July/August 2000


Some Glass Shops Are Taking A Turn Back to the Days of Direct Billing to Avoid the
Toil of Dealing With Insurance Company Networks

by Leslie Shaver

A number of glass shops have turned to an old friend to help them in their ongoing battle to remain competitive in the age of auto glass networks.

Unlike the industry’s past attempts at confronting networks head-on with litigation, a small group of shop owners are now trying the finesse approach by working their way around the networks and into the corporate offices of insurance companies.

So just how are these glass shop owners attempting to neutralize networks? They are going back in time to revive the process of direct billing.


What is Direct Billing?

The practice of direct billing is quite simple: glass shops refrain from belonging to the network of a particular insurance company and send their invoice directly to the insurance company instead of to the network. “Its amazing how easy it is to do,” said Donovan Trana, owner of Express! Auto Glass in Muscatine, Iowa, and president of the Independent Glass Association (IGA).

Direct billing was commonplace in the industry before the advent of networks and third-party administrators. However, as networks arrived on the scene to process invoices, glass shops began to deal less with insurance companies and more with networks.

Now Trana and some other shop owners around the country are returning to direct billing by asking themselves one question for each insurance company they deal with: “Does the third-party administrator for this particular insurance company meet our needs?” If the answer is yes, most shops will continue to bill in that manner.

However, when a shop owner decides a particular network does not meet his or her needs, the owner can attempt to go around the network and deal directly with the insurance company.

Of the three glass shops that AGRR talked with who had decided to bill directly, all offered different reasons for how a network did not meet their needs.

Trana says he used two criteria to determine whether he would go through an insurance company or bill directly. The first was simply if the terms under the network were acceptable to him. Then he asked himself if going directly to the insurance company was a more efficient way of working. During this process he looked at whether each particular network was paying him quick enough and if it had a fast response time. If the answers to any of these questions were “no,” Trana said he began to bill directly.

A spokesperson for a glass shop in the Midwest, who requested to not be identified for this article, gave two other reasons for why her company decided to direct bill. Initially, she said the owner of her shop asked himself if the network was a competitor. “What intelligent business person allows his work to be billed through his competition?” asked the spokesperson. “And further, why would we participate in a system that requires our customer to call our competitor when we do thousands of dollars of advertising for the customer to call us.”

If a network did not offer immediate competition, the owner of this glass shop then asked another question: Does this network refer customers to us? In most instances this was not the case. Consequently, the company turned to direct billing. “Our customers consistently came from our advertising efforts or our current customer base,” said the spokesperson.

The third shop owner, Brian Gleason of Vision’s Auto Glass and Repair in Ft. Dodge, Iowa, had a much less complex reason for attempting to direct bill. He says the insurance agents he worked with persuaded him to try direct billing. “We did it for the agent’s benefit,” he said. “It saved them from having to handle paperwork.”


A Glass Shop on the Fence

While Trana, Gleason and the Midwestern shop owner seem to be happy with their direct billing experience, there are other shops that are not sold on it yet. An executive with one East Coast shop went so far as to develop a map-like guide to use as he decides whether direct billing is right for his company.

In this map, he breaks network jobs into three categories:

Category #1: Cases where customers call his shop first and are put through to networks.

Category #2: Cases where the customer calls the network first and asks specifically for his shop.

Category #3: Cases where the customer calls the network first and the network assigns a shop to him or her.

The executive says that a shop’s mix of business from these categories should determine whether they decide to direct bill or not. “Shop owners not only need to understand how many network jobs they are doing, but also what type of network job they are doing. Of the jobs you are putting through, which category are most of them from?” he asked.

He then dove more deeply into the ramifications of what direct billing would do to a glass shop depending on the categories of jobs from which the shop was receiving more business from.

On Category #1: Since the customers are coming to a shop before going to the network, the executive uses direct billing. “Direct billing is sensible if it could be done at a better risk margin [in case number one],” he said.

On Category #2: In this case the executive thinks direct billing is a hindrance because there is a chance that the network, knowing it will not process the invoice, would steer the customer away, so he continues to work through the network.

On Category #3: When his shop is getting business from network referrals, he stays on the network and steers away from direct billing. “You would lose all of these jobs,” he said. “If all of your jobs are from category number three, you would be a fool to quit the network.”

Outside of these three categories of network jobs, the executive says there are even more factors he considers. The first is the cost of processing all the checks a shop will get when it goes to a direct billing system. This, of course, is more of a consideration for a bigger shop that produces more volume. “If an insurance customer does not accept electronic billing, the cost of handling transactions is a consideration for mid-size and larger shops. If I make a few bucks, I have to be careful that I don’t give them back in processing fees,” he said.

The situation, however, is different for smaller shops. “Most smaller shops do not have too many checks coming through the door,” the executive said.

The final situation the executive warns of is the glass shop’s relationship with insurance agents. “While the agent’s influence has diminished during the past five years, agents in agent-driven companies are still important,” he said.

The executive thinks that going to direct billing could put a strain on an otherwise healthy relationship with an agent. “Some customers will call us directly because their agent told them too,” he said. “If we are not on the network, some agents will no longer tell their insureds to do that. This could mean a loss in the first category [of network business] and no one knows how great that loss could be.”

However, the chance of irritating a friendly agent by direct billing goes away when a company, such as GEICO from Washington, D.C., utilizes a call center instead of agents. Deciding to direct bill one of these companies carries “a lower risk because you are not infringing on a local agent who has a local relationship with a customer,” the executive said. “You are not putting him or her in the middle and putting someone in the middle is not the wisest approach.”


Jumping Through Hoops

Opinions differ on just exactly how hard is it to set up a direct billing system. Gleason did not encounter very much opposition when he decided to switch to direct billing. He began the process by tracking the companies he had worked with during the past few years. Once he had this list compiled, he went to the National Underwriter’s Handbook to find the phone numbers of those companies. Then it was as simple as calling the customer service representatives at each company.

Surprisingly, Gleason found most of these companies co-operative. “I told them [the insurance companies] that I would like to bill them directly,” he said. “All of them were very co-operative.”

Most of the companies requested that Gleason fax the invoices directly to them.

Trana added that he has “never been turned down” when attempting to direct bill. However, he qualifies this by saying he has been selective about the insurance companies he has approached about direct billing.

The spokesperson for the Midwestern glass shop did not paint as pretty of a picture when describing the best ways to approach an insurance company about direct billing. “It is important to speak to an employee of the insurance company and not an employee of the network,” she said. “If you ask for the glass claims network, nine times out of ten you will be connected to the network.” To ensure that this does not happen, the spokesperson suggests that glass shops ask if they are speaking to an employee of the insurance company.


The Insurance Perspective

While some glass shop owners are enjoying success with direct billing, it is important to note that it has been on a limited basis. Most of the insurance companies who agree to directly billed are small, regional companies, said the shop owners interviewed for this article.

Many of the larger companies, such as Allstate of Northbrook, Ill., and State Farm of Bloomington, Ill., still send shops through their networks. “Even if we received a fax from a glass shop, it would be forwarded to LYNX,” said Darrell Ebert, of Allstate. The chance of one these companies accepting a faxed invoice is even more remote considering their movement toward electronic invoices, Ebert explained.

Dave Hurst, a spokesperson for State Farm, says his company has “seen no influx of billings being sent directly to State Farm.” Furthermore, he says this indicates “that the system is working as intended.”

Heritage Mutual Insurance Company of Sheboygan, Wis., is one company that has allowed direct billing in the past, but has plans to change that policy in the future. Heritage is now going to a third-party administrator, though Greg Olson, director of physical damage and auto claims, says this administrator will coordinate billing and handle first notice of loss, but will not set prices. Olson anticipates that Heritage will be sending many of the direct-billed invoices to its administrator (whom he preferred not to name), there may be some cases where glass shops can still bill directly. “Some of the invoices will be passed through to us because some states have statues that will make it difficult for our administrator to process them,” he said.

While insurance companies may choose to funnel invoices through third-party administrators, networks also have stake in the direct billing trend. Chris Umble of LYNX Services from PPG Industries of Pittsburgh, has not noticed an increase in invoices sent directly to LYNX’s insurance partners. He cites two reasons for this. One is that the insurance companies who do not allow direct billing will re-route the invoice back to the network. When this happens it “slows the payment to the glass shop,” said Umble.

Umble also says LYNX has not noticed an increase in direct billing because it is not a competitor with retail glass shops. “The fear [with billing through a network] is reduced with LYNX because we are not a retail glass company,” Umble said.

 Leslie Shaver is a contributing editor for AGRR Magazine.

Allstate Releases New Offer and Acceptance

Allstate Insurance Company’s of Northbrook, Ill., and PPG of Pittsburgh’s, LYNX Services new offer and acceptance may have caused more glass shops to think about joining the direct billing bandwagon.

The details of the contract include NAGS for 52 percent off NAGS for of windshields and tempered glass and $39.00 for labor in territories A and B; 30 percent off of windshields, 36 percent off of tempered glass and $39 for labor in territory C; 15 percent off NAGS for windshields, 26 percent off NAGS for tempered glass and $39 for labor in territory D. In addition, LYNX will be offering flat fees of $21 for installation charges, $60 for the initial windshield repair and $10 for each additional repair.

A number of different industry sources have speculated that auto glass shops will suffer as much as a 20 percent decline in pricing from Allstate once the new Offer and Acceptance is implemented. “The percent they are taking off continues the deterioration of auto glass retail pricing,” said one industry source. “The industry profits, which were already being squeezed, are now being squeezed harder.”


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