administrative overhead.

Certifications can also help drive business from insurance companies and enable you to charge a premium. For example, the I-CAR Gold Class designation can add a lot of value, but you must also train technicians yearly and adhere to other rules. OEM certifications can also help set you apart from the competition for certain brand repairs.

The Bottom Line
Negotiating with insurance companies can be stressful, but it’s a necessary skill set for auto body owners and estimators. Rather than taking an absolutist approach to these negotiations, try building a rapport for adjusters and proposing sensible alternatives that add profit to your bottom line and help the other party feel good about the decision.

Over time, investing in these relationships can help streamline negotiations and even bring in new business from adjusters who like working with you.