It’s about time. We’ve known about this kind of illegal stuff for many years. Now what are you going to do about it? How are you going to manage this kind of operation? The Glass shops that are prefered by the Insurance Co. are the worst offenders of this practice. You pay next to nothing for the replacement of the glass and the shops have to find the cheapest solution to make a buck, no wonder the mobile units that float around make so much money. Do they pay the local tax’s and fee for being in your town and taking your money and leaving with the money? They take money away from your community and dont spend it there. The insurance industry needs to take a closer look at the auto glass industry and then look at themselves in the mirror. They might be surprised at what they find.
Although the article is very accurate and something that we face every day, the article should reflect what the consumer should look for when getting a windshield replaced.
You should mention that there are good, reputable companies practicing good business every day. You should point the consumers to call their agents first and get a referral to a quality company in their area as a good start. You may aslo want to point your customers to the BBB or other reporting agencies that can show any reports of fraud. Simply stating that there is a problem is not enough, you need to tell your insureds what to look for. As a farmers insured, it would be appreciated!
As an employee of a very reputable glass company. I can tell you, we are not making “all this money”. The insurance companies tell us what they will pay us. Insurance companies continue to raise their rates to the insured. But pay us less and less every quarter. Their profit margin has increased, while ours has decrease. Insurance companies do a survey to determine what the “fair and usual cost” should be. These surveys are done by using all glass shops in an area. These include shops that do not have certified installers, that work out of the homes, have no employees or insurance to cover any damage that they may do to your vehicle, use poor quality glass and some even use outdated urethane (because it is cheaper). Shops that do their work properly and will make no sacrifes to increase their profit margin are the ones to suffer. Consumers should to a certain extent use common sense. Windshield replacements are not done on a “drive thru” basis and they are not done in the rain or below freezing temperatures.
Also alot of insurance companies require to speak to the insured before any glass company can bill for repairs. To address the tax comment, we do pay taxes to the city in which the work is done. And we have brought to the tax departments of the surrounding cities a list of those who we believe do not.
Use some logic— what car owner would replace a perfectly good windshield, risking leakage or other damage? What reporter would report this without checking the facts? This a clear attempt to insure they can steer claims.
Oh, I see now… this is an insurance publication, not a journalist one…
It’s funny how the Insurance Industry will attack Glass Shops, using articles like this to conjure up this “consumer beware” type stuff.
Maybe their insureds should be educated about the fact that they are being misled everyday by their Ins. Companies when they tell them to call a certain 800 number to have a glass claim handled, and letting them think that they are speaking with their respective Ins. company.
Is it not mispresentation when an insured thinks they are talking to a rep. from an Ins. Co. and they are really talking to a third party administrator, who just happens to be in the repair/replace business also.
This article is just another example where the strength of the Insurance Industry is taking another opportunity to discredit the Auto Glass Industry.
They fail to mention that in the last two years, that 90% of all Insurance companies have posted RECORD PROFITS, yet have they decreased those “poor taken advantage of insureds” premiums??
I would like to comment on this article. I have shops in states where these car wash’s scare peope into replacements. I personally have experienced going to replace a windshield for a customer and having the network, tell me that it was just repaired 1 month ago, when in fact, the customer went to a car wash turned there car over to the car wash attendent. That attendent gained there insurance information from the glove box and billed for 3 chip repairs. A glass guy standing at a car wash, or at a gas station is just like someone beating down your door selling anything. If your not sure about it dont buy from them. Any reputable glass shop has stores, phone #’s and a van with there name on it. I would suggest asking questions before doing anything. And as for the free cash and steaks, there overbilling your insurance company and chances are you will get billed the difference if over charging occurs.
I am a retired Independent Insurance who was in the business for 37 years in Southeast Arizona. When needed we recommended several of our local well known & honest glaziers. Some 20 years ago a local Farmers Agent and an auto shop owner made false glass claims that the auto owner never knew about and over charged auto body claim invoices. They were both found guilty. The agent was terminated and the repair shop was sold. I believe that Superior Court ordered them to make restitution.
I currently have two windshield cracks damaged by rocks from roads. Neither crack impairs visibility and do not cause hasidarius glare. Iwill leave the cracks as they are until either may cause vision problems. I do not wish to make a claim until necessary. Appearence is not that important.
My Chevrolet PU is 6 1/2 years with 220,000 miles with a reasonable amount of dirt road travel with only one whndshield necessary to be replaced.
I am a TPA who specializes in Commercial Auto and Truckers first party claims. Upon receiving a bill of $4,291.35 for a windshield replaced in a bus, I deceided to research Florida law and the policy issued pertaining to that claim.
Florida law states: “627.7288 Comprehensive coverage; deductible not to apply to motor vehicle glass.–The deductible provisions of any policy of motor vehicle insurance, delivered or issued in this state by an authorized insurer, providing comprehensive coverage or combined additional coverage shall not be applicable to damage to the windshield of any motor vehicle covered under such policy.”
ISO changed this wording on the commercial auto policy under Florida Changes which states:
“A. PHYSICAL DAMAGE COVERAGE is changed as follows:
1.No deductible applies to “loss” to glass used in the windshield”
Since most commercial Auto policies provide Collision and Specified Causes of Loss Coverage (no comprehensive coverage), ISO has broadened the coverage to cover windshields in commercial autos when possibily the underwriters had intended otherwise.
This is costing commercial auto insurers Millions in Florida and possibily other states.
HELLO I OWN AND OPERATE A HONEST, FULL SERVICE GLASS SHOP.. I STRONGLY URGE CUSTOMERS TO REPAIR INSTEAD OF REPLACE,WHEN POSSIBLE.. IT IS BETTER FOR THE CAR, ENVIRONMENT ETC.. IT IS BETTER TO FIX IT WETHER YOU PAY CASH OR GO THROUGH INSURANCE.. IT MAY NOT BE IN YOUR LINE OF SIGHT OR CAUSE A GLARE BIT IT WILL EVENTUALLY…. BETTER TO SPEND A LITTLE TO SAVE A FEW HUNDRED.. ALSO A UNREPAIRED WINDSHIELS IS WEAK IN STRUCTURAL STRENGTH.. WINDSHIELDS ARE DESIGNED TO GIVE STRENGTH AND HELP THE CAR FROM CRUSHING IN THE EVENT OF AN ACCIDENT OR ROLLOVER.. SO IF A WINDSHIELD NEEDS REPLACING I HIGHLY RECOMEND IT, IF IT NEEDS REPAIR AND IT CAN BE DONE FOLLOWING THR NGA-NATIONAL GLASS ASSOCIATION GUDLINES I REPAIR IT.. FOR SAFETY !!!!!
The following comments are the opinion of ‘Dan Fisher’ and do not necessarily reflect the views and/or opinions of this website or any of its affiliates or subscribers, the insurance industry or any other glass shop owner or employee.
I don’t particularly feel sorry for the insurance industry in relation to auto glass insurance fraud. I feel that the insurance industry fat cats, who are not in touch with what really constitutes being someone’s ‘agent’, are responsible for the tremendous rise in auto body and auto glass claims fraud. When I started in this business in 1976 there was no such thing as ‘networks’ or ‘TPA’s. Our company had a one on one relationship with nearly every insurance agent in 26 counties in southeastern North Carolina. These agents were allowed to care for their insured’s needs from within their own office without the restrictive handcuffing that today’s so called agents are forced to deal with. If an insured had a broken windshield, that person did what was expected. He called his insurance agent, and was able to trust his agent to send a qualified and reputable company to replace that windshield. The glass shop would send an invoice to the agent’s office, and the agent would remit payment to the glass shop. Now our world has evolved into the mess that it is today. The poor insured calls his agent, who in turn is forced to refer the agent to a TPA, who in turn sends whoever offers the cheapest price, regardless of that company’s installer’s experience. An insured is more often than not, likely to get an installer who has a year or less experience in replacing windshields. Certification certificates and merit badges do not a qualified installer make. Insurance agents of old were able to choose the services of a proven professional. A shop with whom he had a relationship and was able to trust. Not today. Agents, or should I say premium collectors, have little say in the care of these people who pay their premiums and believe that the agent can help them in time of need. Insurance fraud? Yes, but it is self inflicted. The insurance industry burries its head in the sand when it comes right down to it. They punish all the honest shops by browbeating us into profitless discounts, while ignoring the real problem, which is that insted of fighting the fraud where it exists, they want to fix it by insisting that we are all crooks and that they should be in charge of the pricing. Can you say “fox in the hen house”?
I am in full agreement, anyone replacing a windshield that is not damaged should be prosecuted to the fullest extent of the law. It’s unethical and dishonest!
Farmers’ action of strongly suggesting, almost to the point of requiring, an agent recommend to their customer they use Safellite Auto Glass to provide this service, because Safellite provides Farmers a lower price is equally unethical and dishonest.
Steering a Farmers customer from an independent shop when they call the glass network (Safellite) to Safellite for service because of price, is again unethical and dishonest.
Penalizing agents with financial penalties because claims exceed an established cap, is unethical.
Get off your high horse Farmers – you’re as unethical as the “Glass Harvester” committing insurance fraud.
yes, by all means call the agent, so you can be given the Safelite “Network” number to process your claim. They will steer you to their replacement shops or will let you believe that the shop you requested will be sent your information and instead they show up to do the job. Again, I work at a glass shop and this does happen. We have shown up to do a job and Safelite is already there and the insured is unaware. We’ve had insureds call us and say what time will you be here on such and such day. When we have not received any dispatch. Or they are told that we are not a preferred shop and they may have to pay for any cost above what they feel is fair and reasonable.
As a shop, we don’t even install Safelite glass. One because they are a competitor all the way around. But mainly because their product is not good. It doesn’t always fit correctly. And our installers just cringe when they get to a job and it has been replaced by Safelite, because 99.9% of the time, it was installed improperly. Cash customers should also be aware. Cheaper is not always better!!
Once again, everyone, I would like to remind you that insurance is a for profit business. Insurance isn’t a charity like everyone wants to think it is. Just because we’re making a profit doesn’t mean we owe anyone anything. If you want, go to a non-profit insurance company, but don’t expect the same service.
We all need to make a profit, that’s the only way to stay in business. But that doesn’t give anyone the right to bill for services not rendered. If you do a windshield repair, bill for a repair not a replacement. If you replace a windshield on a mercedes with a ppg or lof part, don’t bill for a dealer part. That’s the point of the caution.
The National Glass Association (NGA) is extremely disappointed with the misleading picture this article paints of thousands of responsible, ethical auto glass service providers in this country.
The NGA condemns any and all forms of fraud – insurance or otherwise. We feel confident our judicial system can and will render justice. However, justice is clearly lacking in Mr. Ashbridge’s article. By definition, auto glass service companies exist to perform auto glass service. They are not “subcontractors”. If there are problems with subcontractors or other third party claims administrators, call them what they are. They are not glass companies.
It is equally distressing to think consumers may be misled or confused into believing they could be implicated in a fraudulent ‘scam’ by consulting with reputable “glass companies” that really are “glass companies”. If, as he maintains, Mr. Ashbridge is most concerned “that driving with a cracked or broken windshield puts both driver and passengers at risk” than he needs to reassess his priorities. Even if “glass fraud…is probably present in as many as 10 percent of claims filed,” that definitely leaves over 90% of his readers wondering if their damaged windshield claim is legitimate.
The recommendation that policyholders consult with their agent before pursuing a claim for damaged auto glass is questionable at best. Twenty years ago local agents knew and referred their customers to several reputable, high quality and competitively priced auto glass service providers. Today, local agents are expected – even required – to send policyholders to a distant third party (subcontractor) for service. Ironic, isn’t it? There seems to be a double standard involving subcontractors.
That irony has not been wasted on state legislatures. Virtually every state has enacted laws to protect the consumer’s right to free choice when selecting their own auto service provider. The catalyst for these consumer protection measures is the pressure some insurance companies exert on policyholders to choose the least costly service provider. Cheap is not consistent with the quality of materials and craftsmanship required when installing automotive safety-related parts. Cheap is also not a justification to circumvent Federal law that prohibits ‘steering’ of customers to a particular service provider.
The last thing the NGA wishes to do is to trivialize Mr. Ashbridge’s concern for fraud. That is precisely why the NGA, its members and allied organizations have invested 20 years in developing training, certification, business accreditation, installation standards and practitioner licensure programs to help consumers identify the true professionals in the auto glass service industry.
The NGA calls upon its insurance customers to join with the NGA to educate all consumers on auto glass safety and to explain how responsible, ethical auto glass service providers can be identified.
Mr. Cyr references ‘steering’ in his post. I would like to hear the NGA’s opinion on anti-steering legislation in states where law also allows insurance companies to require their insureds to call my direct competitor for the purpose of filing their claims. I defy anyone to justify this practice as not steering.
The National Glass Association abides by and respects the laws of the land. If a practice is illegal, it is illegal until and unless that law is changed. There is really nothing more that can be said.
I am, however, confused by the way Dan phrased his question. Using “to require” and “to allow” in the same sentence seems contradictory. Maybe I have misunderstood. If so, I’m sorry.
How can calling a third party administrator, one that owns glass shops, not be steering? As soon as the call is made, one of the first things the customer hears is, “Thank you for calling ________ Insurance, administered by Safelite Auto Glass”. The customer is hit right away with their name. It’s darn near subliminal. As far as scams, if a customer feels they are saving money, they don’t care. If the job looks good and doesn’t leak, they’re happy. We have two companies in the Raleigh area that are waving deds., and rest assured, neither would touch my vehicle. I’ve gone behind enough of their work to know better. Just like a bad intersection, nothing will probably be done until someone is either hurt or killed because of poor workmanship, cheap parts, and/or cheap adhesives.
The Farmers article is misleading and inflamatory. The majority of consumers will not fall prey to replacing a windshield that is not broken. If they do the penalty is severe. In my opinion the “fraud” occurs when the consumer is bilked into replacing the windshield and then authorizes a direct bill to their insurance company without ever asking about the cost. The offers of free dinners and deductible waiver are tempting fruit to the unwary so why worry, right? I don’t have to pay anything and we get free food, how nice. If the consumer paid for the glass replacement out of pocket it would be a competitive price and a different scenario with no free dinners. The unreputable glass companies will typically bill the insurance company three times the “reasonable rate” knowing their profit will come from the inflated insurance payment. It’s no wonder the insurance companies are fed up with these types of scams. If we see a glass bill that is out of line we will pay only the fair and reasonable rate for the area. When the glass company receives a lesser payment the customer is the one that pays the balance of the bill. The insurance company is not ” the customer” so the insured ends up going to court and paying the inflated balance. The policy of insurance is a contract which requires insureds to notify the insurer as soon as possible after a loss. If the insured falls for the free dinner caper and never questions the bill then the insured may as well get ready for small claims court. And we wonder why our insurance rates continue to rise.
I have studied my statement (“I would like to hear the NGA’s opinion on anti-steering legislation in states where law also allows insurance companies to require their insureds to call my direct competitor for the purpose of filing their claims.”) and will stand by it. To me it is clear. Allow, referring to what the law allows. Require, referring specifically to NW insurance and others who require their insureds to call Safelite Auto Glass in order to file an auto glass claim.
In response to Dan…I am not ignoring your question. I did not see it until this morning. I have several previously scheduled conference calls today that require my immediate attention. I will respond to you before the end of the day. I hope that is satisfactory…Leo
Bill, I have read your post, and due to your words “If we see a glass bill that is out of line we will pay only the fair and reasonable rate for the area”, I must assume you work for an insurer.
I therefore have a few questions:
1. If you only pay a ‘fair and reasonable price’ when you see a glass bill that is out of line, WHY does that cause insurance rates to rise, if you didn’t actually PAY the higher bill???
2. If you see an insured being taken advantage of, and taken to small claims court for payment of a bill, do you have a duty to defend them under the policy, because you didn’t fully pay the bill?
3. What measure of quality do you take into account when you determine your ‘fair and reasonable’ payment rates, such as quality of glass, quality of materials, quality of installers, and level of services being offered for the insurers definition of ‘fair and reasonable’? If you are settling claims in public, for the public, with public market data or analysis, do you provide that formula to your insureds when you ‘settle’ their claim to your determination of ‘fair and reasonable’ rates?
4. If you as insurers know that these unscrupulous practices are going on by these glass companies, and, as you say, it is causing insurance rates to rise, why haven’t you gone after them? As a consumer, I would love to see insurers prosecute those submitting inflated bills, waiving deductibles, offering kickbacks to agents, and more.
5. Is it possible you should be careful when accusing these shops that offer dinners, steaks, and other items, to see if it is indeed the glass shop paying for these items, rather than, as found in Denver, where it was the restaurant actually paying for the year’s free meals in the hope of building thier clientel? How do you know the insurer is paying extra through the glass bill at all? Is it possible that glass installers do this to stop insurer steering?
6. Are you painting the glass industry with an incredibly broad brush, using accusations of fraud loosely? What did Farmers have to pay back to the policy holders in Texas recently for overcharging on homeowners premiums? And how much is Allstate going to pay back to Texas policyholders as of a couple of days ago…about $6 mil plus, wasn’t it?
You see, that broad brush paints both sides of the fence.
I am not an attorney so I will not try to respond as if I am. Having left the NGA in 1990 and only returning last September, I needed to do some homework on the question you raised.
The NGA’s Office of General Counsel conducted a thorough search of federal law and found nothing that specifically refers to “steering” as illegal. Several lawsuits, notably in Texas and New York, have alleged that “steering” violated federal racketeering statutes. Both suits failed. At least one other lawsuit is still pending.
I also asked our legislative researcher to review state law so we might respond to your question. You asked…”where law also allows insurance companies to require their insureds to call my direct competitor for the purpose of filing their claims.”
We found no evidence that any state has ever “allowed an insurance company to require their insureds to call” a specific or particular auto glass service provider. To the contrary, Arizona and Michigan passed new laws this year specifically prohibiting insurance companies from telling their customers where they can get their vehicles repaired. The Arizona and Michigan laws specifically reference auto glass as do earlier laws passed in Colorado, Connecticut, Delaware, Illinois, Kansas, Kentucky. Louisiana, Maine, Minnesota, Mississippi, Montana, Nebraska, Vermont, West Virginia and Wisconsin.
Sixteen other states have enacted consumer protection laws to safeguard the consumer’s right to “free choice” in selecting their automotive service provider. In these states, we find no specific reference to auto glass but rather to automotive service in general.
That is a total of 33 states with laws on the books to protect consumer “freedom of choice” in automotive service. The NGA has consistently supported “free choice” to protect consumer rights and will continue to do so. That is the NGA’s position.
Where the entire industry, including the NGA, appears to have fallen short is in educating the consumer that they have a right to free choice and, more importantly, why they should insist on exercising that right. The NGA has formed the Coalition for Auto Glass Safety & Public Awareness (CASPA) to address that deficiency. In fact, CASPA’s first national press release addressing this subject was issued this week. Other releases will follow on a regular basis.
Promoting “free choice” will be a priority item for discussion at the NGA’s Auto Glass Conference & Expo next month in Tampa. Our NGA Auto Glass Division will solicit ideas from its members as well as propose initiatives that are in addition to the national press releases.
In summary, I don’t think the issue is NGA’s position. As I said above, I have gone back through the archives and found the NGA consistently supported “free choice”. The problem is that too few consumers are aware of their “rights” or why it is in their best interest to insist their “free choice” be respected. Because they are unaware or don’t care, they say nothing. That silence leads state government to conclude there is no problem.
The NGA should bear its share of the blame. We all should. Using the wisdom of hindsight, we should have begun the auto glass education of the American consumer 25 years ago. Had we done so… the hue and cry to pressure government for reform and / or to enforce existing law would be deafening.
At the moment there is only silence. We will do everything we can to provide the consumer with the information they need to decide for themselves and we will do so as fast as possible.
In an earlier posting, I assumed “steering” was universally illegal. I suspect I am not the only person in our industry to have made this assumption. I apologize if I misled anyone and I thank you for suggesting I check the facts.
Mark, yes, I am the VP of Claims for a medium size insurer writing personal lines property and casualty business in ninteen states. I appreciate your candor and the candid questions raised in your posting.
Glass replacement pricing has always been a “hot topic” among our producers. A recent meeting in Wisconsin yielded some rather startling but old information. It boils down to this Mark. If the consumer replaces their windshield without filing an insurance claim, the cost is usually ” fair and reasonable” as the consumer is shopping for the best deal on a piece of OEM glass and will go with the most competitive cost because it is “out of pocket”. On the other hand, if the consumer files the insurance claim and the glass company sends the bill direct to the insurer it’s usually double or triple the cost. You may ask why does this happen. Because the glass company hopes the insurer will “fast track” the claim and simply pay it.
I personally tested this assumption and called a national glass network to replace a windshield in my 1994 Chevrolet pick-up. I was quoted a price of $394.00 for OEM glass to include the installation and urethane kit if I paid at the time of installation. Then I proceed to take my vehicle to the network shop and filed a comprehensive claim with my insurer. I was amazed as the glass company submitted a bill to my insurer for $ 904.32 based on the Mitchell NAGS price without a percentage discount. As expected, my insurer paid the company without questioning the bill. When a single insurer is replacing 33,000 windshields a year it’s not worth the expense dollar to examine each and every glass bill for accuracy. The bottom line is “consumer beware”. If you’re accepting free dinners and deductible waivers to save your dollars then expect your rates to rise accordingly. So who’s fault is it? The insurers for not taking a more agressive stance and questioning each bill or the glass company for charging an inflated price to begin with? Perhaps the insurer should call for the glass price and send a check with the insured so the installation is paid for up front at a preferred shop? Would that be steering? You bet! Is it illegal? No. It is my hope the industry reaches a level of standarization that accounts for fair pricing across the board. Then we all win! The customer has a choice and the cost is consistent.
We have no recourse against glass companies that charge inflated pricing as the offer of free dinners and deductible waivers are made equally to all. The customer is the one that suffers when we short pay the bill. And if it goes to small claims we have no duty to defend. The customer pays the difference as the “insurer” is not the customer. So when the consumer is enjoying the free dinners, keep in mind, nothing is free. We all pay for that dinner!
The job that daily and catastrophe adjusters have to do is a uniquely complex one. The ability for the high quality adjuster to maintain their focus, which is to help insured ones while following (sound) carrier instructions, and make a living, is a commendable and challenging calling to follow, and I hope that all of the good people that are in the adjusting field remain commited to that calling and all that it entails. I do not share the same sentiments for others that follow carrier instructions so as to be able maintain their own standard of living, to the detriment of their neighbors reputations and welfare.
I suggest that CEO’s are quite aware of what it takes, from the trenches on up, to cover their company’s operating costs and satisfy stockholders who have gotten use to certain returns on their investments. Hard markets call for hard CEO type decisions, and the glossing over of those decisions.
If you will, carefully follow the nine page Allstate letter to completion, especially keeping in mind the blue lead information at the top of pages 1-8 (and especially page 5)…then reflect on the following neighborly and commendable admonition from khromas to Todd Brooks on CADO 12/18/2003;
(The khromas reply was addressing Brooks receiving his new adjusting license, and Brooks considering employment with Allstate).
Brooks,
“I would not advise calling Allstate if you wish to keep your integrity intact.
After almost 7 years with them and having held a variety of positions, including the sole Quality Evaluator for the entire southern half of Texas, I finally became fed up with their approach to requiring every adjuster to knowingly underpay every claim and left them this past July.
The head of Allstate in Texas – Gary Briggs – had the nerve to stand up in front of an agent’s meeting last spring and say (QUOTE) “I love the new HOA+ policy! It doesn’t cover anything and WE STILL GET TO KEEP THEIR MONEY”!
I used to tell people whose claim I was handling that “the good hands of Allstate were right here” as I held out my hands for them. I could no longer do that in good faith and look myself in the mirror so I left.
One of these days the Texas DOI is going to catch up with their property handling practices and then it will all hit the fan! Good luck with anyone else!”
Kevin Hromas
Gale, the reasons behind Gary Briggs exclamation and part of Allstates profitability margins may very well be connected and may support “why” (so-to-speak) Mr. Poe submitted 5 Allstate claims in 2003 to the TDI and why they are now in the TDI’s legal department. It will also be interesting to see how Allstate (and other carriers) conducted themselves while settling Hurricane Isabel and California fire claims.
At least Kevin, unlike some other Allstate adjusters-associates, had the level of personal integrity needed to not want to harm consumers-people for profit…and so made his livelyhood elsewhere.
< Message edited by Leam Kincaid -- 6/22/2004 9:06:42 AM >
It is our beleif that the real issue in regarding the glass industry and any other repair industry has nothing to do with saving the consumer money. The real issue for consumers is who will get the lions share of their money.
When we look at what is “fair and reasonable” it does not translate. The insurance industry has reported large profits during an economic slow down. CEO’s and Corporate board members have earn large sums of money. These wages a justified by corporate talking heads as “fair and reasonable” because these indiviuals are credited with saving money for their companies and turning profit for the investors.
Every independent glass shop is working hard everyday to provide their customers with the best quality of service, materials, and workmanship in the hopes that they too will be able to turn a profit, build a customer base of repeat customers and earn a living.
This becomes such a huge task because now they must compete not only with other glass shops but, also with TPA’s who are representing corporate glass gaints who are misleading, scaring, steering and in some cases even delaying payment of claims the insured. This constitute a huge disadvantage for small and midsize glass shops. This too is dishonest and immorale. So, if we are all honest about what is happening. Let’s give the public the whole truth and not just parts of the truth.
P.S. Remeber, there are more of us honest and hard working shops then it is of them!
Bill, you said, “I personally tested this assumption and called a national glass network to replace a windshield in my 1994 Chevrolet pick-up. I was quoted a price of $394.00 for OEM glass to include the installation and urethane kit if I paid at the time of installation. Then I proceed to take my vehicle to the network shop and filed a comprehensive claim with my insurer. I was amazed as the glass company submitted a bill to my insurer for $ 904.32 based on the Mitchell NAGS price without a percentage discount. As expected, my insurer paid the company without questioning the bill. When a single insurer is replacing 33,000 windshields a year it’s not worth the expense dollar to examine each and every glass bill for accuracy. The bottom line is “consumer beware”.”
You are the VP of claims of a medium sized insurer? By your own words, 33,000 claims per year. Worst case senario is that number of claims multiplied by your difference in price of $510.32. I checked twice to make sure my calculator wasn’t fooling me. That would be a total of $16,840,560.00 per year. 16.8 million. Geez man, I’ll audit every claim your company encounters for just 10% of what I save you each year. Hell, I don’t even need vacation or benefits. How about it Bill, do I get the job?
You are right about one thing. It is definitely consumer beware. Consumer beware of insurance companies who are crying how much money they are losing to fraud, are too lazy to keep the fraud in check and still report record profits each year with exec’s and ceo’s taking home obscene amounts of salary and bonuses. So where does all that profit come from to pay salaries, bonuses and the fraud losses? My thinking is that the consumer is paying too much for their coverages, and then the honest glass and auto body folks are being cheated out of what should be honest profits for their parts and services.
Why is it that everyone puts down the free offer as something you pay for,illegal,unfair, etc. This is completely innaccurate. A marketing co-op is an advantages agreemant for two parties to share advertising dollars. Free dinners,carwashes, or widgets are offered by the company in the ad to the glass consumer as an incentive with no added cost. The Glass shop, Transmission outfit, or Oil change business that is going to spend advertising dollars anyway finds a way to offset cost or value-add to thier consumer. This is much the same as Geico saving 15% by sitting a gecko in the seat an agent used to occupy. Or the toy in the cereal. There is nothing unfair about it except it makes those without the resources to fight it upset. What better way to get around network steering than a direct to consumer advertising blitz that states come to me and I will offer safety AGRRS cert NGA cert and yes I will charge more than cash to offset my costs.
This brings me to a new focus. Cash. The cash segment is a much smaller segment of business. When I give a deeper discount to a smaller segment of my business (cash) because I do not have to sit on hold and wait for dispatches and reference numbers listening to a safelite rep try to steal my business it is my business not the insurance company’s. If you do not have time to check every invoice then hire more people do not expect me to pay for it. An insurance company gets charged more than cash because they make us spend more time dealing on the phone and less time installing glass.
I guess that would explain why I have gotten absolutely NO quotes from the numerous glass repair/replacement facilities I have contacted…. I didn’t give them my INSURANCE information. Now it all makes sense….
Well, Mr. Foolery, how do you explain why one glass industry publication has had a page specifically quoting the results they obtained while calling for cash quotes around the country?
You say you recieved no quotes because you didn’t give your insurance information?
Politely, I say “HORSEFEATHERS”.
And to Bill, I couldn’t have done a better job of replying to your post than Dan did. Excellent insight Dan.
Bill, steering is illegal in 37 states, and if you short pay a claim, especially without notification to the insured, of how, and why you did so, you have committed bad faith by definition in statute and regulations in my state. And you sure do have a duty to defend, they wouldn’t be in litigation if the insurer had indemnified them. Please understand, I fully acknowledge the insurers right and duty to defend against fraud. I’d like to see it someday.
Somehow, I’m betting you already know that the people who enforce those statutes and regulations, don’t, however.
Finally, Bill, I’d like to see you answer the rest of my questions, sometime.
I absolutely see nothing wrong with this type of marketing. In my opinon, it’s the insurance industry that created this problem and now they are crying about it. What do they expect the small independent operator to do?? You have to capture the FNOL or they will. And you all know what that MEANS!!
You know, it really burns me up that there are shops that beleive that the insurance company and their TPA’s have the authority to set your cost for doing business.
A number of the TPA’s compete with you and have volume on their side and have artificially created a false economic environment for the cost of windshield repair and replacements.
The insurance companies have sold this to the public and elected officials as a means of justifying the claims that this their way of saving the consumers money. Then, they add this issue of fraud on top of it for good, bad, and/or for good measure.
The fact is, we have communicated to the various insurance companies that we do business with that we will not accept their discounts and there are those who fight and then there are those who respect our independent right to charge what we will feel is the appropriate cost for our services.
Those who do not pay are charged a 2% “Late Fee” which will collect once we are forced to resolve the matter in court. If you are late on paying your car insurance. Do you or do you not get hit with a fee? Who do these people think they are dealing with? I know, but do you who work hard everyday like myself really understandd the message these folks are indirectly telling you?
They must first try to get a better price for our services. In my world 50/50 is very fair. However, we go one step better and it is 57%. The save money, we can make a living and pay our bills. Wake UP!.
There is so much I can say… By the way, I agree, any good shop would give a potential customer a quote on a glass job.
Mr. Foolery, I don’t know who you called, but I know that the shop I work for will be happy to give you a quote for a cash job. Some days, that’s most of my work. Now, I just one of the techs so I don’t pretend to understand all of this thread, but I do know what I have to do everyday. I’ve given quotes, dealt with the insurance companies, and done several thousand installations. The one thing I’m sure of is that my shop bills insurance companies according to that little piece of paper that gets faxed to us stating what I call the 3 basics: % off NAGS list, flat fee for labor (way too low), and a flat amount for urethane. I have a friend that used to work for a company that waives deductiables and he told me how they do it. They bill at full list price, install a brand of glass that is strickly aftermarket only, use the cheapest adhesives available, illegally reuse state inspection stickers, and so on. There are plenty of shops that are using glass from quality manufactures, top grade adhesives, proper installation techniques, and abiding by that silly little piece of paper on the fax. Maybe the insurance companies need to work with the glass industry, take the time to see what we really go through. Learn the basic steps of installing a windshield, and what the consiquences are of doing the type of installation that my friends former shop is doing. Vehicles are becoming more and more complex, and as a tech, I have to deal with this. I have different types of urathane depending on the vehicle, heating systems, anntenns for everything, heads up displays, rain senors, and air bags all over the place. Boy, did I get off the subject, sorry. Well, gotta git, brains starting to smolder.
11:19 AM PST Wednesday
Former employees sentenced for defrauding insurer
Two former Farmers Insurance Group employees were sentenced to prison Tuesday for their role in a fraud scheme in which the insurer paid out nearly $188,000 in bogus claims.
Aaron Ward, 26, of Folsom, was sentenced to five months in prison and five months of home detention. Lisa Reynolds, 29, of Sacramento, was sentenced to two months imprisonment and six months of home detention. The two defendants also were ordered to pay restitution of $117,092.
According to federal prosecutors, the fraud scheme involved submitting previously processed insurance claims to Farmers and reprocessing these claims using different payee names and addresses. Checks were mailed to various post office boxes in the Sacramento area controlled by the defendants.
Through these bogus claims, the defendants caused Farmers to issue more than 40 checks with an aggregate value of $187,928.
A third partner in the scheme, Ian Reynolds, 27 – the former husband of Lisa Reynolds – is scheduled to be sentenced next month.
11:19 AM PST Wednesday
Former employees sentenced for defrauding insurer
Two former Farmers Insurance Group employees were sentenced to prison Tuesday for their role in a fraud scheme in which the insurer paid out nearly $188,000 in bogus claims.
Aaron Ward, 26, of Folsom, was sentenced to five months in prison and five months of home detention. Lisa Reynolds, 29, of Sacramento, was sentenced to two months imprisonment and six months of home detention. The two defendants also were ordered to pay restitution of $117,092.
According to federal prosecutors, the fraud scheme involved submitting previously processed insurance claims to Farmers and reprocessing these claims using different payee names and addresses. Checks were mailed to various post office boxes in the Sacramento area controlled by the defendants.
Through these bogus claims, the defendants caused Farmers to issue more than 40 checks with an aggregate value of $187,928.
A third partner in the scheme, Ian Reynolds, 27 – the former husband of Lisa Reynolds – is scheduled to be sentenced next month.
There is no profit in windshields anymore. The nags list has gone from $1,200 on a shield (5 years ago) to $150 WTF is that, and to say glass companies harvest is bull ****. Most customers don’t even know they have glass coverage. Farmers are the worst at stirring customers to there so called shops that use cheap materials. So they can get there yearly bonus.
I guess that once spammers got a look at Rob’s spelling and grammar, all bets are off and they assume we will buy lingere and dope off the internet. Meanwhile, back on the subject, we have managed the transition to NAGS (what a joke) revaluation. Our bottom line has not been affected enough to consider a problem. In more cases than not, the invoice amount is as much if not more than before.
But and this is a big BUT. I don’t know you from a can of paint but, I do know a lot of glass shops that operate honestly like you.
However, many of them perhaps, like you refuse to fight in court for what is rightfully their’s and that’s that.
We are in a battle right now with over 19 insurance companies in the State of Massachusetts. They use that claim of fraud to tie us up in court thinking that will scare us away. They use the right to see our “proof of purchase” to demand to see and perhaps, share with our competitor information is private. I can’t ask to see their information. Where’s this survey they have been claiming to have used to determine our prices? Where is it?
Peter please don’t be bitter towards your former glass colleagues. I beleive and the pervious years have proved that there is more corporate fruad going on in corporate offices then in the “Mom and Pop” operations around this country. I never heard about a family lossing their life saving for what some jerk has done to make a buck. (This is not to condon it either, just a point).
My family and I wish you luck in your future endavors and we hope you will stay in the battle to get a fair share of the American dream for all of hard working and honest glass shop owners and operators.
First of all its called steering, I offer a customized offer to farmers insurance and other insurance groups perhaps this is why your here complaining and not out doing work. If you want to charge $500 a glass I do not blame farmers, or any insurance company for as you call it “stirring” If your a glass shop do you do not want to over pay, you buy from the lowest cost vendor if the end result is cases the same product? I do not know about you but if I was any insurance company spending multi millions a year I would look for any way I could to save anything I could. Your the kind who wants to bill every job at $500 a wack , but yet next week you will be upset because your insurance went up. We are all running a business, and all out to make a profit. Stop ripping people off and go do some work.
I have worked in the Auto glass replacement business for years, I have found there are many companies out there willing to committ fraud. Typically, the way they work…… Some glass shops, bill the insurance companies for “New” replacements after buying glass from a “junk yard” and charging full NAGS pricing. Another way is, they claim to have installed a new Moulding for the windshield and never replace them, that too can be very costly especially for some more expensive mouldings. There are other “neat tricks”….. Hey Mr/Ms Car owner, let me tint all of your glass in your car at no cost, just simply sign this form and I will bill your insurance Co for windshield replacements. Well to Mr/Ms Car owner that presents quite a deal, free tinting and no charge.
I had recently closed my auto glass replacement business for a lack of work, and I was just being honest, but beacause I couldn’t offer people enough ways to “Screw” the system! I write this letter to open the eyes of consumers and insurance companies, THIS is what going on out there, and I could expose many of them.
Thank you for taking the time to look at my remarks. I do agree with your statements, their is a ton of Fraud throughtout the business, perhaps corporate. I have many battles with insurance companies to recieve my honest work……It including a call to one who claims the work that I was about to do, would be covered… and of course I was very upset to find out they denied the claim, stating the insured insurance had run out before the claim was processed, that alone cost me 2300 in glass that I purchased through a local distributor. I wish I had the recources to fight the battle, but I didn’t….. And I understand the claims by insurance Co who do whatever they can to “NOT” pay the claim to legit shops as I had. As a dream of owning my own Business fell short I asked myself……..Why am I stuck between insurance companies that won’t pay, and the shops ” stroking” the insurance companies and the consumers in the end. Insurance is high enough!!
Peter, we have had some of the same experiences and I must ask, “Did you get a authorization number?” “Was the work done before the insurance ran out?”
There are ways to get them to pay. If the insurance is an up and up company, they will pay.
No I did not get a claim number. Lessons learned…Do my homework, and avoid all Massachusetts based insurance companies. Honesty is “still” the best policy, I just wish they would be honest with me!
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Considering the complex nature of collision repairs compared to those of glass, it’s debatable whether networking collision shops will be doable. It’s also debatable whether networks are in the best long-term interest of the collision industry, consumers or even insurers.
by Dick Strom
Some 15 years ago while glass shops were occupied making reasonable profits, they failed to pay attention to the development of glass networks. The stage for networks was set when State Farm wanted electronic billing, a move that many glass shops agreed would streamline paperwork.
It all seemed innocent enough.
Receiving little flack from shops for this move, State Farm soon upped the ante, pushing an ever-tightening multi-tiered “offer and acceptance” (O&A) agreement between independent shops and the insurer. Other insurers followed suit.
Under the terms of State Farm’s original O&A, small-town shops were limited to something in the range of list-plus-10-percent, and big city shops about 25 percent off list. This O&A pricing was based on glass shops accepting a flat-rate price (currently around $40) for installation labor, rather than an hourly rate plus a flat-rate price on installation materials.
Though few glass shops were enamored with this arrangement, most were still able to make a parts profit. They managed to stay in business by streamlining the installation labor process to make up for what was – and still is – a totally unrealistic labor charge for glass installation.
For decades, glass shops have cost shifted the labor costs of installation to markup on the parts being installed – a ridiculous, yet commonplace practice that’s finally being recognized by the National Auto Glass Specifications (NAGS), which once again is restructuring its pricing for glass replacement in early 2005.
Shops had been making money on the glass itself, but nothing on installation materials and labor. Therefore, they cost shifted labor and materials costs to come out of the glass markup. Of course, with ever-increasing glass discounts, what was profitable in the past isn’t profitable today.
Bigger shops could make additional money on volume purchasing of the approximately 800 most-used pieces of glass. But when insurer bean-counters realized this, they wasted no time whittling parts profit to below list cost. An adjuster for a major insurer stated the pathetically obvious: “The glass industry is the only industry that would probably pay [insurers] for the privilege of installing glass.”
Says another adjuster: “We’ll continue to discount glass installation pricing until less than 50 percent of glass shops are still signed up.”
And so the race to the bottom of the barrel began in earnest.
Ever-increasing insurer-generated interference encouraged a blight of shops taking risky labor shortcuts and installing inferior sealers and glass, as they scrambled to maintain market share and a semblance of profitability.
Since glass is fragile and has to be shipped many miles to installers, shipping prices (typically in the $50 range) that previously had been often absorbed by shops – back when they had reasonable profit margins – now became an additional expense very seldom covered by insurers. A multitude of similar negatives resulted in many shops that refused to compromise on quality being forced out of business.
A further squeeze was put on all glass shops some years ago when NAGS restructured its pricing schedule, reportedly to more accurately reflect fair prices to glass shops, insurers and consumers. (It’s worth noting that although insurers and others frequently refer to the NAGS price as list price, NAGS considers their prices to be merely a benchmark.)
Why am I giving you all this background information, you ask? Because the same network forces at play in the glass industry are now implementing the same process in the collision repair industry. But considering the extremely complex nature of collision repairs compared to those of glass, it remains to be seen whether networking collision shops will be doable.
Doable or not, it’s the opinion of many in this industry that collision industry networks are not in the best long-term interest of the collision industry, consumers or even insurers – in part because by their very nature, networks virtually eliminate personal contact with the insurer to settle claims fully, fairly and efficiently. They also shed insurers of liability and accountability, instead placing these responsibilities totally on shops.
Why Insurers Like Glass Networks
Networks sell shops a “quality validated program” for insurers to back. You, as a shop owner, are expected to believe that you’re signing onto a program that will get you referrals from insurers for quality work.
But what many collision shops fail to comprehend is that quality cannot be sold by any network to insurers, any more than you can sell Mephisto shoes to someone who refuses to pay for anything more than functional equivalents from K-Mart. Insurers want low cost and the quality “monkey” removed from their back.
Though there are presently many glass networks, LYNX Services and Safelite Glass Network are the two major players. Second-string networks vying for prominence include Harmon Solutions (currently owned by Glass Doctor/Dwyer Group) and Alliance Claims solutions (owned by Iowa Glass, which also owns Auto Glass Centers and a couple other small glass chains). A number of third-string networks follow.
Networks are middlemen, a firewall of sorts between the insurer and the shop/consumer relationship. Generally speaking, networks make their money by taking all or most of the responsibility off the insurer.
Insurance companies originally hired the services of glass networks to provide wholesale claims administration services and to shift the costs of administration to the cost of the claim. This shifting is a huge bonus to insurers when we consider that state Department of Insurance (DOI) offices must approve of premium increases before an insurer can implement them.
And DOIs, while more hesitant to approve of rate increases based on increases in administrative costs, will virtually always approve them if based on an increase in claims costs.
The reason for this is that DOIs view “administrative” costs as something insurers should be able to control and “claims” costs as being largely beyond insurers’ control. So there are distinct monetary advantages for an insurer, through a network, to shift its administrative costs to that of claims.
Insurance companies are in the claims business and, as such, are required to investigate claims. Networks, however, administrate insurers work more economically by taking their own shortcuts, one of them being not investigating claims.
Networks also seldom consider the fact that additional cleanup may be required, as in many vandalism claims, or that glass may need to be replaced on a weekend in order to prevent further damage (both resulting in additional costs to shops). And while an adjuster’s investigation often includes speaking directly to the insured, or at least sending the correct paperwork in order for him to file a claim, when networks receive a “notice of loss,” they often ignore it if it doesn’t show a corresponding claim number.
A more common scenario would be that the network would contact the participating glass shop, telling them to contact the insured to have him call the 800-number. And it’s not uncommon for a network to ignore “good faith” statutes requiring adjusters to quote the portion of the policy dealing with the reason for claim-payment denial or short-payment, and the proper method of contesting the denial or partial denial of payment.
In essence, many networks have increased their profits by collecting an administrative fee from the insurer while shifting much of that work to the shop – a handling fee for work the shop didn’t want to send to the network in the first place. And yet networks typically take months to pay their claims that, when finally settled, are often short-payed.
From an insurer’s point of view, however, it’s much more profitable – and easier – to keep a lid on outlay expenses when dealing with a limited number of networks, rather than thousands of shops.
For a relatively minor fee, then, networks must compete among themselves for insurance work, based on how inexpensively the network can get shops to work. Promising that they can get glass shops to work for 5-10 percent less than that of competing networks (in addition to taking care of insurer paperwork) will definitely convince an insurer to switch networks.
And, thus, the downward spiral begins for shops – caught in the middle as networks scramble to attract insurers through ever-deepening cost-cutting pricing. Meanwhile, it’s common practice among networks to tell shops, both in their network or not, that it’s insurers that are dictating the allowable rates that networks can pay.
The Economies of Network Cost Cutting
Cost-cutting pressures brought to bear on shops arise when networks contend for the business of the choicest insurers. Networks that are owned by glass companies, Safelite and LYNX being major ones, wield a distinct advantage over networks not owned by glass companies by being able to “navigate” jobs to their own shops under the disguise of “First Notice Of Loss” (FNOL) – which equates to “first contact with the customer.”
A July 2004 article in the insurance industry magazine Claims, titled “The Earlier the Better,” stated in part that, “Insurers have come to understand that improved results can be achieved by performing select claim tasks earlier in the process. A good example is direct repair network use for auto claims. … As time elapses between the first report and the adjuster review, many claimants find repair shops on their own, which usually is more costly for the insurer. In fact, one mid-sized personal auto insurance carrier projects its annual loss/expense savings at $3 million as a result of recently moving its direct-repair referral process nearer to the first notice of loss.”
This is doable because very few customers realize they’re being marketed by the network. Rather, they believe that they’re being told limits and provisions of the insurance policy. But shops lose the game when they lose first contact with the customer.
In order to reduce the expensive costs of glass shipment, networks such as LYNX (which is owned by a glass company) can navigate insureds to glass shops that use primarily the glass that they themselves produce, an advantage of monumental proportions, as outlined by LYNX’s Paul MacFarland in early 2004.
Speaking in a Nebraska Legislative Committee Session, MacFarland stressed the impact of LYNX on the glass replacement industry, stating that LYNX alone processes more than 3 million claims each year and that last year, they paid more than 26,000 different glass service providers (shops).
Honing in on the awesome effectiveness of highly structured networks to navigate the mass of available work, the most recent U.S. Economic Census report stated in part that, “Though a multibillion-dollar business, the collision industry remains competitive and highly fragmented … with the top 50 [collision firms in 2002] accounting for only 7.7 percent [of collision repair sales]. By contrast, the 50 largest firms in the auto glass-replacement business accounted for 46 percent of the sales.”
These figures are staggering in their implications of the directing power that networks have exerted over glass shops and consumers – and of the power they’re beginning to exert over collision repairers. Will all glass and collision shops soon be subject to “fair and reasonable” pricing as established by networks via their members, being effected even against those shops that are not members of the network?
Once networks can say they have 50 percent of the marketplace, will their price become “fair and reasonable” for all and their way of doing business the “industry standard”?
To add insult to injury, Safelite recently sent out letters to all shops, including those that haven’t signed a contract with Safelite, announcing new fees that shops will be charged for claims processing. Basically, this is akin to a cable TV company demanding that you have to pay their line maintenance charges for the cables in your alley, even though you use a satellite dish.
Safelite’s paper invoice fee (not for electronic billing of invoices) is for a service for which insurers are already paying Safelite – and from a network that shops had no part in hiring. Has demanding such a fee become an “industry standard”?
As networks compete for insurer administration jobs, they compete using the price at which they can get shops to work. And this competition has become so intense that even many large shops can’t compete anymore.
It’s worth noting here that the sale of network Harmon Glass last year resulted in an immediate improvement in the finances of their previous owner, APOGEE. Likewise, the network Diamond Triumph’s first three-quarter financial statement showed $171 million in sales, down $7 million from the previous year. Further, Olympic glass and several other large U.S. chains closed last year, and Safelite and Alliance made many personnel cuts.
Networking Collision Repair Shops
Last year, Pittsburgh Business Wire reported in part that, “(PPG) LYNX Services announced today that it has become the exclusive national provider of automotive physical damage (APD) repair management services for Ohio Casualty Group. The LYNX-managed repair services include the LYNXSelect direct repair program (DRP), estimate auditing and rental car concierge. LYNX Services connects Ohio Casualty adjusters and customers with a national selection of qualified repair shops via a Web-based portal, allowing for easy dispatch and retrieval of repair estimates and images.”
Within weeks of this announcement that LYNX was expanding into the collision-claims arena, other networks also announced they were developing – or were ready to release their own – collision-claims processing systems. In fact, all the paint manufacturers announced within weeks of each other that they intended to enter into claims processing via a network of shops.
One major liability in all this for collision shops in any way tied to networks is that shops are likely candidates to be dragged into lawsuits brought against networks and/or their insurers. As in many collision DRP contracts, most glass-network contracts contain “hold harmless” agreements, wherein the glass or collision shop agrees to hold the network and insurer harmless in case of a liability claim. And since repairing the vehicle is the obligation of the shop (in court, insurers and their networks will insist their only responsibility lies in paying the claim; the shop is the repair expert), courts will most likely hold shops at least partially accountable for what is and is not repaired or replaced.
For this reason, before joining networks, shops should be aware that the hold-harmless agreements they make require contractual acceptance of liability and that accepting this additional liability frequently voids the shop’s own general liability policy coverage.
And when a collision shop subcontracts out glass or other work to another shop, the terms, practices and materials used by the other party should be carefully considered. Considering that many experienced, quality-minded glass installers have been forced out of business, are all those taking their places properly trained in safe installation? The cheapest rate available is seldom worth the liability risk.
There Is Some Good News …
Since so many collision industry problems so closely mirror those faced by glass installers, certain people from both industries have begun working together on several fronts. One avenue with great promise is in their cooperation in establishing a database of experts on various issues common to us both.
A forerunner in this, NEON Claims Advantage is currently building a database of experts who’ll be available for shops to access. This database league of experts in the field of repair and replacement would receive expert opinions free of charge in exchange for the opinions they provided – other shops then being charged a small administrative fee for accessing these opinions.
The expert opinions then can be used when insurers or their networks refuse to pay for legitimate and necessary labor or materials or when they attempt to short-pay.
Also, NEON will be offering collision and glass shops a short-pay collections service by spring 2005.
If you’d like to be part of the database or want to be notified as soon as NEON’s short-pay program is available, contact them at (402) 223-4700.
Additional good news for shops is that many states are attempting to beef up their anti-steering laws through legislation that closely mimics that of California. And a new avenue of business providing similar services for shops as glass networks provide for insurers is opening for independent glass shops.
Performing many of the time-consuming, frustrating paperwork chores that shops typically lack time to do, this much-needed service could easily include collision shops. Its genius is in its ability to increase shop efficiency through consolidating much shop paperwork from many shops into single calls, keeping constant pressure on insurers/networks to force them to comply with their particular state’s bad-faith time regulations.
Some states allow a payment deadline of as little as 10 working days before these become “bad faith” issues, after which declaration they can be dealt with in court and without short-pay.
Shops’ right to full payment, due to waiver and estoppel, may be brought to bear when the party responsible for compensating glass installers and collision repairers has done nothing to settle accounts within the limited time frame allotted in individual states’ codes. Generally speaking, when the paying party ignores a legitimate request for payment for services beyond the state’s allowed time frame, it’s illegal for the insurer/network to short-pay the shop.
The Demise of DRPs?
Networks are popular with insurers because they take care of the claims-handling details, administrate and schedule which shop will receive the work, and they eliminate insurers’ need for expensive claims centers and employees – all for a negotiated fee of around $15-$20 per claim to insurers. This partially explains why network employees are typically unwilling to invest any extra time working out bugs in the claim; their agreed profit margin with insurers doesn’t allow for it.
But for shops left with the scraps, networks typically require ridiculously deep, controlling discounts. And installers have reported having their money tied up for as long as 60 days (by some reports, as high as six months), while shop expenses, liability insurance and other business expenses accrue. And there’s no guarantee that labor and materials will be fully compensated when the check finally does arrive.
Yet shops can’t get referral work without joining the network the insurer uses. And some network representatives are skillful at “navigating” work from the insured’s non-network shop of choice, even in states where this is illegal.
Now, by the looks of things, it appears that glass networks are determined to replace the collision DRP system. And once insurers are employing networks, is it not logical to expect that these networks will treat the collision industry the same way they treat the glass industry?
For example, glass claims not submitted electronically are sometimes charged an additional paperwork fee, and all claims must be for the exact amount the network has told the shop to charge – or not charge – or the bill will be rejected. Also, if the shop doesn’t send in a claim that the network will accept within 90 days, they characteristically reply that they don’t owe the shop anything.
Current collision repair DRP programs at least allow shops to speak to an adjuster, but the network program will introduce the collision industry to the experience of not being able to talk to anyone. And shops that try to circumvent the network through the insurer will be told the company no longer handles those claims and will be forwarded to a network operator who has authority only to say “no.” (Network operators may tell you that they can pass a message on to their supervisor but that they can’t allow you to talk to the supervisor.)
During the collision industry’s “honeymoon,” networks will be easier to work with than DRPs. But as they gather more companies, they’ll begin choosing which shop will get the work. And when customers call in an insurance claim, they’ll be informed that their chosen shop is not preferred, that there may be warranty problems if they go to that shop and that they may have to pay more than their deductible.
Says a glass industry spokesperson: “I once asked the vice president of claims for a large insurer why no other segment of the auto collision or repair industry has to deal with the problems that auto glass companies do. He answered, ‘When insurers tried to squeeze the body shop, they all joined together and it didn’t work. Insurers then tried to squeeze the mechanical and engine repair shops, but that didn’t work either. Finally, they tried to squeeze the auto glass industry, and this was the first industry that blinked.”
Though disorganization has, thus far, cost the auto glass industry much more than the collision industry, this could soon change. The auto glass industry has begun uniting and organizing and is making inroads into regaining control. For the most part, however, collision repairers remain estranged from each other.
As someone in the glass industry said: “We bent over backwards to please insurers; we arrived where we are today, incrementally.”
Best advice: Get smart and learn from the glass industry’s mistakes. Walk in with your eyes open, and keep consumers and their best interests in mind at all times – and don’t let that change. What’s good for the consumer is good for shops and, ultimately, good for insurers.
Writer Dick Strom and wife Bobbi own and operate Modern Collision Rebuild, a 10,000-square-foot shop in Bainbridge Island, Wash. Strom can be reached at http://www.moderncol@qwest.net
Warning! If you have a glass claim on your car, don’t let your insurance company suggest a company for you. Most, if not all insurance companies contract with another company that takes care of their glass claims. You might think that you will be treated better by going through the contracted company, but in my case that was not the case. I have Farmer’s insurance which uses Farmer’s Glass to handle claims. Farmer’s glass is managed by Safelite Auto Glass. I had a claim for comprehensive damage to the front fender, hood and windshield of my car. I had the car in the body shop for the body damage, but could not get the windshield done that day. I paid the $500.00 to the body shop. I was told by the insurance company that I could have it done at a later time and was assured that this would not cause a problem and that I would not be asked to pay another deductable. I set aside a day that I could be home from work and waited for Safelite Auto Glass to arrive. When the technician came, he said that I owed 374.00 before they would begin work. I explained that I had already paid the 500.00 deductable and showed him my receipts. He called his superviser and I heard the supervisor say that I would have to straighten it out with my insurance company. I spent the next 3 hours on the phone talking to various people at my Farmer’s insurance agency, Farmer’s Auto Glass, Safelite Complaints department (which didn’t even apologize for my inconvience). Finally my agency told me to pay for it out of my pocket and give them the bill. I got 3 quotes on-line for 275.00, 285.00 and 295.00. I called two other places in my area and got quotes of 285.00 and 289.00. I chose Speedy Auto Glass at 285.00, but I’m going to have to take another 3 hours away from my job to get the work done. This is a total of about 6 hours of missed work that I could have avoided if I had just taken my car to a shop instead of having Farmer’s glass (AKA Safelite Auto Glass) send their mobile truck over. Also, Safelite was 90 to 100.00 more out of pocket than any other place that I called. So here is the scam. Your insurance company is getting a big break from the company that it contracts with to put in your windshield. If the amount is below your deductable, you may be charged a much higher rate out of pocket. The insurance company wins. The glass company wins. You lose. If your windshield is broken and you insurance company asks if you would like them to suggest a company for you DON’T DO IT! They cannot make you go to their contracted company nor can they penalize you in any way. Call around for estimates and choose the best shop with the best customer service and the best times for you to get the work done.
As I work for a glass company I will keep my name to myself… You should know that Safe Lite Auto glass is one of the biggest jokes in the business… I have to call claims in with customers all the time… Not just Farmers insureds but Hartford, AARP, American Family… the list goes on and on… I am on their network which means they are supposed to give jobs to me anyways… Why would they when they have their own company to look out for? Then when I call the claim in with one of my customers the suddenly can’t verify information on the policy… They then try to call the insured back and state that they have verified coverage and they would be happy to set them up with an appointment… this causes the company and many others to loose tons of jobs… I work for a nationwide company and we do great business.. I always tell my customers to pay attention to what people are saying… Just so you know they reason Safe Lite quoted you so much more is because you were going through farmers… Farmers has CONTRACT pricing with all in network glass companies and that pricing is PRIVATE… We are not allowed to disclose any insurance pricing to customers for any reason per contract… But knowing that people don’t have all the money in the world and most of us live pay check to pay check… I always give my customers a break… I wish I knew what kind of vehicle you drive so I could tell you what your windshield should have cost… chances are if the other company knew you were billing your insurance agent for the work they also quoted you high… If you ever need glass again… call around say NOTHING about insurance… if you are asked tell the customer service person that you just need a price and nothing more… then call 5 companies… ones with big ads in the phone book and if someone quotes you WAY less than everyone else… DONT Go with them… same thing goes for anyone quoting way more… and make sure you get a NATIONWIDE LIFETIME WARRANTY ON THE LABOR. If you don’t then you know you are dealing with a company that won’t stand behind their work 100%… we are all human and we make mistakes… Kind people fix their mistakes… Good luck in your auto glass endeavors and GOD BLESS!!! -L
It’s about time. We’ve known about this kind of illegal stuff for many years. Now what are you going to do about it? How are you going to manage this kind of operation? The Glass shops that are prefered by the Insurance Co. are the worst offenders of this practice. You pay next to nothing for the replacement of the glass and the shops have to find the cheapest solution to make a buck, no wonder the mobile units that float around make so much money. Do they pay the local tax’s and fee for being in your town and taking your money and leaving with the money? They take money away from your community and dont spend it there. The insurance industry needs to take a closer look at the auto glass industry and then look at themselves in the mirror. They might be surprised at what they find.
Although the article is very accurate and something that we face every day, the article should reflect what the consumer should look for when getting a windshield replaced.
You should mention that there are good, reputable companies practicing good business every day. You should point the consumers to call their agents first and get a referral to a quality company in their area as a good start. You may aslo want to point your customers to the BBB or other reporting agencies that can show any reports of fraud. Simply stating that there is a problem is not enough, you need to tell your insureds what to look for. As a farmers insured, it would be appreciated!
As an employee of a very reputable glass company. I can tell you, we are not making “all this money”. The insurance companies tell us what they will pay us. Insurance companies continue to raise their rates to the insured. But pay us less and less every quarter. Their profit margin has increased, while ours has decrease. Insurance companies do a survey to determine what the “fair and usual cost” should be. These surveys are done by using all glass shops in an area. These include shops that do not have certified installers, that work out of the homes, have no employees or insurance to cover any damage that they may do to your vehicle, use poor quality glass and some even use outdated urethane (because it is cheaper). Shops that do their work properly and will make no sacrifes to increase their profit margin are the ones to suffer. Consumers should to a certain extent use common sense. Windshield replacements are not done on a “drive thru” basis and they are not done in the rain or below freezing temperatures.
Also alot of insurance companies require to speak to the insured before any glass company can bill for repairs. To address the tax comment, we do pay taxes to the city in which the work is done. And we have brought to the tax departments of the surrounding cities a list of those who we believe do not.
Use some logic— what car owner would replace a perfectly good windshield, risking leakage or other damage? What reporter would report this without checking the facts? This a clear attempt to insure they can steer claims.
Oh, I see now… this is an insurance publication, not a journalist one…
call your insurance agent first!
It’s funny how the Insurance Industry will attack Glass Shops, using articles like this to conjure up this “consumer beware” type stuff.
Maybe their insureds should be educated about the fact that they are being misled everyday by their Ins. Companies when they tell them to call a certain 800 number to have a glass claim handled, and letting them think that they are speaking with their respective Ins. company.
Is it not mispresentation when an insured thinks they are talking to a rep. from an Ins. Co. and they are really talking to a third party administrator, who just happens to be in the repair/replace business also.
This article is just another example where the strength of the Insurance Industry is taking another opportunity to discredit the Auto Glass Industry.
They fail to mention that in the last two years, that 90% of all Insurance companies have posted RECORD PROFITS, yet have they decreased those “poor taken advantage of insureds” premiums??
Who is taking advantage of the insureds???
What a crock!!
I would like to comment on this article. I have shops in states where these car wash’s scare peope into replacements. I personally have experienced going to replace a windshield for a customer and having the network, tell me that it was just repaired 1 month ago, when in fact, the customer went to a car wash turned there car over to the car wash attendent. That attendent gained there insurance information from the glove box and billed for 3 chip repairs. A glass guy standing at a car wash, or at a gas station is just like someone beating down your door selling anything. If your not sure about it dont buy from them. Any reputable glass shop has stores, phone #’s and a van with there name on it. I would suggest asking questions before doing anything. And as for the free cash and steaks, there overbilling your insurance company and chances are you will get billed the difference if over charging occurs.
I am a retired Independent Insurance who was in the business for 37 years in Southeast Arizona. When needed we recommended several of our local well known & honest glaziers. Some 20 years ago a local Farmers Agent and an auto shop owner made false glass claims that the auto owner never knew about and over charged auto body claim invoices. They were both found guilty. The agent was terminated and the repair shop was sold. I believe that Superior Court ordered them to make restitution.
I currently have two windshield cracks damaged by rocks from roads. Neither crack impairs visibility and do not cause hasidarius glare. Iwill leave the cracks as they are until either may cause vision problems. I do not wish to make a claim until necessary. Appearence is not that important.
My Chevrolet PU is 6 1/2 years with 220,000 miles with a reasonable amount of dirt road travel with only one whndshield necessary to be replaced.
I am a TPA who specializes in Commercial Auto and Truckers first party claims. Upon receiving a bill of $4,291.35 for a windshield replaced in a bus, I deceided to research Florida law and the policy issued pertaining to that claim.
Florida law states: “627.7288 Comprehensive coverage; deductible not to apply to motor vehicle glass.–The deductible provisions of any policy of motor vehicle insurance, delivered or issued in this state by an authorized insurer, providing comprehensive coverage or combined additional coverage shall not be applicable to damage to the windshield of any motor vehicle covered under such policy.”
ISO changed this wording on the commercial auto policy under Florida Changes which states:
“A. PHYSICAL DAMAGE COVERAGE is changed as follows:
1.No deductible applies to “loss” to glass used in the windshield”
Since most commercial Auto policies provide Collision and Specified Causes of Loss Coverage (no comprehensive coverage), ISO has broadened the coverage to cover windshields in commercial autos when possibily the underwriters had intended otherwise.
This is costing commercial auto insurers Millions in Florida and possibily other states.
HELLO I OWN AND OPERATE A HONEST, FULL SERVICE GLASS SHOP.. I STRONGLY URGE CUSTOMERS TO REPAIR INSTEAD OF REPLACE,WHEN POSSIBLE.. IT IS BETTER FOR THE CAR, ENVIRONMENT ETC.. IT IS BETTER TO FIX IT WETHER YOU PAY CASH OR GO THROUGH INSURANCE.. IT MAY NOT BE IN YOUR LINE OF SIGHT OR CAUSE A GLARE BIT IT WILL EVENTUALLY…. BETTER TO SPEND A LITTLE TO SAVE A FEW HUNDRED.. ALSO A UNREPAIRED WINDSHIELS IS WEAK IN STRUCTURAL STRENGTH.. WINDSHIELDS ARE DESIGNED TO GIVE STRENGTH AND HELP THE CAR FROM CRUSHING IN THE EVENT OF AN ACCIDENT OR ROLLOVER.. SO IF A WINDSHIELD NEEDS REPLACING I HIGHLY RECOMEND IT, IF IT NEEDS REPAIR AND IT CAN BE DONE FOLLOWING THR NGA-NATIONAL GLASS ASSOCIATION GUDLINES I REPAIR IT.. FOR SAFETY !!!!!
The following comments are the opinion of ‘Dan Fisher’ and do not necessarily reflect the views and/or opinions of this website or any of its affiliates or subscribers, the insurance industry or any other glass shop owner or employee.
I don’t particularly feel sorry for the insurance industry in relation to auto glass insurance fraud. I feel that the insurance industry fat cats, who are not in touch with what really constitutes being someone’s ‘agent’, are responsible for the tremendous rise in auto body and auto glass claims fraud. When I started in this business in 1976 there was no such thing as ‘networks’ or ‘TPA’s. Our company had a one on one relationship with nearly every insurance agent in 26 counties in southeastern North Carolina. These agents were allowed to care for their insured’s needs from within their own office without the restrictive handcuffing that today’s so called agents are forced to deal with. If an insured had a broken windshield, that person did what was expected. He called his insurance agent, and was able to trust his agent to send a qualified and reputable company to replace that windshield. The glass shop would send an invoice to the agent’s office, and the agent would remit payment to the glass shop. Now our world has evolved into the mess that it is today. The poor insured calls his agent, who in turn is forced to refer the agent to a TPA, who in turn sends whoever offers the cheapest price, regardless of that company’s installer’s experience. An insured is more often than not, likely to get an installer who has a year or less experience in replacing windshields. Certification certificates and merit badges do not a qualified installer make. Insurance agents of old were able to choose the services of a proven professional. A shop with whom he had a relationship and was able to trust. Not today. Agents, or should I say premium collectors, have little say in the care of these people who pay their premiums and believe that the agent can help them in time of need. Insurance fraud? Yes, but it is self inflicted. The insurance industry burries its head in the sand when it comes right down to it. They punish all the honest shops by browbeating us into profitless discounts, while ignoring the real problem, which is that insted of fighting the fraud where it exists, they want to fix it by insisting that we are all crooks and that they should be in charge of the pricing. Can you say “fox in the hen house”?
I am in full agreement, anyone replacing a windshield that is not damaged should be prosecuted to the fullest extent of the law. It’s unethical and dishonest!
Farmers’ action of strongly suggesting, almost to the point of requiring, an agent recommend to their customer they use Safellite Auto Glass to provide this service, because Safellite provides Farmers a lower price is equally unethical and dishonest.
Steering a Farmers customer from an independent shop when they call the glass network (Safellite) to Safellite for service because of price, is again unethical and dishonest.
Penalizing agents with financial penalties because claims exceed an established cap, is unethical.
Get off your high horse Farmers – you’re as unethical as the “Glass Harvester” committing insurance fraud.
yes, by all means call the agent, so you can be given the Safelite “Network” number to process your claim. They will steer you to their replacement shops or will let you believe that the shop you requested will be sent your information and instead they show up to do the job. Again, I work at a glass shop and this does happen. We have shown up to do a job and Safelite is already there and the insured is unaware. We’ve had insureds call us and say what time will you be here on such and such day. When we have not received any dispatch. Or they are told that we are not a preferred shop and they may have to pay for any cost above what they feel is fair and reasonable.
As a shop, we don’t even install Safelite glass. One because they are a competitor all the way around. But mainly because their product is not good. It doesn’t always fit correctly. And our installers just cringe when they get to a job and it has been replaced by Safelite, because 99.9% of the time, it was installed improperly. Cash customers should also be aware. Cheaper is not always better!!
Once again, everyone, I would like to remind you that insurance is a for profit business. Insurance isn’t a charity like everyone wants to think it is. Just because we’re making a profit doesn’t mean we owe anyone anything. If you want, go to a non-profit insurance company, but don’t expect the same service.
We all need to make a profit, that’s the only way to stay in business. But that doesn’t give anyone the right to bill for services not rendered. If you do a windshield repair, bill for a repair not a replacement. If you replace a windshield on a mercedes with a ppg or lof part, don’t bill for a dealer part. That’s the point of the caution.
The National Glass Association (NGA) is extremely disappointed with the misleading picture this article paints of thousands of responsible, ethical auto glass service providers in this country.
The NGA condemns any and all forms of fraud – insurance or otherwise. We feel confident our judicial system can and will render justice. However, justice is clearly lacking in Mr. Ashbridge’s article. By definition, auto glass service companies exist to perform auto glass service. They are not “subcontractors”. If there are problems with subcontractors or other third party claims administrators, call them what they are. They are not glass companies.
It is equally distressing to think consumers may be misled or confused into believing they could be implicated in a fraudulent ‘scam’ by consulting with reputable “glass companies” that really are “glass companies”. If, as he maintains, Mr. Ashbridge is most concerned “that driving with a cracked or broken windshield puts both driver and passengers at risk” than he needs to reassess his priorities. Even if “glass fraud…is probably present in as many as 10 percent of claims filed,” that definitely leaves over 90% of his readers wondering if their damaged windshield claim is legitimate.
The recommendation that policyholders consult with their agent before pursuing a claim for damaged auto glass is questionable at best. Twenty years ago local agents knew and referred their customers to several reputable, high quality and competitively priced auto glass service providers. Today, local agents are expected – even required – to send policyholders to a distant third party (subcontractor) for service. Ironic, isn’t it? There seems to be a double standard involving subcontractors.
That irony has not been wasted on state legislatures. Virtually every state has enacted laws to protect the consumer’s right to free choice when selecting their own auto service provider. The catalyst for these consumer protection measures is the pressure some insurance companies exert on policyholders to choose the least costly service provider. Cheap is not consistent with the quality of materials and craftsmanship required when installing automotive safety-related parts. Cheap is also not a justification to circumvent Federal law that prohibits ‘steering’ of customers to a particular service provider.
The last thing the NGA wishes to do is to trivialize Mr. Ashbridge’s concern for fraud. That is precisely why the NGA, its members and allied organizations have invested 20 years in developing training, certification, business accreditation, installation standards and practitioner licensure programs to help consumers identify the true professionals in the auto glass service industry.
The NGA calls upon its insurance customers to join with the NGA to educate all consumers on auto glass safety and to explain how responsible, ethical auto glass service providers can be identified.
Mr. Cyr references ‘steering’ in his post. I would like to hear the NGA’s opinion on anti-steering legislation in states where law also allows insurance companies to require their insureds to call my direct competitor for the purpose of filing their claims. I defy anyone to justify this practice as not steering.
The National Glass Association abides by and respects the laws of the land. If a practice is illegal, it is illegal until and unless that law is changed. There is really nothing more that can be said.
I am, however, confused by the way Dan phrased his question. Using “to require” and “to allow” in the same sentence seems contradictory. Maybe I have misunderstood. If so, I’m sorry.
How can calling a third party administrator, one that owns glass shops, not be steering? As soon as the call is made, one of the first things the customer hears is, “Thank you for calling ________ Insurance, administered by Safelite Auto Glass”. The customer is hit right away with their name. It’s darn near subliminal. As far as scams, if a customer feels they are saving money, they don’t care. If the job looks good and doesn’t leak, they’re happy. We have two companies in the Raleigh area that are waving deds., and rest assured, neither would touch my vehicle. I’ve gone behind enough of their work to know better. Just like a bad intersection, nothing will probably be done until someone is either hurt or killed because of poor workmanship, cheap parts, and/or cheap adhesives.
The Farmers article is misleading and inflamatory. The majority of consumers will not fall prey to replacing a windshield that is not broken. If they do the penalty is severe. In my opinion the “fraud” occurs when the consumer is bilked into replacing the windshield and then authorizes a direct bill to their insurance company without ever asking about the cost. The offers of free dinners and deductible waiver are tempting fruit to the unwary so why worry, right? I don’t have to pay anything and we get free food, how nice. If the consumer paid for the glass replacement out of pocket it would be a competitive price and a different scenario with no free dinners. The unreputable glass companies will typically bill the insurance company three times the “reasonable rate” knowing their profit will come from the inflated insurance payment. It’s no wonder the insurance companies are fed up with these types of scams. If we see a glass bill that is out of line we will pay only the fair and reasonable rate for the area. When the glass company receives a lesser payment the customer is the one that pays the balance of the bill. The insurance company is not ” the customer” so the insured ends up going to court and paying the inflated balance. The policy of insurance is a contract which requires insureds to notify the insurer as soon as possible after a loss. If the insured falls for the free dinner caper and never questions the bill then the insured may as well get ready for small claims court. And we wonder why our insurance rates continue to rise.
I have studied my statement (“I would like to hear the NGA’s opinion on anti-steering legislation in states where law also allows insurance companies to require their insureds to call my direct competitor for the purpose of filing their claims.”) and will stand by it. To me it is clear. Allow, referring to what the law allows. Require, referring specifically to NW insurance and others who require their insureds to call Safelite Auto Glass in order to file an auto glass claim.
Is it just me, or did the NGA adopt a defensive posture in response to my inquiry to their opinion on steering?
In response to Dan…I am not ignoring your question. I did not see it until this morning. I have several previously scheduled conference calls today that require my immediate attention. I will respond to you before the end of the day. I hope that is satisfactory…Leo
Bill, I have read your post, and due to your words “If we see a glass bill that is out of line we will pay only the fair and reasonable rate for the area”, I must assume you work for an insurer.
I therefore have a few questions:
1. If you only pay a ‘fair and reasonable price’ when you see a glass bill that is out of line, WHY does that cause insurance rates to rise, if you didn’t actually PAY the higher bill???
2. If you see an insured being taken advantage of, and taken to small claims court for payment of a bill, do you have a duty to defend them under the policy, because you didn’t fully pay the bill?
3. What measure of quality do you take into account when you determine your ‘fair and reasonable’ payment rates, such as quality of glass, quality of materials, quality of installers, and level of services being offered for the insurers definition of ‘fair and reasonable’? If you are settling claims in public, for the public, with public market data or analysis, do you provide that formula to your insureds when you ‘settle’ their claim to your determination of ‘fair and reasonable’ rates?
4. If you as insurers know that these unscrupulous practices are going on by these glass companies, and, as you say, it is causing insurance rates to rise, why haven’t you gone after them? As a consumer, I would love to see insurers prosecute those submitting inflated bills, waiving deductibles, offering kickbacks to agents, and more.
5. Is it possible you should be careful when accusing these shops that offer dinners, steaks, and other items, to see if it is indeed the glass shop paying for these items, rather than, as found in Denver, where it was the restaurant actually paying for the year’s free meals in the hope of building thier clientel? How do you know the insurer is paying extra through the glass bill at all? Is it possible that glass installers do this to stop insurer steering?
6. Are you painting the glass industry with an incredibly broad brush, using accusations of fraud loosely? What did Farmers have to pay back to the policy holders in Texas recently for overcharging on homeowners premiums? And how much is Allstate going to pay back to Texas policyholders as of a couple of days ago…about $6 mil plus, wasn’t it?
You see, that broad brush paints both sides of the fence.
Dan…Here is the response I promised earler today.
I am not an attorney so I will not try to respond as if I am. Having left the NGA in 1990 and only returning last September, I needed to do some homework on the question you raised.
The NGA’s Office of General Counsel conducted a thorough search of federal law and found nothing that specifically refers to “steering” as illegal. Several lawsuits, notably in Texas and New York, have alleged that “steering” violated federal racketeering statutes. Both suits failed. At least one other lawsuit is still pending.
I also asked our legislative researcher to review state law so we might respond to your question. You asked…”where law also allows insurance companies to require their insureds to call my direct competitor for the purpose of filing their claims.”
We found no evidence that any state has ever “allowed an insurance company to require their insureds to call” a specific or particular auto glass service provider. To the contrary, Arizona and Michigan passed new laws this year specifically prohibiting insurance companies from telling their customers where they can get their vehicles repaired. The Arizona and Michigan laws specifically reference auto glass as do earlier laws passed in Colorado, Connecticut, Delaware, Illinois, Kansas, Kentucky. Louisiana, Maine, Minnesota, Mississippi, Montana, Nebraska, Vermont, West Virginia and Wisconsin.
Sixteen other states have enacted consumer protection laws to safeguard the consumer’s right to “free choice” in selecting their automotive service provider. In these states, we find no specific reference to auto glass but rather to automotive service in general.
That is a total of 33 states with laws on the books to protect consumer “freedom of choice” in automotive service. The NGA has consistently supported “free choice” to protect consumer rights and will continue to do so. That is the NGA’s position.
Where the entire industry, including the NGA, appears to have fallen short is in educating the consumer that they have a right to free choice and, more importantly, why they should insist on exercising that right. The NGA has formed the Coalition for Auto Glass Safety & Public Awareness (CASPA) to address that deficiency. In fact, CASPA’s first national press release addressing this subject was issued this week. Other releases will follow on a regular basis.
Promoting “free choice” will be a priority item for discussion at the NGA’s Auto Glass Conference & Expo next month in Tampa. Our NGA Auto Glass Division will solicit ideas from its members as well as propose initiatives that are in addition to the national press releases.
In summary, I don’t think the issue is NGA’s position. As I said above, I have gone back through the archives and found the NGA consistently supported “free choice”. The problem is that too few consumers are aware of their “rights” or why it is in their best interest to insist their “free choice” be respected. Because they are unaware or don’t care, they say nothing. That silence leads state government to conclude there is no problem.
The NGA should bear its share of the blame. We all should. Using the wisdom of hindsight, we should have begun the auto glass education of the American consumer 25 years ago. Had we done so… the hue and cry to pressure government for reform and / or to enforce existing law would be deafening.
At the moment there is only silence. We will do everything we can to provide the consumer with the information they need to decide for themselves and we will do so as fast as possible.
In an earlier posting, I assumed “steering” was universally illegal. I suspect I am not the only person in our industry to have made this assumption. I apologize if I misled anyone and I thank you for suggesting I check the facts.
Mark, yes, I am the VP of Claims for a medium size insurer writing personal lines property and casualty business in ninteen states. I appreciate your candor and the candid questions raised in your posting.
Glass replacement pricing has always been a “hot topic” among our producers. A recent meeting in Wisconsin yielded some rather startling but old information. It boils down to this Mark. If the consumer replaces their windshield without filing an insurance claim, the cost is usually ” fair and reasonable” as the consumer is shopping for the best deal on a piece of OEM glass and will go with the most competitive cost because it is “out of pocket”. On the other hand, if the consumer files the insurance claim and the glass company sends the bill direct to the insurer it’s usually double or triple the cost. You may ask why does this happen. Because the glass company hopes the insurer will “fast track” the claim and simply pay it.
I personally tested this assumption and called a national glass network to replace a windshield in my 1994 Chevrolet pick-up. I was quoted a price of $394.00 for OEM glass to include the installation and urethane kit if I paid at the time of installation. Then I proceed to take my vehicle to the network shop and filed a comprehensive claim with my insurer. I was amazed as the glass company submitted a bill to my insurer for $ 904.32 based on the Mitchell NAGS price without a percentage discount. As expected, my insurer paid the company without questioning the bill. When a single insurer is replacing 33,000 windshields a year it’s not worth the expense dollar to examine each and every glass bill for accuracy. The bottom line is “consumer beware”. If you’re accepting free dinners and deductible waivers to save your dollars then expect your rates to rise accordingly. So who’s fault is it? The insurers for not taking a more agressive stance and questioning each bill or the glass company for charging an inflated price to begin with? Perhaps the insurer should call for the glass price and send a check with the insured so the installation is paid for up front at a preferred shop? Would that be steering? You bet! Is it illegal? No. It is my hope the industry reaches a level of standarization that accounts for fair pricing across the board. Then we all win! The customer has a choice and the cost is consistent.
We have no recourse against glass companies that charge inflated pricing as the offer of free dinners and deductible waivers are made equally to all. The customer is the one that suffers when we short pay the bill. And if it goes to small claims we have no duty to defend. The customer pays the difference as the “insurer” is not the customer. So when the consumer is enjoying the free dinners, keep in mind, nothing is free. We all pay for that dinner!
The job that daily and catastrophe adjusters have to do is a uniquely complex one. The ability for the high quality adjuster to maintain their focus, which is to help insured ones while following (sound) carrier instructions, and make a living, is a commendable and challenging calling to follow, and I hope that all of the good people that are in the adjusting field remain commited to that calling and all that it entails. I do not share the same sentiments for others that follow carrier instructions so as to be able maintain their own standard of living, to the detriment of their neighbors reputations and welfare.
I suggest that CEO’s are quite aware of what it takes, from the trenches on up, to cover their company’s operating costs and satisfy stockholders who have gotten use to certain returns on their investments. Hard markets call for hard CEO type decisions, and the glossing over of those decisions.
http://www.allstate.com/investor/annual_report/2002/chair_letter.asp
If you will, carefully follow the nine page Allstate letter to completion, especially keeping in mind the blue lead information at the top of pages 1-8 (and especially page 5)…then reflect on the following neighborly and commendable admonition from khromas to Todd Brooks on CADO 12/18/2003;
(The khromas reply was addressing Brooks receiving his new adjusting license, and Brooks considering employment with Allstate).
Brooks,
“I would not advise calling Allstate if you wish to keep your integrity intact.
After almost 7 years with them and having held a variety of positions, including the sole Quality Evaluator for the entire southern half of Texas, I finally became fed up with their approach to requiring every adjuster to knowingly underpay every claim and left them this past July.
The head of Allstate in Texas – Gary Briggs – had the nerve to stand up in front of an agent’s meeting last spring and say (QUOTE) “I love the new HOA+ policy! It doesn’t cover anything and WE STILL GET TO KEEP THEIR MONEY”!
I used to tell people whose claim I was handling that “the good hands of Allstate were right here” as I held out my hands for them. I could no longer do that in good faith and look myself in the mirror so I left.
One of these days the Texas DOI is going to catch up with their property handling practices and then it will all hit the fan! Good luck with anyone else!”
Kevin Hromas
Gale, the reasons behind Gary Briggs exclamation and part of Allstates profitability margins may very well be connected and may support “why” (so-to-speak) Mr. Poe submitted 5 Allstate claims in 2003 to the TDI and why they are now in the TDI’s legal department. It will also be interesting to see how Allstate (and other carriers) conducted themselves while settling Hurricane Isabel and California fire claims.
At least Kevin, unlike some other Allstate adjusters-associates, had the level of personal integrity needed to not want to harm consumers-people for profit…and so made his livelyhood elsewhere.
< Message edited by Leam Kincaid -- 6/22/2004 9:06:42 AM >
It is our beleif that the real issue in regarding the glass industry and any other repair industry has nothing to do with saving the consumer money. The real issue for consumers is who will get the lions share of their money.
When we look at what is “fair and reasonable” it does not translate. The insurance industry has reported large profits during an economic slow down. CEO’s and Corporate board members have earn large sums of money. These wages a justified by corporate talking heads as “fair and reasonable” because these indiviuals are credited with saving money for their companies and turning profit for the investors.
Every independent glass shop is working hard everyday to provide their customers with the best quality of service, materials, and workmanship in the hopes that they too will be able to turn a profit, build a customer base of repeat customers and earn a living.
This becomes such a huge task because now they must compete not only with other glass shops but, also with TPA’s who are representing corporate glass gaints who are misleading, scaring, steering and in some cases even delaying payment of claims the insured. This constitute a huge disadvantage for small and midsize glass shops. This too is dishonest and immorale. So, if we are all honest about what is happening. Let’s give the public the whole truth and not just parts of the truth.
P.S. Remeber, there are more of us honest and hard working shops then it is of them!
Bill, you said, “I personally tested this assumption and called a national glass network to replace a windshield in my 1994 Chevrolet pick-up. I was quoted a price of $394.00 for OEM glass to include the installation and urethane kit if I paid at the time of installation. Then I proceed to take my vehicle to the network shop and filed a comprehensive claim with my insurer. I was amazed as the glass company submitted a bill to my insurer for $ 904.32 based on the Mitchell NAGS price without a percentage discount. As expected, my insurer paid the company without questioning the bill. When a single insurer is replacing 33,000 windshields a year it’s not worth the expense dollar to examine each and every glass bill for accuracy. The bottom line is “consumer beware”.”
You are the VP of claims of a medium sized insurer? By your own words, 33,000 claims per year. Worst case senario is that number of claims multiplied by your difference in price of $510.32. I checked twice to make sure my calculator wasn’t fooling me. That would be a total of $16,840,560.00 per year. 16.8 million. Geez man, I’ll audit every claim your company encounters for just 10% of what I save you each year. Hell, I don’t even need vacation or benefits. How about it Bill, do I get the job?
You are right about one thing. It is definitely consumer beware. Consumer beware of insurance companies who are crying how much money they are losing to fraud, are too lazy to keep the fraud in check and still report record profits each year with exec’s and ceo’s taking home obscene amounts of salary and bonuses. So where does all that profit come from to pay salaries, bonuses and the fraud losses? My thinking is that the consumer is paying too much for their coverages, and then the honest glass and auto body folks are being cheated out of what should be honest profits for their parts and services.
Why is it that everyone puts down the free offer as something you pay for,illegal,unfair, etc. This is completely innaccurate. A marketing co-op is an advantages agreemant for two parties to share advertising dollars. Free dinners,carwashes, or widgets are offered by the company in the ad to the glass consumer as an incentive with no added cost. The Glass shop, Transmission outfit, or Oil change business that is going to spend advertising dollars anyway finds a way to offset cost or value-add to thier consumer. This is much the same as Geico saving 15% by sitting a gecko in the seat an agent used to occupy. Or the toy in the cereal. There is nothing unfair about it except it makes those without the resources to fight it upset. What better way to get around network steering than a direct to consumer advertising blitz that states come to me and I will offer safety AGRRS cert NGA cert and yes I will charge more than cash to offset my costs.
This brings me to a new focus. Cash. The cash segment is a much smaller segment of business. When I give a deeper discount to a smaller segment of my business (cash) because I do not have to sit on hold and wait for dispatches and reference numbers listening to a safelite rep try to steal my business it is my business not the insurance company’s. If you do not have time to check every invoice then hire more people do not expect me to pay for it. An insurance company gets charged more than cash because they make us spend more time dealing on the phone and less time installing glass.
I guess that would explain why I have gotten absolutely NO quotes from the numerous glass repair/replacement facilities I have contacted…. I didn’t give them my INSURANCE information. Now it all makes sense….
Well, Mr. Foolery, how do you explain why one glass industry publication has had a page specifically quoting the results they obtained while calling for cash quotes around the country?
You say you recieved no quotes because you didn’t give your insurance information?
Politely, I say “HORSEFEATHERS”.
And to Bill, I couldn’t have done a better job of replying to your post than Dan did. Excellent insight Dan.
Bill, steering is illegal in 37 states, and if you short pay a claim, especially without notification to the insured, of how, and why you did so, you have committed bad faith by definition in statute and regulations in my state. And you sure do have a duty to defend, they wouldn’t be in litigation if the insurer had indemnified them. Please understand, I fully acknowledge the insurers right and duty to defend against fraud. I’d like to see it someday.
Somehow, I’m betting you already know that the people who enforce those statutes and regulations, don’t, however.
Finally, Bill, I’d like to see you answer the rest of my questions, sometime.
Have a nice weekend, all.
I absolutely see nothing wrong with this type of marketing. In my opinon, it’s the insurance industry that created this problem and now they are crying about it. What do they expect the small independent operator to do?? You have to capture the FNOL or they will. And you all know what that MEANS!!
You know, it really burns me up that there are shops that beleive that the insurance company and their TPA’s have the authority to set your cost for doing business.
A number of the TPA’s compete with you and have volume on their side and have artificially created a false economic environment for the cost of windshield repair and replacements.
The insurance companies have sold this to the public and elected officials as a means of justifying the claims that this their way of saving the consumers money. Then, they add this issue of fraud on top of it for good, bad, and/or for good measure.
The fact is, we have communicated to the various insurance companies that we do business with that we will not accept their discounts and there are those who fight and then there are those who respect our independent right to charge what we will feel is the appropriate cost for our services.
Those who do not pay are charged a 2% “Late Fee” which will collect once we are forced to resolve the matter in court. If you are late on paying your car insurance. Do you or do you not get hit with a fee? Who do these people think they are dealing with? I know, but do you who work hard everyday like myself really understandd the message these folks are indirectly telling you?
They must first try to get a better price for our services. In my world 50/50 is very fair. However, we go one step better and it is 57%. The save money, we can make a living and pay our bills. Wake UP!.
There is so much I can say… By the way, I agree, any good shop would give a potential customer a quote on a glass job.
Mr. Foolery, I don’t know who you called, but I know that the shop I work for will be happy to give you a quote for a cash job. Some days, that’s most of my work. Now, I just one of the techs so I don’t pretend to understand all of this thread, but I do know what I have to do everyday. I’ve given quotes, dealt with the insurance companies, and done several thousand installations. The one thing I’m sure of is that my shop bills insurance companies according to that little piece of paper that gets faxed to us stating what I call the 3 basics: % off NAGS list, flat fee for labor (way too low), and a flat amount for urethane. I have a friend that used to work for a company that waives deductiables and he told me how they do it. They bill at full list price, install a brand of glass that is strickly aftermarket only, use the cheapest adhesives available, illegally reuse state inspection stickers, and so on. There are plenty of shops that are using glass from quality manufactures, top grade adhesives, proper installation techniques, and abiding by that silly little piece of paper on the fax. Maybe the insurance companies need to work with the glass industry, take the time to see what we really go through. Learn the basic steps of installing a windshield, and what the consiquences are of doing the type of installation that my friends former shop is doing. Vehicles are becoming more and more complex, and as a tech, I have to deal with this. I have different types of urathane depending on the vehicle, heating systems, anntenns for everything, heads up displays, rain senors, and air bags all over the place. Boy, did I get off the subject, sorry. Well, gotta git, brains starting to smolder.
http://sacramento.bizjournals.com/sacramento/stories/2005/01/24/daily20.html?jst=b_ln_hl
11:19 AM PST Wednesday
Former employees sentenced for defrauding insurer
Two former Farmers Insurance Group employees were sentenced to prison Tuesday for their role in a fraud scheme in which the insurer paid out nearly $188,000 in bogus claims.
Aaron Ward, 26, of Folsom, was sentenced to five months in prison and five months of home detention. Lisa Reynolds, 29, of Sacramento, was sentenced to two months imprisonment and six months of home detention. The two defendants also were ordered to pay restitution of $117,092.
According to federal prosecutors, the fraud scheme involved submitting previously processed insurance claims to Farmers and reprocessing these claims using different payee names and addresses. Checks were mailed to various post office boxes in the Sacramento area controlled by the defendants.
Through these bogus claims, the defendants caused Farmers to issue more than 40 checks with an aggregate value of $187,928.
A third partner in the scheme, Ian Reynolds, 27 – the former husband of Lisa Reynolds – is scheduled to be sentenced next month.
© 2005 American City Business Journals Inc.
http://sacramento.bizjournals.com/sacramento/stories/2005/01/24/daily20.html?jst=b_ln_hl
11:19 AM PST Wednesday
Former employees sentenced for defrauding insurer
Two former Farmers Insurance Group employees were sentenced to prison Tuesday for their role in a fraud scheme in which the insurer paid out nearly $188,000 in bogus claims.
Aaron Ward, 26, of Folsom, was sentenced to five months in prison and five months of home detention. Lisa Reynolds, 29, of Sacramento, was sentenced to two months imprisonment and six months of home detention. The two defendants also were ordered to pay restitution of $117,092.
According to federal prosecutors, the fraud scheme involved submitting previously processed insurance claims to Farmers and reprocessing these claims using different payee names and addresses. Checks were mailed to various post office boxes in the Sacramento area controlled by the defendants.
Through these bogus claims, the defendants caused Farmers to issue more than 40 checks with an aggregate value of $187,928.
A third partner in the scheme, Ian Reynolds, 27 – the former husband of Lisa Reynolds – is scheduled to be sentenced next month.
© 2005 American City Business Journals Inc.
There is no profit in windshields anymore. The nags list has gone from $1,200 on a shield (5 years ago) to $150 WTF is that, and to say glass companies harvest is bull ****. Most customers don’t even know they have glass coverage. Farmers are the worst at stirring customers to there so called shops that use cheap materials. So they can get there yearly bonus.
I guess that once spammers got a look at Rob’s spelling and grammar, all bets are off and they assume we will buy lingere and dope off the internet. Meanwhile, back on the subject, we have managed the transition to NAGS (what a joke) revaluation. Our bottom line has not been affected enough to consider a problem. In more cases than not, the invoice amount is as much if not more than before.
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Peter sorry to hear about your troubles.
But and this is a big BUT. I don’t know you from a can of paint but, I do know a lot of glass shops that operate honestly like you.
However, many of them perhaps, like you refuse to fight in court for what is rightfully their’s and that’s that.
We are in a battle right now with over 19 insurance companies in the State of Massachusetts. They use that claim of fraud to tie us up in court thinking that will scare us away. They use the right to see our “proof of purchase” to demand to see and perhaps, share with our competitor information is private. I can’t ask to see their information. Where’s this survey they have been claiming to have used to determine our prices? Where is it?
Peter please don’t be bitter towards your former glass colleagues. I beleive and the pervious years have proved that there is more corporate fruad going on in corporate offices then in the “Mom and Pop” operations around this country. I never heard about a family lossing their life saving for what some jerk has done to make a buck. (This is not to condon it either, just a point).
My family and I wish you luck in your future endavors and we hope you will stay in the battle to get a fair share of the American dream for all of hard working and honest glass shop owners and operators.
Honorable Kevin A. Tarpley I, proud IGA member.
First of all its called steering, I offer a customized offer to farmers insurance and other insurance groups perhaps this is why your here complaining and not out doing work. If you want to charge $500 a glass I do not blame farmers, or any insurance company for as you call it “stirring” If your a glass shop do you do not want to over pay, you buy from the lowest cost vendor if the end result is cases the same product? I do not know about you but if I was any insurance company spending multi millions a year I would look for any way I could to save anything I could. Your the kind who wants to bill every job at $500 a wack , but yet next week you will be upset because your insurance went up. We are all running a business, and all out to make a profit. Stop ripping people off and go do some work.
Larry
I have worked in the Auto glass replacement business for years, I have found there are many companies out there willing to committ fraud. Typically, the way they work…… Some glass shops, bill the insurance companies for “New” replacements after buying glass from a “junk yard” and charging full NAGS pricing. Another way is, they claim to have installed a new Moulding for the windshield and never replace them, that too can be very costly especially for some more expensive mouldings. There are other “neat tricks”….. Hey Mr/Ms Car owner, let me tint all of your glass in your car at no cost, just simply sign this form and I will bill your insurance Co for windshield replacements. Well to Mr/Ms Car owner that presents quite a deal, free tinting and no charge.
I had recently closed my auto glass replacement business for a lack of work, and I was just being honest, but beacause I couldn’t offer people enough ways to “Screw” the system! I write this letter to open the eyes of consumers and insurance companies, THIS is what going on out there, and I could expose many of them.
Dear Sir,
Thank you for taking the time to look at my remarks. I do agree with your statements, their is a ton of Fraud throughtout the business, perhaps corporate. I have many battles with insurance companies to recieve my honest work……It including a call to one who claims the work that I was about to do, would be covered… and of course I was very upset to find out they denied the claim, stating the insured insurance had run out before the claim was processed, that alone cost me 2300 in glass that I purchased through a local distributor. I wish I had the recources to fight the battle, but I didn’t….. And I understand the claims by insurance Co who do whatever they can to “NOT” pay the claim to legit shops as I had. As a dream of owning my own Business fell short I asked myself……..Why am I stuck between insurance companies that won’t pay, and the shops ” stroking” the insurance companies and the consumers in the end. Insurance is high enough!!
Peter, we have had some of the same experiences and I must ask, “Did you get a authorization number?” “Was the work done before the insurance ran out?”
There are ways to get them to pay. If the insurance is an up and up company, they will pay.
Stay strong and in the fight.
Honorable Kevin A. Tarpley. I
Dear sir,
No I did not get a claim number. Lessons learned…Do my homework, and avoid all Massachusetts based insurance companies. Honesty is “still” the best policy, I just wish they would be honest with me!
Through the Looking Glass – Head First?
——————————————————————————–
Considering the complex nature of collision repairs compared to those of glass, it’s debatable whether networking collision shops will be doable. It’s also debatable whether networks are in the best long-term interest of the collision industry, consumers or even insurers.
by Dick Strom
Some 15 years ago while glass shops were occupied making reasonable profits, they failed to pay attention to the development of glass networks. The stage for networks was set when State Farm wanted electronic billing, a move that many glass shops agreed would streamline paperwork.
It all seemed innocent enough.
Receiving little flack from shops for this move, State Farm soon upped the ante, pushing an ever-tightening multi-tiered “offer and acceptance” (O&A) agreement between independent shops and the insurer. Other insurers followed suit.
Under the terms of State Farm’s original O&A, small-town shops were limited to something in the range of list-plus-10-percent, and big city shops about 25 percent off list. This O&A pricing was based on glass shops accepting a flat-rate price (currently around $40) for installation labor, rather than an hourly rate plus a flat-rate price on installation materials.
Though few glass shops were enamored with this arrangement, most were still able to make a parts profit. They managed to stay in business by streamlining the installation labor process to make up for what was – and still is – a totally unrealistic labor charge for glass installation.
For decades, glass shops have cost shifted the labor costs of installation to markup on the parts being installed – a ridiculous, yet commonplace practice that’s finally being recognized by the National Auto Glass Specifications (NAGS), which once again is restructuring its pricing for glass replacement in early 2005.
Shops had been making money on the glass itself, but nothing on installation materials and labor. Therefore, they cost shifted labor and materials costs to come out of the glass markup. Of course, with ever-increasing glass discounts, what was profitable in the past isn’t profitable today.
Bigger shops could make additional money on volume purchasing of the approximately 800 most-used pieces of glass. But when insurer bean-counters realized this, they wasted no time whittling parts profit to below list cost. An adjuster for a major insurer stated the pathetically obvious: “The glass industry is the only industry that would probably pay [insurers] for the privilege of installing glass.”
Says another adjuster: “We’ll continue to discount glass installation pricing until less than 50 percent of glass shops are still signed up.”
And so the race to the bottom of the barrel began in earnest.
Ever-increasing insurer-generated interference encouraged a blight of shops taking risky labor shortcuts and installing inferior sealers and glass, as they scrambled to maintain market share and a semblance of profitability.
Since glass is fragile and has to be shipped many miles to installers, shipping prices (typically in the $50 range) that previously had been often absorbed by shops – back when they had reasonable profit margins – now became an additional expense very seldom covered by insurers. A multitude of similar negatives resulted in many shops that refused to compromise on quality being forced out of business.
A further squeeze was put on all glass shops some years ago when NAGS restructured its pricing schedule, reportedly to more accurately reflect fair prices to glass shops, insurers and consumers. (It’s worth noting that although insurers and others frequently refer to the NAGS price as list price, NAGS considers their prices to be merely a benchmark.)
Why am I giving you all this background information, you ask? Because the same network forces at play in the glass industry are now implementing the same process in the collision repair industry. But considering the extremely complex nature of collision repairs compared to those of glass, it remains to be seen whether networking collision shops will be doable.
Doable or not, it’s the opinion of many in this industry that collision industry networks are not in the best long-term interest of the collision industry, consumers or even insurers – in part because by their very nature, networks virtually eliminate personal contact with the insurer to settle claims fully, fairly and efficiently. They also shed insurers of liability and accountability, instead placing these responsibilities totally on shops.
Why Insurers Like Glass Networks
Networks sell shops a “quality validated program” for insurers to back. You, as a shop owner, are expected to believe that you’re signing onto a program that will get you referrals from insurers for quality work.
But what many collision shops fail to comprehend is that quality cannot be sold by any network to insurers, any more than you can sell Mephisto shoes to someone who refuses to pay for anything more than functional equivalents from K-Mart. Insurers want low cost and the quality “monkey” removed from their back.
Though there are presently many glass networks, LYNX Services and Safelite Glass Network are the two major players. Second-string networks vying for prominence include Harmon Solutions (currently owned by Glass Doctor/Dwyer Group) and Alliance Claims solutions (owned by Iowa Glass, which also owns Auto Glass Centers and a couple other small glass chains). A number of third-string networks follow.
Networks are middlemen, a firewall of sorts between the insurer and the shop/consumer relationship. Generally speaking, networks make their money by taking all or most of the responsibility off the insurer.
Insurance companies originally hired the services of glass networks to provide wholesale claims administration services and to shift the costs of administration to the cost of the claim. This shifting is a huge bonus to insurers when we consider that state Department of Insurance (DOI) offices must approve of premium increases before an insurer can implement them.
And DOIs, while more hesitant to approve of rate increases based on increases in administrative costs, will virtually always approve them if based on an increase in claims costs.
The reason for this is that DOIs view “administrative” costs as something insurers should be able to control and “claims” costs as being largely beyond insurers’ control. So there are distinct monetary advantages for an insurer, through a network, to shift its administrative costs to that of claims.
Insurance companies are in the claims business and, as such, are required to investigate claims. Networks, however, administrate insurers work more economically by taking their own shortcuts, one of them being not investigating claims.
Networks also seldom consider the fact that additional cleanup may be required, as in many vandalism claims, or that glass may need to be replaced on a weekend in order to prevent further damage (both resulting in additional costs to shops). And while an adjuster’s investigation often includes speaking directly to the insured, or at least sending the correct paperwork in order for him to file a claim, when networks receive a “notice of loss,” they often ignore it if it doesn’t show a corresponding claim number.
A more common scenario would be that the network would contact the participating glass shop, telling them to contact the insured to have him call the 800-number. And it’s not uncommon for a network to ignore “good faith” statutes requiring adjusters to quote the portion of the policy dealing with the reason for claim-payment denial or short-payment, and the proper method of contesting the denial or partial denial of payment.
In essence, many networks have increased their profits by collecting an administrative fee from the insurer while shifting much of that work to the shop – a handling fee for work the shop didn’t want to send to the network in the first place. And yet networks typically take months to pay their claims that, when finally settled, are often short-payed.
From an insurer’s point of view, however, it’s much more profitable – and easier – to keep a lid on outlay expenses when dealing with a limited number of networks, rather than thousands of shops.
For a relatively minor fee, then, networks must compete among themselves for insurance work, based on how inexpensively the network can get shops to work. Promising that they can get glass shops to work for 5-10 percent less than that of competing networks (in addition to taking care of insurer paperwork) will definitely convince an insurer to switch networks.
And, thus, the downward spiral begins for shops – caught in the middle as networks scramble to attract insurers through ever-deepening cost-cutting pricing. Meanwhile, it’s common practice among networks to tell shops, both in their network or not, that it’s insurers that are dictating the allowable rates that networks can pay.
The Economies of Network Cost Cutting
Cost-cutting pressures brought to bear on shops arise when networks contend for the business of the choicest insurers. Networks that are owned by glass companies, Safelite and LYNX being major ones, wield a distinct advantage over networks not owned by glass companies by being able to “navigate” jobs to their own shops under the disguise of “First Notice Of Loss” (FNOL) – which equates to “first contact with the customer.”
A July 2004 article in the insurance industry magazine Claims, titled “The Earlier the Better,” stated in part that, “Insurers have come to understand that improved results can be achieved by performing select claim tasks earlier in the process. A good example is direct repair network use for auto claims. … As time elapses between the first report and the adjuster review, many claimants find repair shops on their own, which usually is more costly for the insurer. In fact, one mid-sized personal auto insurance carrier projects its annual loss/expense savings at $3 million as a result of recently moving its direct-repair referral process nearer to the first notice of loss.”
This is doable because very few customers realize they’re being marketed by the network. Rather, they believe that they’re being told limits and provisions of the insurance policy. But shops lose the game when they lose first contact with the customer.
In order to reduce the expensive costs of glass shipment, networks such as LYNX (which is owned by a glass company) can navigate insureds to glass shops that use primarily the glass that they themselves produce, an advantage of monumental proportions, as outlined by LYNX’s Paul MacFarland in early 2004.
Speaking in a Nebraska Legislative Committee Session, MacFarland stressed the impact of LYNX on the glass replacement industry, stating that LYNX alone processes more than 3 million claims each year and that last year, they paid more than 26,000 different glass service providers (shops).
Honing in on the awesome effectiveness of highly structured networks to navigate the mass of available work, the most recent U.S. Economic Census report stated in part that, “Though a multibillion-dollar business, the collision industry remains competitive and highly fragmented … with the top 50 [collision firms in 2002] accounting for only 7.7 percent [of collision repair sales]. By contrast, the 50 largest firms in the auto glass-replacement business accounted for 46 percent of the sales.”
These figures are staggering in their implications of the directing power that networks have exerted over glass shops and consumers – and of the power they’re beginning to exert over collision repairers. Will all glass and collision shops soon be subject to “fair and reasonable” pricing as established by networks via their members, being effected even against those shops that are not members of the network?
Once networks can say they have 50 percent of the marketplace, will their price become “fair and reasonable” for all and their way of doing business the “industry standard”?
To add insult to injury, Safelite recently sent out letters to all shops, including those that haven’t signed a contract with Safelite, announcing new fees that shops will be charged for claims processing. Basically, this is akin to a cable TV company demanding that you have to pay their line maintenance charges for the cables in your alley, even though you use a satellite dish.
Safelite’s paper invoice fee (not for electronic billing of invoices) is for a service for which insurers are already paying Safelite – and from a network that shops had no part in hiring. Has demanding such a fee become an “industry standard”?
As networks compete for insurer administration jobs, they compete using the price at which they can get shops to work. And this competition has become so intense that even many large shops can’t compete anymore.
It’s worth noting here that the sale of network Harmon Glass last year resulted in an immediate improvement in the finances of their previous owner, APOGEE. Likewise, the network Diamond Triumph’s first three-quarter financial statement showed $171 million in sales, down $7 million from the previous year. Further, Olympic glass and several other large U.S. chains closed last year, and Safelite and Alliance made many personnel cuts.
Networking Collision Repair Shops
Last year, Pittsburgh Business Wire reported in part that, “(PPG) LYNX Services announced today that it has become the exclusive national provider of automotive physical damage (APD) repair management services for Ohio Casualty Group. The LYNX-managed repair services include the LYNXSelect direct repair program (DRP), estimate auditing and rental car concierge. LYNX Services connects Ohio Casualty adjusters and customers with a national selection of qualified repair shops via a Web-based portal, allowing for easy dispatch and retrieval of repair estimates and images.”
Within weeks of this announcement that LYNX was expanding into the collision-claims arena, other networks also announced they were developing – or were ready to release their own – collision-claims processing systems. In fact, all the paint manufacturers announced within weeks of each other that they intended to enter into claims processing via a network of shops.
One major liability in all this for collision shops in any way tied to networks is that shops are likely candidates to be dragged into lawsuits brought against networks and/or their insurers. As in many collision DRP contracts, most glass-network contracts contain “hold harmless” agreements, wherein the glass or collision shop agrees to hold the network and insurer harmless in case of a liability claim. And since repairing the vehicle is the obligation of the shop (in court, insurers and their networks will insist their only responsibility lies in paying the claim; the shop is the repair expert), courts will most likely hold shops at least partially accountable for what is and is not repaired or replaced.
For this reason, before joining networks, shops should be aware that the hold-harmless agreements they make require contractual acceptance of liability and that accepting this additional liability frequently voids the shop’s own general liability policy coverage.
And when a collision shop subcontracts out glass or other work to another shop, the terms, practices and materials used by the other party should be carefully considered. Considering that many experienced, quality-minded glass installers have been forced out of business, are all those taking their places properly trained in safe installation? The cheapest rate available is seldom worth the liability risk.
There Is Some Good News …
Since so many collision industry problems so closely mirror those faced by glass installers, certain people from both industries have begun working together on several fronts. One avenue with great promise is in their cooperation in establishing a database of experts on various issues common to us both.
A forerunner in this, NEON Claims Advantage is currently building a database of experts who’ll be available for shops to access. This database league of experts in the field of repair and replacement would receive expert opinions free of charge in exchange for the opinions they provided – other shops then being charged a small administrative fee for accessing these opinions.
The expert opinions then can be used when insurers or their networks refuse to pay for legitimate and necessary labor or materials or when they attempt to short-pay.
Also, NEON will be offering collision and glass shops a short-pay collections service by spring 2005.
If you’d like to be part of the database or want to be notified as soon as NEON’s short-pay program is available, contact them at (402) 223-4700.
Additional good news for shops is that many states are attempting to beef up their anti-steering laws through legislation that closely mimics that of California. And a new avenue of business providing similar services for shops as glass networks provide for insurers is opening for independent glass shops.
Performing many of the time-consuming, frustrating paperwork chores that shops typically lack time to do, this much-needed service could easily include collision shops. Its genius is in its ability to increase shop efficiency through consolidating much shop paperwork from many shops into single calls, keeping constant pressure on insurers/networks to force them to comply with their particular state’s bad-faith time regulations.
Some states allow a payment deadline of as little as 10 working days before these become “bad faith” issues, after which declaration they can be dealt with in court and without short-pay.
Shops’ right to full payment, due to waiver and estoppel, may be brought to bear when the party responsible for compensating glass installers and collision repairers has done nothing to settle accounts within the limited time frame allotted in individual states’ codes. Generally speaking, when the paying party ignores a legitimate request for payment for services beyond the state’s allowed time frame, it’s illegal for the insurer/network to short-pay the shop.
The Demise of DRPs?
Networks are popular with insurers because they take care of the claims-handling details, administrate and schedule which shop will receive the work, and they eliminate insurers’ need for expensive claims centers and employees – all for a negotiated fee of around $15-$20 per claim to insurers. This partially explains why network employees are typically unwilling to invest any extra time working out bugs in the claim; their agreed profit margin with insurers doesn’t allow for it.
But for shops left with the scraps, networks typically require ridiculously deep, controlling discounts. And installers have reported having their money tied up for as long as 60 days (by some reports, as high as six months), while shop expenses, liability insurance and other business expenses accrue. And there’s no guarantee that labor and materials will be fully compensated when the check finally does arrive.
Yet shops can’t get referral work without joining the network the insurer uses. And some network representatives are skillful at “navigating” work from the insured’s non-network shop of choice, even in states where this is illegal.
Now, by the looks of things, it appears that glass networks are determined to replace the collision DRP system. And once insurers are employing networks, is it not logical to expect that these networks will treat the collision industry the same way they treat the glass industry?
For example, glass claims not submitted electronically are sometimes charged an additional paperwork fee, and all claims must be for the exact amount the network has told the shop to charge – or not charge – or the bill will be rejected. Also, if the shop doesn’t send in a claim that the network will accept within 90 days, they characteristically reply that they don’t owe the shop anything.
Current collision repair DRP programs at least allow shops to speak to an adjuster, but the network program will introduce the collision industry to the experience of not being able to talk to anyone. And shops that try to circumvent the network through the insurer will be told the company no longer handles those claims and will be forwarded to a network operator who has authority only to say “no.” (Network operators may tell you that they can pass a message on to their supervisor but that they can’t allow you to talk to the supervisor.)
During the collision industry’s “honeymoon,” networks will be easier to work with than DRPs. But as they gather more companies, they’ll begin choosing which shop will get the work. And when customers call in an insurance claim, they’ll be informed that their chosen shop is not preferred, that there may be warranty problems if they go to that shop and that they may have to pay more than their deductible.
Says a glass industry spokesperson: “I once asked the vice president of claims for a large insurer why no other segment of the auto collision or repair industry has to deal with the problems that auto glass companies do. He answered, ‘When insurers tried to squeeze the body shop, they all joined together and it didn’t work. Insurers then tried to squeeze the mechanical and engine repair shops, but that didn’t work either. Finally, they tried to squeeze the auto glass industry, and this was the first industry that blinked.”
Though disorganization has, thus far, cost the auto glass industry much more than the collision industry, this could soon change. The auto glass industry has begun uniting and organizing and is making inroads into regaining control. For the most part, however, collision repairers remain estranged from each other.
As someone in the glass industry said: “We bent over backwards to please insurers; we arrived where we are today, incrementally.”
Best advice: Get smart and learn from the glass industry’s mistakes. Walk in with your eyes open, and keep consumers and their best interests in mind at all times – and don’t let that change. What’s good for the consumer is good for shops and, ultimately, good for insurers.
Writer Dick Strom and wife Bobbi own and operate Modern Collision Rebuild, a 10,000-square-foot shop in Bainbridge Island, Wash. Strom can be reached at http://www.moderncol@qwest.net
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I\’ll also add CHEAT,THIEF & COWARD. This guy is all that and more as anybody here in Somerville , Ma will tell you.
Warning! If you have a glass claim on your car, don’t let your insurance company suggest a company for you. Most, if not all insurance companies contract with another company that takes care of their glass claims. You might think that you will be treated better by going through the contracted company, but in my case that was not the case. I have Farmer’s insurance which uses Farmer’s Glass to handle claims. Farmer’s glass is managed by Safelite Auto Glass. I had a claim for comprehensive damage to the front fender, hood and windshield of my car. I had the car in the body shop for the body damage, but could not get the windshield done that day. I paid the $500.00 to the body shop. I was told by the insurance company that I could have it done at a later time and was assured that this would not cause a problem and that I would not be asked to pay another deductable. I set aside a day that I could be home from work and waited for Safelite Auto Glass to arrive. When the technician came, he said that I owed 374.00 before they would begin work. I explained that I had already paid the 500.00 deductable and showed him my receipts. He called his superviser and I heard the supervisor say that I would have to straighten it out with my insurance company. I spent the next 3 hours on the phone talking to various people at my Farmer’s insurance agency, Farmer’s Auto Glass, Safelite Complaints department (which didn’t even apologize for my inconvience). Finally my agency told me to pay for it out of my pocket and give them the bill. I got 3 quotes on-line for 275.00, 285.00 and 295.00. I called two other places in my area and got quotes of 285.00 and 289.00. I chose Speedy Auto Glass at 285.00, but I’m going to have to take another 3 hours away from my job to get the work done. This is a total of about 6 hours of missed work that I could have avoided if I had just taken my car to a shop instead of having Farmer’s glass (AKA Safelite Auto Glass) send their mobile truck over. Also, Safelite was 90 to 100.00 more out of pocket than any other place that I called. So here is the scam. Your insurance company is getting a big break from the company that it contracts with to put in your windshield. If the amount is below your deductable, you may be charged a much higher rate out of pocket. The insurance company wins. The glass company wins. You lose. If your windshield is broken and you insurance company asks if you would like them to suggest a company for you DON’T DO IT! They cannot make you go to their contracted company nor can they penalize you in any way. Call around for estimates and choose the best shop with the best customer service and the best times for you to get the work done.
As I work for a glass company I will keep my name to myself… You should know that Safe Lite Auto glass is one of the biggest jokes in the business… I have to call claims in with customers all the time… Not just Farmers insureds but Hartford, AARP, American Family… the list goes on and on… I am on their network which means they are supposed to give jobs to me anyways… Why would they when they have their own company to look out for? Then when I call the claim in with one of my customers the suddenly can’t verify information on the policy… They then try to call the insured back and state that they have verified coverage and they would be happy to set them up with an appointment… this causes the company and many others to loose tons of jobs… I work for a nationwide company and we do great business.. I always tell my customers to pay attention to what people are saying… Just so you know they reason Safe Lite quoted you so much more is because you were going through farmers… Farmers has CONTRACT pricing with all in network glass companies and that pricing is PRIVATE… We are not allowed to disclose any insurance pricing to customers for any reason per contract… But knowing that people don’t have all the money in the world and most of us live pay check to pay check… I always give my customers a break… I wish I knew what kind of vehicle you drive so I could tell you what your windshield should have cost… chances are if the other company knew you were billing your insurance agent for the work they also quoted you high… If you ever need glass again… call around say NOTHING about insurance… if you are asked tell the customer service person that you just need a price and nothing more… then call 5 companies… ones with big ads in the phone book and if someone quotes you WAY less than everyone else… DONT Go with them… same thing goes for anyone quoting way more… and make sure you get a NATIONWIDE LIFETIME WARRANTY ON THE LABOR. If you don’t then you know you are dealing with a company that won’t stand behind their work 100%… we are all human and we make mistakes… Kind people fix their mistakes… Good luck in your auto glass endeavors and GOD BLESS!!! -L
I am disputing my Claim and need assistance from the VP Level or Higher.