Managed Auto Repair Seen as Best Hope for Salvaging Collision Repair Process

June 7, 2000

These problems, along with the prospect of huge profits, have given consolidators — repair shop aggregators — the impetus to overhaul the collision repair process through a managed auto repair initiative.

The Conning study, “The Managed Auto Repair Initiative: Raising the Bar and Focusing on the Customer,” reported that the initiative has three main goals.

They are: Improved customer convenience and satisfaction that will enable insurers to retain more business and increase market share. More positive and productive insurance company/auto repairer relationships that will reduce loss adjustment expenses. Fundamental changes to the collision repair process that will result in consistently high quality repairs at reduced costs.

“The focus of the managed repair initiative appears to have changed from a cost reduction strategy to a customer service initiative,” said Jack Gohsler, Senior Vice President of Conning & Company and author of the study. “Insurers do not expect to reduce costs any time soon because it will take some time for consolidators to perfect their business model. But insurers do expect to see improvements in customer service, which is key to their customer retention initiatives.”

Last year, the auto repair industry took in $25.6 billion in revenue. Insurance pay outs accounted for $22.4 billion of this total. This revenue was split among an estimated 54,000 repair shops of various size and sophistication.

Many industry experts suggest that this fragmentation within the collision repair industry prevents adequate investments in people, facilities and equipment which are necessary for an efficient business model.

Many believe the managed auto repair initiative can be something greater than just an extension of Direct Repair Programs (DRPs), a two-decade old initiative that aligns repair shops with insurers.

The promise of managed auto care is that insurers will have to deal with far fewer repairers and, in fact, will interact electronically with dozens of repair shops by sharing data through a central hub.

These more efficient relationships will enable more technology investment, refined and re-engineered processes and simplified procedures, to the benefit of customers and insurers.

Consolidators have emerged from both within and outside the collision repair industry. Generally, they are well funded and have enough financial clout and managerial talent to drive fundamental change within the industry.

“The managed auto care initiative continues to evolve, and it is too early to judge its success or failure,” said Gohsler. “Clearly, the importance of the insurer /repairer relationship can not be emphasized enough, and both insurers and consolidators report that they are still in the ‘feeling out stage’. Rather than being able to point out specific improvements they have seen, insurers are more likely to be impressed by the potential benefit of the consolidators’ business model and are willing to give them time to perfect the model before making any judgement.”

According to the Conning study, insurers are concerned that the consolidators are focused on growth through acquisition at the expense of perfecting their business model. They believe the ability of consolidators to deliver on the goals of the initiative, rather than merely increase their own revenues, will be crucial to the legacy of managed auto repair.

The Conning study, “The Managed Auto Repair Initiative: Raising The Bar and Focusing on the Customer,” is available from Conning & Company for $575 by calling toll free 888/707-1177 or 860/520-1521 or can be purchased through the company’s web site at www.conning.com

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