The "S" Word
A Look at Steering and How it is Perceived in the Industry
by Brigid O'Leary
Steering. Just say the word—or mention it on industry message boards— and you’re sure to receive a flurry, if not a full-fledged storm, of vehement responses.
“Document, document, document. There are 15,000 glass shops in the US. Imagine all of us raising cane at any steering,” wrote an AGRR magazine forum visitor who posted under the name Fight!
“We have had jobs stolen as well but it’s very hard to get evidence [it’s hard to convince] the customers … to help because they think their insurance company will get mad at them or drop their coverage or raise their rates … If you explain everything to them, they feel bad but don’t want to get involved,” responded CT a few hours later, recounting an experience with alleged steering he had the week.
“Nothing new about this at all! Seen it hundreds of times. Been in the biz 20+ years,” wrote Nalis a day later.
That steering exists is not in question. It is the degree to which steering takes place and the actions of alleged “steerers” that form the cusp of the debate.
There are many different facets to the steering issue and an equal number of different sides to the story. Auto glass shops, insurers, third party administrators (TPAs) and customers are all affected by the practice, whether judiciously or not. Associations are fighting it and wholesalers are observing it all with a certain amount of trepidation.
When discussing steering, it’s important to lay some ground rules, or, at the very least, define the topic clearly. The crux of the steering issue rests in the exact definition of steering.
Going into this article, AGRR magazine was defining steering as “the use of language or actions to influence a customer (insured) to use a shop other than one they have chosen.”
That, however, is just one definition. Some people defining steering simply as “stealing jobs,” regardless of the methods used. Others define it by specific actions.
For purposes of this article, we will define steering as an action (comment, discussion, arrival of another company’s truck on the scene) that changes the intended assignment of a replacement job.
Knowing, they say, is half the battle. Knowing that steering exists, then, would indicate that the industry is halfway through the rigors of combating it. Hardly. In this case, knowing that it exists is merely the first of many steps in a process that really doesn’t get anyone much further than the recognition that something is happening.
As members of the industry have pointed out along the way, most recently at the Independent Glass Association’s Conference and Spring Glass Show™, steering happens even if the shop doesn’t know about it.
“How many jobs have you lost before you even knew you had it?” asked Marc Anderson, executive director of the IGA. “How do you know the customer didn’t ask for your shop but was steered away before they made the call to you? I will bet that for every job you know gets steered away from you, there are ten others that you never even knew you had before you lost them.”
Shop owners, as one might imagine, are the most vocal about the steering situation and what it does to business.
“It’s huge. I would say it’s enormous. If I had to rank it, it’s number one or two. It’s one of the biggest problems that we’re facing. It’s right up there at the top,” said Clyde Stephens, owner of Visions Glass in Perham, Minn.
Stephens is not alone in that opinion.
“It’s a big problem. It’s a big problem,” said Nathan Hemperly, owner of Windshield Doctor Inc. in Pocatello, Idaho, who was interviewed by AGRR magazine along with his son, Corey, company operations manager. “It’s in the top five problems. It’s probably number two. Insurance companies controlling our pricing is number one.”
As do others in the industry, Steve Wood, owner of Canyon Windshield Repair in Nampa, Idaho feels that there is one entity that employs steering tactics more frequently and more boldly than do others. He is of this opinion due to first-hand experience with it.
“The reason I say this is because there are times I receive calls from an insured and they set up an appointment. [Then] I let them know that they need to call their insurance company who is going to turn them over to [a third party administrator] and sometimes I get a call back from the customer and they say they have to go to [to a specific chain of shops]. Other times, I call them myself and they tell my customer right there in front of me that I’m not a preferred member because I won’t pay the fees. If someone wants to pay the fees they should be allowed to bill through them. I think it’s a scare tactic,” said Wood.
What Wood finds particularly upsetting about this situation is that he is a member of the TPA network.
“This is my sixth year [owning my own business] and I’ve been billing through [this specific TPA] since day one. I’ve always agreed to their terms and conditions, I’ve never tried to buck the system. They should not be allowed to inform the customer that I am not a preferred vendor or that my work isn’t guaranteed. It shouldn’t be guaranteed by them; I should be the one guaranteeing my work. They shouldn’t be allowed to do that,” he said.
Factoring into this equation is that few TPAs are strictly third party administrators. Some glass manufacturers own a couple TPAs; other TPAs are part of a company that also owns glass shops. Many independent glass shop owners in the industry feel this is a contributing factor to the steering problem.
“We do have one TPA that does own local shops, so they have a conflict of interest right from the beginning and I know we lose a substantial amount of business,” said Nathan Hemperly.
And while Wood has a situation that many feel is much more blatant, considering he is a network member with a TPA that is allegedly steering work away from him, most shop owners have a story to tell of witnessing work being steered away from them.
“As installers we received a call from a TPA with a regular customer of ours on the line and set up an appointment for a mobile repair. When we arrived, [we learned that] the TPA had sent out [another installer’s] tech to install a new windshield. The customer was confused and wanted to know why our company wasn’t there. Our technician asked if the tech from the [other shop] had a work order, which he did not; he only had a printout from the shop.
The customer ordered the man off his property,” related Corey Hemperly, operations manager for Windshield Doctor Inc. in Pocatello, Idaho. “We contacted the local insurance agency and were told ‘it was just a mix-up, don’t get so worked up.’ Well, it’s happened several more times and they (the competitors) started figuring out to go out much earlier than we do to get the job first. So much for the china wall that insurance companies say exists between their local jobs. Even though we had the dispatch and the customer, they still had the scheduled time.”
“We’ve had several occasions where a customer will call us and say ‘thanks for sending Phil out, he came early,’ but [Phil doesn’t work for] us. In essence, we lost that job and it was already completed,” added Nathan Hemperly.
In such cases, more often than not, the shops just lose the job. Stephens had the same thing happen to him, but he fought it and eventually did get paid for it, anyway.
“We had one customer [who needed] a quarter glass. He came in, we ordered the glass and set up the appointment for the next morning. He was late for the appointment, so I called him and he said, ‘I thought you were here doing it.’ Apparently, in that time, the TPA had sent [another shop’s employee]. I went straight to the president of the insurance company and ultimately, the president ordered the TPA to pay us in full for the job because it was flagrant stealing of a job,” Stephens explained.
While Wood and Stephens and the Hemperlys are independent shop owners, the subject of steering hits all levels of the auto glass replacement—and repair—equation. In 2002, Diamond Triumph Auto Glass filed suit against Safelite for alleged steering.
The initial complaint accuses Safelite of “failing to refer work to Diamond Triumph and, in fact, actively steering work away from Diamond Triumph when Diamond Triumph is the vendor of choice by the insured/consumer” (see AGRR May/June 2002, page 20).
Diamond-Triumph leveled six allegations at Safelite: breach of contract, breach of duty of good faith and fair dealings, commitment of deceptive trade practices, tortuous interference, disparagement (making false or misleading representations of the company) and Lanham Act violations.
The case was filed four years ago this April and on the same day Diamond Triumph’s contract with Safelite expired; yet it is the prime example of just how intertwined every member of the auto glass industry is when it comes to the subject of steering. No one is immune from the topic and very, very few can say they haven’t either accused or been accused of steering.
Out of Control
What bothers shop owners the most, it seems, is that the steering tactics from which they feel the most pressure are easily combated. Others say those doing the complaining just don’t know how to do business and are complaining because they don’t know how to compete in today’s business climate.
“Pretty much everything else is within our control,” said Wood. “We can change the outcome with what we want to do with the business. I don’t have problems with steering from insurance agents. I have a problem with steering through the network. Agents aren’t supposed to be able to recommend anyone anymore. I don’t have a problem with the agents advising. I have control over that. I can go to the agents, drop off my card and work with them and try to win them over on my reputation, the work that I do and customer satisfaction. An insurance agent is going to send someone to a person they feel is going to get the job done right. Guys doing quality work will win out in the end. When it hits the network, they should run it straight through and not say anything to discredit me or scare them away from using me.”
Even if insurance agents had the ability to recommend shops directly, the Hemperlys don’t feel that that would solve the problem in their area.
“We can’t do business with one insurer unless we go through this one particular TPA. They have our customer database, everything. They recently wanted us to sign a release so that we wouldn’t hold them liable for anything, and that we could never use any of the data [if we accused them of] doing something illegal, that we couldn’t use that information against them in court if we’re ever to do business with them. I thought that was interesting,” said Nathan Hemperly. “In this one segment of the industry, it’s a big, big problem.”
His son echoed a similar sentiment, noting that it’s still not a level playing field so long as the networks have a chance to influence agents.
“We hear all the time of shops giving agents kick-backs and all sorts of things, but I believe TPAs are doing it, too—taking them [insurance agents] to golf and all sorts of things. It’s not just shops, its networks, too, wining and dining them as well,” said Corey Hemperly.
“Of course, if they get real close to the agents or to the underwriters in the parent companies, the next thing you know, you can’t say anything about that TPA without the agent or underwriter getting very defensive because they’ve gotten to be very close with those individuals. We believe there are larger kickbacks, but we can’t put our fingers on that, though. When we call a parent company over here, and show them evidence of what’s happening and they just slough it off, it raises the questions in our minds. Why are they so defensive of that particular TPA?” added Nathan Hemperly.
So, what’s the answer? Is it better to be on the TPA network or not? Wood, you’ll recall, is on the networks and says he’s still having work steered away from him. Stephens is not, and by not being a network shops, he has a slightly different perspective on the industry.
“The biggest thing we’re seeing is that not being a network shop, our work has to come to us or we have to go out and get the work. We don’t rely on the networks to refer anything,” he said.
No fan of the networks, Stephens has found that the more the public is either educated about how the system works or gets frustrated with it, the better the scene for the independent glass shop.
Wholesalers, Whole New Outlook
Steering is not just a shop problem. The ripple effect that it causes touches every member of the industry, including wholesalers.
Steve Theisen is a managing partner for AGdistributors, headquartered in Boise, Idaho.
“It has a very negative affect on the independently-owned shops and the industry in general, so it does affect us. We’re dealing with it because our customers are dealing with it. The problem is that, if that business is going to be steered away from the small or mid-sized independent shops and replaced with large national chains that are owned by the same company that owns a TPA, it takes business away from the wholesaler’s hands, too,” said Theisen. “The retailer doesn’t get the business because it was steered away from them and the wholesaler doesn’t get the business because the retailer doesn’t have the business. It affects two businesses at once.”
While the effect of steering on his business and that of his clients is a concern to Theisen, what really got his blood boiling was a much more personal experience with it. His dad was steered away from using a shop of his choice—and one of Theisen’s clients—to using a shop operated by a TPA affiliate.
“My dad was so convinced he had to go to [the shop owned by the TPA] because that’s where his insurance company told him he had to go. He’d had the job all set up to work with one of my customers and he was steered to [the TPA owned shop] and when I explained to him what happened, he was furious. I have had personal, first-hand experience and I hear it every day from customers. I know that it’s there. I think it’s happening a lot. I think it’s going to continue to get worse unless someone does something about it. My thinking on it is that steering can take on many different forms. When people think of steering, they’re only thinking of something that’s fairly blatant. It doesn’t have to be real obvious. It can be casual or subtle things ... I think the idea of not advising an insured that a claim is being handled by a TPA and that the TPA has a stake in the industry is the beginning of the whole problem.”
Talking with TPAs
There is at least one TPA chief executive officer who won’t argue with that assessment.
“In this business, in this industry, if you look at the nature of how TPAs were created, almost without exception, the TPAs were created because they had a vested interested in pushing glass to their retail stores or a vested interest in manufacture of glass. And those two issues are really at the root of steering,” said Paul Gross, president of Harmon Solutions Group, an Eau Claire-based third party administrator that, in recent years, has taken steps to rectify the situation, at least with regard to its own company. Harmon Solutions Group has been trying to distance itself from the Harmon Auto Glass chain of retail shops, which were sold by parent company Apogee two years ago, many of which were purchased by Glass Doctor.
“The conflict [about steering] is one that exists [among] customer, TPA, insurance agencies—it exists because [TPA owned shops are] trying to optimize revenue, and from a shop’s perspective, when you have a TPA that is a competitor in the local market, the shop is being asked to give a favorable rate in exchange for business. But the TPA has an interest in sending business to their company-owned local shop. They’ll go down that path, so it’s a disingenuous relationship and that’s what creates the angst around the subject. It’s an unhealthy relationship from the TPA to the insurance company and to the glass shop. That’s why we made such a concerted effort to sell those locations and be a truly TPA with no interest in selling or wholesaling glass,” explained Gross.
By distancing the TPA from the retail segment of the business and cutting all ties, Gross and the rest of the Harmon Solutions Group leadership is working to build the company’s integrity as a true—and more importantly fair and respected—TPA.
“There are choices, there are dynamics. There are glass shops we work with that view it as a very favorable situation when they realize it’s a free and open market. Some shops don’t like to be competitive, and they don’t understand it. For those who really value and understand what a free, open and competitive market is, they love our model,” said Gross.
“For those who say they want it but don’t want to be competitive, they don’t have the same fondness for us because frankly, they don’t want to be competitive or they don’t want understand capitalism. Those are the shops that have a wide disparity between cost and insurance pricing. They want to get rich at the insurer’s expense and that’s just not right.”
Though the sale of the retail operation took place more than a year ago, the company is still working to make sure people know the difference.
“There’s still a great deal of confusion. We need to do a better job to help shops understand that Harmon Solutions Group and Harmon Auto Glass aren’t run by the same company,” Gross said.
Whether or not the majority of the auto glass industry recognizes that Harmon Solutions Group and Harmon Auto Glass aren’t one and the same, Gross made it clear that members of the industry place the blame for steering solely on the shoulders of the TPAs—his and others—when, in fact, sometimes what happens is less about steering and more about the uninformed consumer.
“We very much believe in freedom of choice. The policyholder has a choice to go in one direction or another. We believe in that. We record all of our outbound calls, all of our inbound calls and we save them for years so we can always refer to them if there’s a problem. When a policyholder has a choice in mind, we always honor it, no ifs ands or buts.
What the glass community doesn’t understand or grasp, is that there are a lot of policyholders who call in that don’t have a choice [in mind]. They may have heard of a glass company somewhere, but having heard of a glass company is different than knowing who they want,” Gross explained, touching on what others who are often in the direct line of fire for steering accusations also cite as a source of confusion and misguided assertions.
Safelite declined to be interviewed for this article citing current legal battles in which the company is currently engaged.
Insurers Facing Inquisition
OK, so that’s three takes on the problem. What is important to note is that insurance companies view steering—and what constitutes steering—differently than do shops, as can be expected.
“Steering involves wrongfully conditioning payment of a claim on the insured using a particular shop, or the insured being told not to get the work done at a shop which the insured has made an informed decision to use,” said Bob Bischoff, national glass manager for State Farm Insurance, headquartered in Bloomington, Ill. “What should not be construed as steering is a situation in which an insurer provides its policyholders with truthful information about its glass program and the ramifications of selecting a shop not participating in the program, so the customer can make an informed decision. The goal is an informed decision by the policyholder, which includes knowing of freedom of choice.”
Insurance companies certainly are aware of steering complaints and the fact that steering does exist.
Brigid O’Leary is a contributing news editor of AGRR magazine.
© Copyright 2006 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.