agrrfpo.tif (135164 bytes)

Volume 7    Issue 5        September/October  2005

State Farm Decision has Multiple Implications
by Les Shaver

Ken Drews, owner of A Better Windshield in Bossier City, La., won’t make any bones about it. He doesn’t like State Farm’s decision to stop waiving deductibles for repairs. But to Drews the argument just isn’t about economics.

It’s about the perception of repair.

“I think it will send a negative image of windshield repair to the public,” he said. “People may think that if State Farm doesn’t pay for windshield repair, it must not be worthwhile. This is not a good image for windshield repair.”

It seems that everyone has an opinion on State Farm’s decision to stop paying for repairs. The key to each shops reaction tends to be based on where it is on the glass food chain. Those repairers who do cash only business seem to welcome the decision because it gives them a chance to escape insurance companies and networks, set their own price for their work and it may even eliminate some of the competition they face along the side of the road and at carwashes. 

On the other side are those repairers who rely on insurance work. While there have been more consumers paying out of pocket for repair work, they’re concerned that most consumers won’t do this. To survive, they’ll have to fight cash-only businesses and adopt some of their practices. Then there are the bigger auto glass chains. As a rule, they’re either happy to see the new State Farm policy (because they think it shows that repair has little legitimacy) or will continue with business as usual.

In the late 90’s Safelite AutoGlass in Columbus, Ohio, moved into the repair business. Though the company is now entrenched in repair, it says the State Farm decision will have little effect on it.

“State Farm’s decision will not impact how Safelite AutoGlass conducts business,” said Bret Baird, a spokesman for the company. “We will continue to offer the repair option to customers for convenience and value and price repair service consistent with our current policies.”

Other auto glass shop owners say the move shows that insurance companies have become frustrated with repair. “I think insurance companies are tired of people doing windshield repair and it’s not working,” said Chris Tate, owner of Old Dominion Glass in Richmond, Va. “It could be some fraud thing. Windshield repair used to be $29.95. Now it’s $60 or $65. The insurance companies won’t pay it anymore.”

Wes Topping, president Elite Auto Glass, a regional chain in Denver, guesses that State Farm eliminated its repair coverage because it was receiving a substantial amount of claims. “Whether these repairs are warranted or not is debatable,” he said. “It could be they’re looking at more claims from guys set up on the corner.”

The key, according to Topping, is whether deductibles go up. If the deductibles go up, it could mean less work. But if not, it’s a different story. “If they don’t raise deductibles, it could mean that more glass is replaced,” he says.

The View From Inside
Scott Weiss, a small repairer in Lehighton, Pa., doesn’t like the decision for different reasons. After watching what’s been happening in the industry for the past couple of years, he’s been pulling out of the business. And, the decision by State Farm hasn’t convinced him to revisit those plans. 

“This is not a good thing for my business,” he said. “I believe people are resistant to getting anything done when they have to pay for it directly, even though it may be in their best interest.” 

Gary Gifford, owner of Maverick Glass in Glendale, Ariz., sees many of the same issues. “I don’t think customers will pay $15, $20 or $25 out of their pocket to do a pit,” he stated. “State Farm is paying $50 for a pit. It could change the landscape, certainly, if one or two more carriers follow suit.”

Brenda Jerrard, owner of Ace Windshield Repair in Clute, Texas, fully expects some early resistance when State Farm stops paying for repairs in Texas. “I think initially there might be a drop off in business because people are so used to having that deductible waived,” said the longtime owner of Ace. “They’ll be a little ticked off and maybe go away. But once they get done paying for a replacement, they’ll realize that maybe they should have gotten the repair. It’s still a whole lot cheaper and easier to repair than getting a replacement.”

Since many customers have become more sensitive about submitting small claims to insurers, Jerrard thinks they’ll be more likely to open their pocketbooks for repair. This may make the cash case easier for shops to sell.

“There have been instances where I’ve had an irate customer come to me and say, ‘They’re raising my rates because of nothing but windshield repair,’” she said. “It put me in the position of having to explain that their insurance company does waive the deductible, but they do keep track of every little thing you do.

If customers have a lot of activity on their policy, they may want to think about it before we bill insurance. Many times, people may use insurance a couple of times, but then start paying for it themselves.”

Lucille Massey, owner of Vinyl and Windshield Repair Inc., a Houston-based windshield repair products supplier that also does some repair work, has also noticed some customers are wary about making insurance claims. “It depends on what kind of experience they’ve had with their insurance companies and how many claims they’ve made,” she explained. “Some customers have gotten comments from their agents saying that should save their claims for larger things.”

Pushing the Envelope
Gerald Zwart, owner of Clearview Windshields in Inwood, Iowa, hasn’t waited for the agents to make recommendations. He’s been pushing cash pricing on his own. 

“We’ve been trying to educate the consumer for a year or two that cash isn’t all bad,” he said. “If we know they have frequency of claims, we tell them maybe they want to pay themselves. My cash customers are constantly growing. We’re moving the pendulum there without the public realizing it.”

In a way, State Farm’s move lets Zwart push the pricing envelope even further.

“I will get to charge what I deem fair and reasonable rather than someone else setting my prices,” he pointed out. There are other advantages, as well. “I will be able to charge for a crack repair at full costs,” he added. “We also won’t have to EDI anything. We can just put the money in the bank. That’s a positive.”

For people like Dee Berge-Morse, owner of Dee’s Windshield Repair Inc. in Westminster, Calif., the State Farm decisions will probably have very little impact on the bottom line. 

“We worked with insurance companies at one time and I was on the program with them, but I got off and then went on again,” she said. “Eventually, I left. I did not get any business because we offer long crack repair, we don’t do mobile service and I wasn’t willing to go with their prices if I wasn’t getting business.”

Exposing Lesser Quality
With the possibility of a market that rewards companies skilled in cash business, it’s little wonder that repairers like Berge-Morse are happy with State Farm’s decision. But there are other things she likes about it, as well.
“I like the idea that the insurance companies will get out of it,” she said. 

“I also think it will get rid of guys doing little chips that don’t need to be repaired.”

A number of other repair technicians have also expressed reservations about the number of people who’ve popped up at places like car washes offering to repair minor dings that usually don’t need to be fixed and billing the insurance company $50. 

“With this decision, these people will find it a lot harder to operate unless they’re in a zero deductible state like Arizona,” Gifford said. “It’s going to be a harder sell for these people in car washes if the customer has State Farm.

What does it do to these guys in the car wash where State Farm is 20 percent of the business they do?”

While Drews doesn’t like the policy overall, he also thinks it could help thin the herd of installers in his area. “Maybe it’ll get rid of all the jack legs out there that are using the system for some free money,” he said. “I get really tired of seeing windshield repair being offered by car washes and quick lubes done by some guy with two days of on-the-job training. Poor quality repairs give the industry a bad name.”

Moving Into New Territories
Berge-Morse thinks that many of the repairers who rely on insurance business will have other markets into which they can move. “Those companies that don’t do replacement in my area do car dealers and fleet services so they shouldn’t be hurting,” she said. “There’s tons of fleet work out there.”

But not everyone agrees with this. “The repair guy who relies strictly on the agent for his work could be in a world of hurt,” Zwart pointed out. “He will have to make major adjustments. He’s going to have to advertise to get his name out there. He could be struggling financially to do that.” Zwart will be one of these people who have to become less reliant on insurance. “We’re going to have to move into the cash business,” he said. “We won’t have a choice.”

Robert Hart, owner of Alabama Windshield Repair in Tuscaloosa, Ala., has been in business for 20 years and relies on fleets and corporate accounts. He isn’t worried about possible encroachment by shops looking to tap into his cash business. 

“We go in to our customers with a pretty strong case because the main office tells us to go there,” he said. “Then we send thank you cards to our contact person in the shop, his boss, his secretary and whoever. We also give a notebook out with a fleet sheet. Everytime someone goes there, they do a fleet sheet and show the vehicle damage and VIN number and whether it can be replaced or repaired. It allows the person our competitor would talk to say, ‘We use Alabama Windshield and have used them a long time.’”

Others think they also have loyal customers who won’t stray. “Most of my customers are repeats,” Massey said about her retail customers. “They know the value of windshield repair.”

To stay in business, many of the repairers who rely on insurance will have to build that kind of loyalty and find new markets. “They [her repair customers] will have to get out of their comfort zone,” Massey stated. “They just have to keep on changing. If one door closes, another door will open. They just have to explore the waters.”

In some ways Massey’s advice isn’t just for her customers though. It’ll have to be the mantra of many small shops around the industry to survive if more insurers move out of repair. 

Les Shaver is a contributing editor of AGRR magazine.

© Copyright Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.