View From The Trenches

For generations, the board game “Monopoly” has provided entertainment for millions. The original concept was to educate players on the value of acquisition. Today, anyone who is in auto glass has a front-row seat in a real-life display on how a monopoly can form, how it operates and perhaps endeavors to avoid being charged with violating anti-trust laws.

Let’s first define the term “monopoly.” Several dictionaries do so by saying this: “an exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.” If this were a quiz among those knowledgeable of the auto glass business, I don’t believe my company, Auto Glass Menders, would be the first company that would come to mind that has a monopoly with anything connected to auto glass. (except stubbornness, perhaps). There already is a feeling among many independents that those conditions already exist within the insurance sector. The question becomes this: what, if anything, can be done to alter or reverse that situation?

A mysterious letter was sent out to various individuals in the industry around the first of the year commenting on the Allstate move from LYNX. The letter delineated a concern that the consolidation of retail glass and third-party administration (TPA) services to a single international corporation raises anti-trust issues. One point the letter made is that massive size is not a barometer for regulatory redress, but anti-competitive behavior toward independents would be. What the letter is appearing to say is that the structure and financial relationship of Safelite Solutions as a TPA should be tested under the “essential facility” doctrine within anti-trust law. If a TPA is determined to be “essential,” it will need to treat independent shops on an equal and non-discriminatory basis with its captive affiliated shops. That doctrine, if or when found applicable, would impose liability when a firm denies a second firm reasonable access to a product or service that the firm needs in order to compete with the first. Can anyone say steering?

I wonder what Belron’s installation/repair penetration percentage is among the insurers it represents. That would be an interest to many of us, along with perhaps an indolent regulatory agency as well. In the Monopoly board game, Belron’s position is similar to not only owning hotels on the bulk of the properties, but it also is the banker who then takes a percentage of a player’s $200 allotment as he passes “go,” as well as requiring authorization to do so.

That brings up a point raised by some in both the insurance and auto glass world. Once Belron disposes of or at least neutralizes its largest competitors, what will become of Guaranteed Average Invoice (GAI) pricing? Insurers have certainly aided Belron’s march to the top not only here in the United States, but elsewhere in world markets. It is one of the most obvious parts of the company’s business model. There are those in the insurance world that have voiced concern that as national or even regional chains retrench, dissolve or are even acquired by Belron, insurers themselves become far more vulnerable to the market power that is being attained by their pet TPA’s corporate owners. That’s sort of like having every Chance or Community Chest card start with the phrase “Pay Belron …”

One of the all-time obnoxious public relations spins is to hear an insurance or TPA lobbyist use the terms “consumer choice” or “consumer protection” in defending the script content when a claimant makes contact with a person erroneously believed to be a direct employee of the person’s insurer. No doubt if they were playing the board game, these CSRs and upper management would do everything to buy the B&O, the Reading and the other two train companies because they have every intention of railroading the claimant into using their captive services throughout the process.

Also acknowledging the political lobbying power of the insurance industry, you can foresee that sector being employed in defense of its glass claims contracting methods. You could sort of call that the “get out of jail free” card for Safelite Solutions unless it commits very real or egregious misdeeds.

As for those who have been bemoaning the loss of Allstate referrals; some of those companies who bid extremely low in their offer-and-acceptance contracts to become “preferred vendors” are now learning their is no “free parking” in real life. Also, if people thought that there would be little change in their businesses with the change of TPAs for Allstate, they probably would accept monopoly money in exchange for their services. Get your head out of the sand!

If you notice, there is no government regulatory agency in the Monopoly game. If a person acquires enough properties to bankrupt the rest of the players, he wins. There is no limit to how much they can own or money a player can accrue. In fact, there are no rules on business practices either. Same seems to be true in our real world as well.

What should an independent do these days? Work smart! Build your business around quality. Charge accordingly. If you base your future success on small volume margins, your chances for failure increase dramatically. I know this much; if I were playing the game, I would want to own Boardwalk and Park Place rather than Baltic Ave. The same applies to any business.

I apologize for not writing a blog the past few weeks but I have a good excuse. I have been strongly considering a career change. I feel after putting more than 30 years in the auto glass business, I want to give back to the industry. I think I can achieve that goal best by providing what independents need the most … yes… you guessed it … a new third-party glass claims administrator.

Why not? I can take most of what I learned in kindergarten and then deduct my life experience from that and satisfy a need that we in the industry know sorely needs to be filled.

You may ask—how can you as a sole proprietor actually think you can succeed at this venture? Folks, it is as easy as setting an DW847 without sealant or a Ridgeline without removing the cowl. You just do it.

After all, what is the basis of the free enterprise system? We see it every day in our industry … by underbidding and overselling our services. After all, what insurance company would not resist paying a lower guaranteed average invoice (GAI)? I truly believe you can go a long way in making a glass claim “revenue neutral.”

First of all, I would apply the most basic principle of auto glass economics: Bid cheap. Find out your competitor’s GAI and undercut by at least 25 percent. Get more serious attention by halving their price. To further sweeten the pot, one could pay x amount of dollars back to the insurer per penetration point achieved in the marketplace. No one really needs to know the details. That is what is known as trade secrets.

To offset some of these giveaways, I will have to cut expenses. One thought is to employ offshore call centers to act as the contact when an insured needs to file a glass claim. Most people don’t understand their policy coverage, so why should they need to understand the CSR they speak to? It would seem to me much easier to use the “Tower of Babel” effect in directing claimants to my TPA’s preferred vendors. Also I would not need to pay any benefits.

Did I use the term “preferred vendor?” Should I change that to “approved?” After all, any TPA would want to instill into the claimant’s mind that the company that shows up to perform an install had to go through a rigorous approval process to gain that hallowed status. Those people would be quite correct. Every merchant who conducts business with my TPA would have to supply us with letters of certification of professionalism along with the percentages of discounts that they will give to us. We will make our associate selections based solely on merit. Those giving us the deepest discounts or kickbacks will merit our attention the most.

Paying for OE glass will not be a problem. It is my belief that too many insurers feel that they are being duped by false claims from independent shops. I have an idea that may find acceptance among my client corporations. Instead of providing proofs of purchases (POPs), shops would only need to send the bug from the newly installed windshield in with their invoice, along with a digital photo documenting the removed etching. If Allstate decides to switch TPAs, they would most likely demand a 10 percent increase in surface area removed, which would be acceptable to me.

I also have a few technological breakthroughs up my sleeve that may just entice more than a few insurers to jump on board. While one insurer is promoting the use of a voluntary tattle-tale data collector, my idea would be more pro-active. This new TPA would not pay for any urethane that was non-conductive and provide to its installation vendors a proprietary mixture of Mountain Dew, antiperspirant and glass cleaner. Once applied to the aftermarket glass, it would have the effect of blocking any electronic signals from entering the vehicle making talk or texting impossible from cell phones.

Take the mantra, “Who is the customer?” As a TPA, my sole responsibility is to my client insurance companies and not to the demands of some needy and greedy client of theirs. After all, does it take a Einstein to figure out what side of the bread the butter goes on? Free enterprise is not free, especially when it comes to either insurance or auto glass, and consumers have confused cheap with value from the dawn of time. Fair and reasonable (like beauty, as we all know) is in the eye of the beholder and I want a number of insurers and independents beholding to me for pricing and claimant management.

How many insurers can I sign up? Time will tell. I know this much, if I can bag most of them, I wonder if the Federal Trade Commission would care or even notice. After all, unlike my competition, I would not have any ownership or financial interest in wholesale or retail glass sales. I would, however, expect my national or international golfing excursions to be covered by grateful parties. I suppose those trips will be documented via surveillance videos by jealous competitors, which only would put pressure on my scoring well at Pebble Beach or St. Andrews in Scotland. That’s only fair and reasonable to me. I would like to have them as home movies.

Let’s face it, owning a TPA is the best thing since sliced bread or free adult movies via the Internet. It is a license to print money and then to keep it. Claimants are anxious not to offend their insurance companies so they are amenable to almost every suggestion one gives them. After all, what does the term “pre-loss condition” really mean? Should a glass company even wipe down the aftermarket windshield anyway? The old glass was probably dirty so why should the new one be clean? On the installation side, there is always someone out there who will undercut his competition so there is no lacking of short-sighted glass vendors. Many could promote themselves as being “green.” I would mandate that they would reuse (oops, I meant to say recycle) mouldings to save the landfills. Heck, I might even allow some of my past rivals on my “approved” list since it is the Christian thing to do. All they need to do is to perform a little penance (aka tithing to my favorite charity, which, of course, is me). In short, I just want to be known as a “job creator” to those in my new tax bracket.

I am almost all set to go. I have my smart phone and my laptop. What I really lack is a catchy name for this new venture. Without one, I fear my marketing campaign may fail. I had thought of “Lemming Resolutions” as a brand since I could use a cute little rodent as my corporate logo, but I fear it is just too long a title. Until I can be a bit more creative, I will put my plans on hold. That gives me time to work on my golf swing.

When I heard the news yesterday that the National Insurance Crime Bureau (NICB) has named Safelite Solutions as a “strategic partner,” I truly was overcome with emotion. Does this mean that glass claims fraud will be at last rooted out and stopped? Or is it a classic case of having the fox stand guard over the chicken coop?

First of all, who is the NICB? Since it is not connected with any state or federal regulatory agency, why does it exist? I must surmise that it must be indeed the brainchild of the public relations department for the insurance industry. Does the NICB supervise fraud prevention or does it just report and compile statistics that are sent to them? Does the NICB serve a real purpose or is it just a mouthpiece for insurers to justify claims management?

It would be my fondest wish that the auto glass industry would be perceived as possessing great integrity. I would hope that every American consumer could get the highest craftsmanship, quality products and the greatest value when their need for auto glass arises. In truth, it is roulette plain and simple. From the largest installation company to the smallest mini-pickup purveyor, a customer is taking his chances on getting the best that the industry can offer.

Right now, that “best” hardly would make a needle move on a quality meter. First of all, a tech is only as good as the products they install. Wholesale glass prices have dropped tremendously over the past 15 years, but so has the quality of those products. It is my strongest belief that much of the aftermarket glass is of substandard quality, in strength, fit or clarity in comparison to what was branded as original equipment. The substitution of moulding products is rampant, the application (or non-use) of primers and adhesives is unprofessional, and the technical expertise and pride of far too many installers is non-existent.

Oh yes, Virginia, fraud does exist. Given the creativity of the human mind (and cyber one as well), numerous scams and schemes have been uncovered and continue to bedevil insurers in a timeless and tireless manner. Now a self-proclaimed super hero has come forward to help insurers combat this apparent assault on insurer profits.

Over the past 10 to 15 years, a marriage of convenience has existed between insurers and a very small group of glass companies through a corporate entity known as third-party administrators (TPA). TPAs have relieved much of the economic burden on insurers of both internal and externals costs that would be associated with glass claims. One popular feature that a TPA like Safelite Solutions uses to attract new insurer clients is its Guaranteed Average Invoice pricing. One way a company like Safelite Solutions can live by such contractual limits is that it happens to be owned by the nation’s largest (albeit the world’s as well) glass installation concern. Much has been said and written about the perceived abuses this corporate gatekeeper has allegedly inflicted upon its competition, both large and small at the time of first contact with a claiming policyholder. Now as a strategic partner for the NICB, the company seems to be working it way into being the “top cop” against fraud.

Look at what Safelite’s parent company, Belron, has developed into here in the United States over the past ten years. By its own words, the company is the TPA for 19of the top 30 insurers in this country. The company just wrestled Allstate away from LYNX Services, leaving State Farm as the only vehicle insurer of any real size that is not a Safelite Solutions client. The amount of claims and client data Safelite has amassed over the years is astronomical and while it can be said that the company can provide insurers with needed proof for fraud, the opportunity for abuse is just as great. That greatly concerns me.

Fighting “windshield bullies” is one matter. Alerting clients to a flood of chip repairs is another, but who is to say that this is not corporate altruism but self preservation of the ugliest kind? Windshield repair is a highly profitable revenue stream for Safelite. If that is threatened in certain areas by an aggressive competitor, who is paying for and providing fraud detection? One would bet that video surveillance and undercover operations are not being conducted by the NICB.

The issue of glass inspections has become a very contentious one for independent glass shops. An insurer has every right to ask for, or, in fact, demand to inspect glass damage prior to a repair of any kind. However, most insurers do not want to waste their limited adjuster resources on common claims. However, it becomes a whole different issue when a repair or replacement technician from the TPA’s sister’s stable shows up fully prepared to complete the claim once the “inspection” takes place at the expense of a delayed competitor. This is not altruism but outright theft. To broach another subject, how many “repairs” have been turned into profitable replacements by our nation’s largest? Does that sort of tactic get reported to the NICB under “questionable claims practices?” I would bet Mitt Romney the answer would be no.

Last of all, it is fact that Safelite owns the lion’s share of the insurance market. What if a competitor emerges to try to challenge the company in either a regional or on a national level? Will that challenger be immune from all sorts of claim reviews that emanate from one particular TPA? Also the data collected from previous claims can be used strategically against the newcomer to help thwart its growth. Who is to say that won’t or hasn’t happened?

From this viewpoint, I believe the NICB spews factoids to help fill newspaper space. Its sole purpose is to place in the American public’s mind that it is simply “not safe” to think independently when it comes to making a claim. The implicit message the NICB is trying to transmit is that you should trust the insurer’s judgment when it suggests an “approved” vendor when a claim arises. That becomes Claims 101 in consumer “education.”

If the TPA was truly independent from any corporate glass connection, fraud detection would certainly be a reasonable activity to undertake. However, with that not being the case, the process is gravely tainted. It is one more reason to legally demand TPAs should not be owned or controlled by any company with a connection to auto glass. What we have now is completely unacceptable with the fox plumping up the chickens to ensure a steady food supply for years to come.