View From The Trenches

It is an established truism in the auto glass business in where the more it changes, the more it stays the same. The current business about State Farm’s modification (or no alteration if you read their PR statement) of policy about dealer-purchased or branded glass is just another attempt by an insurer to try to cut claims cost but, as importantly, to try to close off sources of fraud emanating from their vendors. It’s a sort of corporate “Whack a Mole” game that is being played out by this insurer to attempt to stop what it perceives is a widespread source of fictional billing or a route for a glass shop to increase profit, thereby decreasing State Farm’s. Yet be assured that other creative opportunities will present themselves that will try to pull an end around the famous O&A contracts to which shops tie themselves to gain insurance work. Agreements or no agreements, there always seem to be an adversarial relationship between any insurer and the vendors and even the insured when it comes to the claims process. This sort of behavior is hardly an exclusive mindset with Bloomington. In fact, I’m not sure if there is more mutual trust between Israel and the Arab world than exists between glass shops and insurance companies.

Fraud is indeed an ugly word, yet it is one that often comes up in claim discussions. When someone asked the famous criminal Willie Sutton why he liked robbing banks so much, his reply of “That’s where the money is” became an instant classic. The same can be said of insurance companies. Paranoia is an observable tension when it comes to insurers having to pay claims. Since it is the nature of glass to break and be replaced, the AGR industry has had a close, perhaps even symbiotic relationship with the casualty insurance sector since cars were first manufactured using glass.

Personally, I am tired of the mentality put forth by some: “I will do it to them since they are doing it to us.” To me, billing for something that was not installed is just plain wrong. What happened in Florida, where aftermarket glass was installed while billing as dealer-purchased, deserves criminal prosecution. Here in California and up in Washington State, there have been cases unearthed by insurance investigators that exposed fake glass claims with installations using policy and VIN numbers. The car wash repair scam also should be remembered in Arizona since it resulted in State Farm’s cessation of deductible waivers for windshield repair. Those are just the recent notable cases, I’m sure there are many other ongoing investigations.

Unfortunately, nothing is going to stop the creative process in the attempt to pad a glass claim. There seems to be something inalienable about trying to squeeze more profit out of a situation in which the shop has conceded, or attempted, to comply with a contract.

Two situations would best be considered that would help alleviate abuse.

First of all, if there were true accurate parts registration on all auto glass, it would stop some of this mis-billing or non-billing of lites. OE and aftermarket could be coded differently. Shade or tint could be as well as well. Logos and acoustic features also would be differentiated. Having the ability to trace where a particular windshield or sidelite was installed and by whom is necessary if we truly want to have transparency. The reality is there are many out there both big and small companies that would be hurt financially and most likely legally if their actions were subjected to that sort of revelation. However, the overall health and reputation of this industry would certainly be improved to have that sort of applied disinfectant.

As much as I detest the corporate misers that insurers seem to be, I can’t see a reason why they have to pay such a high premium on glass claims. If a shop has one price for a cash customer, it should establish a secondary pricing for any sort of billed customer. I don’t see the logic of inflating insurance claims. We have every right to recover any cost and make a reasonable profit. The biggest conflict is how the word “reasonable” is defined, especially when compared to cash sales. That sector currently does not accurately reflect any sort of reality except perhaps a “giveaway” in many urban areas, so how relevant is that price? However, the old excuses of time delays of claim payments are ending with the advent of computers and online banking. Claim checks are being processed much faster than a decade ago. In short, I have no problem charging more for my services when I have to provide additional administrative functions along with not being instantly compensated fully at the end of the job. With that said, I would consider having a two-tiered billing system that truly reflects true costs and expenses. The days of looking at insurance billing as a cash cow are over, thanks to many of us in this industry. Trust me when I say that there is one glass company that has aligned itself with the insurance industry and should be the poster child in regard to getting in bed with them.

I truly believe that much of the resentment concerning insurance billing and independents goes to third-party administrators (TPAs). First of all, they are not neutral in the least and, in fact, many are our competitors.

Take this little hissy fit about logoed glass. Carlite for the most part is the leading manufacturer of such windshields. Does Solutions or LYNX (owned by PGW) instantly order DW 1529s when a claim for a Ford F-150 windshield comes in? My bet is that the common response is to install a DW 1551 unless a customer is aware enough that an alternative exists. As State Farm was so carefully to note that: “most of their vendor shops already would already install the most competitive priced glass.” Why not? Safelite and PGW (through Prostars) want to push their own cheaper (and higher profit) in-house manufactured brands in the first place, saving the Farm on claims. It’s a win/win for insurer and installer. The answer is less clear for the claimant.

I wonder what security programs exist between an insurance subscriber and a TPA? After all, it seems that the keys to the vault are handed over a glass installation company when it comes down to it. They have access to policy numbers, coverages and VIN numbers. If billing fraud can happen to Lee and Cates, it could happen even on a larger scale in the situation of a third-party administrator. I have peered many times into a certain company’s vans and rarely seen a moulding kit. I do see rolls of generic, however. Does State Farm or Farmer’s care that perhaps a strip of generic rain channel gets billed out as a WFT part?

The one great truism that exists is an international glass installation and manufacturing company owns the largest TPA. That company’s goal is to have a major say and impact on the American auto glass market and has been aggressively trying to attain that target. Through its ownership of Safelite Solutions, the other 15,000 glass shops are helping them attain that goal indirectly.

In my opinion, trust and Belron are two words that don’t necessarily go together. Many have had incidents of what we feel are deceptive referrals occur to our callers. I take the golfer’s approach to cheating. If you break the rules in one area, you can never trust the cheater in any other area. I wonder what an insurer’s view of this situation is. Is it better to have a limited number of vendors to eliminate fraud? What is an insurer willing to accept in exchange for lower operational claims costs. Remember, if you can add $1 to a million claims or $5 to 200,000 of them, you have a achieved a pure profit of one million dollars.

It’s unfortunate that fraud will never truly end as long as human nature remains as frail as it is. Just ask any IRS employee or auditor of Medicare and Medicaid to add to that opinion. Taking State Farm’s approach, I won’t be surprised that they would soon just drop glass coverage altogether. That would be a way to stop being taken advantage of.

In a business of few surprises, the change of State Farm’s glass payment policy for OE glass caught my attention. It seems more and more our nation’s “Good Neighbor” has become the latest insurer to tighten its purse strings, and in the process to become far less neighborly to its clients and vendors.

I realize this seismic shift has its roots in two vastly different corporate mindsets. One is the obvious desire to save on claims. The second is the misguided attempt to reduce fraud. One should not be surprised. There is reason to believe there is replicated history here in its actions. State Farm has used this same approach when they eliminated their waiving of deductibles for windshield repairs in response to abuse in the Southwest.

If I were either a State Farm policyholder or a signatory of an Offer and Acceptance contract with them I would be appalled at the heavy-handed language and attitude that our nation’s largest insurer has taken in its approach to paying for auto glass. State Farm has stated it will pay for only “the most competitively priced piece available.” That means cheap. When the policy amendment states: “ You agree that replacement glass need not have any insignia, logo, trademark, etching or any marking that was on the replaced glass,” State Farm has the sole intention of eliminating original equipment glass and the higher cost associated with it.

I am very angry and frustrated on many levels with this insurer’s decision. Let’s look at this on a few different levels.

From a consumer’s viewpoint, I would feel cheated. With any sort of claim, I would expect State Farm or any insurer to pay to have my vehicle best returned to a pre-accident condition using the correct replacement parts. One reason auto insurance rates differ is the wide range of repair costs associated with various manufacturers, makes and models. An ‘09 Audi costs more to fix than an ‘09 Cobalt. That same Cobalt costs more to repair and is more valuable than most 10-year-old Audis. An Acura TL quarter panel replacement should be more costly than if performed on its Honda cousin, the Accord.

Most consumers are completely unaware of the pitfalls that lay before them when they file a glass or body claim. Agents neglect to inform their clients at the time of policy purchase that the company reserves the right to use “like quality parts” in the repair of their vehicles. To me, when I hear or read that policy term, I shudder with disgust. It’s reprehensible since it is code for cheap. Most “like quality” have neither quality nor have the same properties, fit or finish than the originally installed part. Is the company being a “good neighbor” as it tries to cut corners when it comes to the claims process? Surely State Farm has enough actuarial data to support charging the correct premium to offset the repair or replacement cost of any car with body or glass damage. If Farmers Insurance can offer an OE parts rider, why can’t Start Farm and the rest of the industry? At least they should be transparent with insured clients and inform them directly and openly that the term “generic” is in their future when it comes to repairs.

It is mystifying to me that a company that has donated more than $20,000 to AGRSS, ostensibly supporting proper installation practices, can on the other hand say that a DOT 563 or 65 produced windshield is equal to or better than Asahi or Carlite. The other dirty secret is that if State Farm is demanding the “most competitively priced” glass, it is turning its corporate back on the probability that the installation of said product may very well reflect that same attitude.

Every owner or installer out there has his or her own opinion on the subject of OE versus aftermarket. My position starts with asking the customer what they want first. Pleasing my client becomes my primary concern.

I truly understand the dilemma the glass retailer is put in. There is little doubt that in most circumstances the price of a dealer purchased windshield or sidelite is substantially if not unreasonably higher than what is available in the aftermarket. All of us have seen as much as a $1000 difference in the wholesale price purchased from a dealer and one from the same manufacturer bought from a glass wholesaler minus a logo. In cases like a common Ford windshield there is little price difference. From that OE equivalent, the quality of what is available in the aftermarket drops precipitously as does its costs.

Still, that is not our problem. To use an oft-used phrase, “Who is the customer?” Don’t we owe the person for whom we are performing our installation service the very best possible product for our stated price or coverage? How do we achieve that? If the customer wants the “exact” windshield that the car was built with, isn’t it their right? Not in State Farm and other insurers’ views.

I also can, for example, certainly appreciate the efforts of Zeledyne, the owner and producer of the Carlite brand to attempt to differentiate their glass by branding it. Whether it is the large Pony that appears on the Mustang windshield or the words “Super Duty” in their trucks, that manufacturer tries to protect and hopefully retain replacement business and increase profitability by imprinting trademarks in their OE glass sales. Why not try to stand above the copycat crowd?

To complicate matters, the consumer is amidst a shift when it comes to glass coverage in regard to insurance. In order to dampen premium increases, higher deductibles have been chosen, oftentimes exposing people to the true cost of glass replacement

That fact alone, along with a shrinking economy, which is causing a thrift movement in its own right, has unleashed an assumption and an unfounded belief in consumers that all auto glass is alike in both construction and installation. Many in our industry have pandered to this myth and have focused their entire effort to benefit from this mistruth.

With the growth of the cash market and its seemingly never-ending discounting, it has caused a set of unintended consequences with the insurance market. Insurers have witnessed consumer acceptance of offshore glass in exchange for lower prices and have begun to demand billing equality through its third party administrators whose owners ironically have an incestuous relationship with discounting themselves, originating from their installation divisions.

All of the above reasons certainly have had effects upon the ebbing insurance aftermarket when it comes to glass replacement. However, the real conflict lies with the adversarial relationship insurers have with repair vendors of all crafts. Within every insurance company lies an inherent phobia of fraud, whether true or not. Historically, the AGR industry has done very little to dispel that virulent fear from the casualty insurance sector. This conflict has elevated itself into a one-upmanship type of behavior wherein each side tries to outsmart itself in order to retain profitability. The real repercussion has been to encourage the creation of the corporate third-party administrators where actual installations and pricing levels are redirected and managed away from the local level. Have we shot ourselves in the collective feet or are we just diving deeper as we wrestle in the mud?

I’ve been trying to define the word “independent” as in independent glass shop the past few days. I’ve been finding it to be an elusive task. One thing is for sure, to steal a phrase from the tots, is: “It’s not easy being me.”

The Random House dictionary lists 18 different uses or definitions of the word. The primary one states, “Not influenced or controlled by matters of opinion, conduct, etc.” Another usage says the word independent could mean: “Not subject to another’s authority or jurisdiction.” Those two could certainly qualify to be used for many of us in the auto glass replacement business. However, allow me ask a simple question: How independent are you?

Are you a network member? Once you sign a contract with a network, haven’t you ceded much of your independence? In order to gain “free” business, you have agreed to certain pricing levels and behaviors. What does that make you?

It irritates me to no end to hear people espouse the concepts of a free market and then admit to me that their company is a signed member of an insurance network. The only free thing about that action is that no one forced you to sign a binding agreement. Other than that, some network owns your corporate booty. You can be told what to charge and even how to charge for it and locked into being completely liable for everything concerned with that claim. That’s not exactly independent commerce.

A company makes these decisions based on the hope that they can garner more unsolicited business by signing up with a network. I’m sure many wish that the resident office fax may suddenly be transformed into a money machine with all of the expected new business being routed into your shop. What is so amazing is the number of newbie shops that line up to join a network and think it is a teat of mother’s milk. Many find is more like the Road to Perdition.

I may be very wrong but it is my opinion that there are no random acts of kindness when it comes to assignments. If you price yourself cheap, you will get work … until the guy before you that was getting the work finds out why his fax slowed or stopped issuing dispatches. I also would expect to find a whole new mindset and the application of the “black arts” when it comes to the large regional and national chains vying and jockeying for a position alongside Mr. Single Point shop to get new work. What’s that magic phrase? Can we all say, “Customized offers?” Yep, that’s free enterprise. Free to cut deals with any and everyone. Does it hurt to schmooze with insurance executives these days? Never has and it never will. I know I can’t afford to pay for a group of claim managers on a Vegas outing or a fishing expedition. I know one inescapable fact that has never really changed over my 28 years in this business; it never hurts to be nice to the folks who cut you checks. But if you think that Joe Main Street and Joe Corporate are on equal footing when it comes to rotation, I have a bridge for sale in Brooklyn.

This is why it becomes so maddening and frustrating to have laws designed to protect the little guy used against us. Take the Sherman Anti-Trust Act. Let’s say my shop is in a small city where there are three auto glass shops. On a golf course, the three meet and complain that the flat labor rate that a certain TPA forces upon us is unreasonable and agree to charge more. That’s illegal and prosecution could conceivably take place. I’ll also remind some of the posters on the glassBYTEs.com/AGRR Message Forum that is the main reason why pricing can’t be discussed.

However, if a chain moves into my town and starts dumping glass and poor installs, that’s called free enterprise. If that same corporation lowers its prices in 30 states to weaken regional chains or just to gain an overall majority market share, that’s also considered fair business practice, up to a certain point that our ineffective FTC can’t ignore.

With the obvious stated, let’s return to the myth of independence. How many shops respond to slow times by matching competitor pricing? Ever think that tactic will just cause you to fail faster? Hopefully your business model (that is not a figure of your shop cast in Play-Doh) tells you what your revenue per unit is. From your largest to your smallest competitor, that number is different. Belron, for instance, has a much lower per unit cost due to expenses, which are substantially less with in-house manufacturing and volume purchases of needed materials. On the other end of the spectrum, Joe’s Mobile Service just wants to make a gross profit of $50 on every windshield they get their mitts on. Every shop or mobile has its own profit equation and if you respond to every harebrain offered price without knowing your true costs yourself (your choice of course), the tail is wagging you instead of the other way around. Perhaps that still can be called “independent,” but it sounds more like being subservient to me.

The life of an independent is not an easy one. We possess qualities that both indicate toughness and fragility. One of the most needed traits is flexibility because we have to be adaptable in order to survive. I believe that is one of our greatest strengths along with knowing our market and finding niches that we can defend and in which we can prosper. You should always think long-term. Thinking outside the box takes both creativity and courage as well. That’s independence and we sure need more of it.