In many cases, insurance companies do not accept a body shop’s estimate of what a repair will cost. In other occasions, the insurer will generate the original estimate, but a repair shop might disagree. Unfortunately, in the end it is the insured that suffers from this ongoing argue.
A matter of trust
The insurer and the repair shop are not on the same page when it comes to repair estimates. They both have the feeling the other party is calculating in its own favor in order to push revenues or reduce costs. According to insurance companies and repair shops the following points are most common in their disagreements:
- Whether a part can be fixed or needs to be replaced. For instance, a garage’s estimate might call for replacing a body panel, but an insurer wants the body shop to try repairing it first.
- What kind of replacement part to use. Sometimes an insurer does not pay for a part from the original manufacturer, insisting a used part or cheaper “aftermarket” version is good enough. Some high-end insurance policies guarantee use of original manufacturer parts.
- How long repairs should take. A repair shop might estimate a dent in a door will take six hours to fix, but an insurance company says the work can be done in four. Each extra hour is more labor cost. And each extra day adds to the insurer’s bill for a rental car, if the policy pays for it.
- The labor rate. A garage might have a per-hour cost that is more than an insurer is willing to pay.
- Whether there are errors in the estimate. An estimate might call for replacement of a part that is not damaged or omit something that requires a repair.
Impact on the insured
Insurance companies are continuously changing policies to stay competitive. The long-term consequences of premiums that are too low are easy to predict: returns shrink and insurers respond by cutting costs. An example of this is the fairly recent introduction in The Netherlands of compulsory use of recommended or required insurance repair shops. In case of car damage, the insured is no longer allowed to have it fixed at a repair shop of his own choice. Instead, the insured must go to a repair shop or chain of repair shops selected by the insurance company. The reason is usually because they have come to some pricing agreements or purchasing benefits.
An agreement between insurance company and repair shop (chain) to lower prices may also mean that repair parts and work are of lesser quality. Policy terms and conditions often give the insured the option to choose an own repair shop, but in most cases this results in a “compulsory additional own-risk” for the insured.
Repair shop screening
Many claim managers mention that wrong estimates and repair fraud are huge issues and they are dealing with the following questions:
- Which damages or repairs are genuinely related to a current claim?
- Which vehicles are actually imported with damage?
- Which repair shops perform incorrect repairs? (i.e. shoddy work)
- Why does a policyholder changes from repair shop?
- Why does a policyholder does not use a repair shop in its area of residence?
Together with Solera Audatex FRISS developed a repair shop screening. Through this screening a fraud check is possible during the interaction between the repair shop and the insurer (before, during and after the repair is carried out). A huge amount of historical Solera Audatex data, combined with data from the insurer, it is possible to get a more complete overview of the repair. During these steps, it is instantly possible to alert the claim expert and assess the repair (real time).