Volume 8,  Issue 4                         July/August  2006

The "S" Word

The Final Part Of Our
Look at Steering And Its Impact On The Industry
by Brigid O'Leary

Insurance companies view steering—and what constitutes steering—differently than do auto glass replacement shops, as can be expected.

According to Bob Bischoff, national glass manager for State Farm Insurance, Bloomington, Ill., “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.” What should not be construed as steering, he added, 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,” he said.

Insurance companies certainly are aware of steering complaints and the fact that steering does exist. 

“We’re aware that steering does occur, but we do not support the practice and if we find out it is taking place, we do investigate,” said Mike Siemienas, with Allstate Insurance, Northbrook, Ill. “Allstate customers have a choice when choosing a glass repair shop. They can either use one of the approximately 8,000 shops in our network, or a shop of their choosing,” he explained.

A regular visitor to the AGRR message boards, Hal Hare, a corporate claims manager with State Auto, headquartered in Columbus, Ohio, has had to catch the flack from the auto glass industry on a number of different topics and agreed to share his point of view on the issue of steering with AGRR magazine.

“The most common complaint scenario is that the glass shop thinks it has the job locked up, but when our insured calls to report the claim to the third party administrator (TPA), the insured does not tell us about the earlier conversation with ABC Glass. The State Auto policy is to honor an insured’s preference—but this preference must be expressed to be honored. Perhaps a three-way call should be considered,” said Hare.

The insurance company representatives say they take steering claims seriously.
“We expect our policyholders to select the glass shop they want to perform their work. If a policyholder asks for assistance in selecting a shop, we will suggest local shops that have agreed to the terms of our Offer and Acceptance (O&A) Program. If we receive concerns relating to steering, we investigate each one of them,” explained Bischoff.

“I am aware of the complaints regarding alleged steering away of business. I investigate each and every one that can be identified. This can be done since our TPA records all incoming telephone conversations between their staff and our insured. I have found that 99 percent of the steering complaints are actually unfounded,” added Hare.

Hare, Bischoff and Siemienas were clear about their companies’ expectations for fairness and honoring the customer’s choice.

“State Auto wishes to play fair. In order to meet that goal, one of the first questions in our script asks if the insured has selected a glass shop for the repairs. If one has been requested, we honor our insured’s choice,” said Hare.

“State Farm supports freedom of choice in shop selection and does not ‘steer’ customers to specific shops either contrary to that position, or in violation of any law,” said Bischoff.

“It’s all about customer choice,” said Siemienas. “We do have the network that customers can use, but if there is a shop they wish to use, that’s their choice. And approximately 75 percent of shops participate in our program, so we feel customers have a lot of shops to choose from.” 

That said, insurance companies aren’t necessarily going to know if steering happens unless they field complaints about it—and while many shops will read this and say that they do complain, the question begs, to whom, exactly are the shops complaining? If as many shops are calling in to report steering as say they are experiencing it, the reports aren’t all going to the same person. Apparently, they’re not all getting to Hare or Bischoff.

Two Types of Complaints
“There are two types of complaints: verbal (informal) and written (formal). I might receive one or two verbal complaints per month, which are of a general nature. No specific claim is usually identified and no investigation can be done. Typically I advise the shops what is needed if they wish me to explore the complaint further or what is needed for the handling of future incidents. Written—I might receive one or two formal written complaints a year that are filed with or through the various state insurance departments,” said Hare.

Bischoff also stated that he doesn’t think steering happens very often, though he admitted that to his knowledge State Farm doesn’t track such complaints.

What happens if there is an undeniable, completely provable case of steering that is presented to the insurer? All allegations, the insurance reps assured AGRR, would be investigated and “appropriate action would be taken.” 

Hare shared what constitutes “appropriate action” for State Auto.

“If we found steering, we would review the specifics to see what the damage was and how this could be avoided in the future. Parties involved would be debriefed, counseled, retrained, or released. We would share our findings with the damaged shop. Finally, we would make sure that the damaged shop received referrals to offset their lost income,” he said. 

For shops that have experienced what they perceive as steering tactics, each has found a way to deal with it, each with a varying degree of success.

“The ironic thing is we are on a particular network and they still [steer business away from us].

Before we started making the calls for the customer, it happened more. It’s been cut in half since we started doing it,” said Corey Hemperly, operations manager for Windshield Doctor Inc. in Pocatello, Idaho. “We also inform them that we are recording the conversation. That seems to cut down. There is definitely a script or policy in place [when the shop is involved]. There is a difference between informing them that the customer is at the shop.”

Band-Aid Brand Solutions
“I think if the industry would finally unite and say enough is enough and stop them–cut them off, but that’s difficult to get all the shops in town to band together. Educating the insurance industry, that’s probably a good thing,” chimed in Nathan Hemperly, owner of the Pocatello-based company. “Work with the states to pass legislation. How can one company be so vertically integrated that it can start controlling the industry? They manufacture their own glass, they have TPAs to get between the insurer and the shops, and even if we bill the insurance company directly … they send it to the TPA which shorts the check anyway,” he added.

“That’s a tough one. Stop the TPAs. If they were there only to set up a claim and had no interference as to what shop or at what price … if they were only there to help the customer set up the claim … but since that won’t happen. I think it’s going to take legislation with solid wording to stop the control and it would have to be in every state. Legislation in every state with solid wording to stop the situation the shops are facing,” said Clyde Stephens, owner of Visions Glass in Perham, Minn. “What we need is to open up an avenue so that those who do not wish to work within the controls of networks can invoice insurance companies directly and not be short paid by the TPAs,” he added. “We’ve been doing the best we can, but we need to take more time to do it, get customers involved and do more logging, documenting, everything possible.”

Stephens is also considering—and recommending to other shops—collecting affidavits, jotting down on work orders and invoices the problems the glass shop or the customer had with getting the appointment, concerns, anything dealing with their transactions. 

“It’s a Catch 22. To get the work, you’ve got to be on the network, but the networks and the insurance industry at large has told us that as long as we’re on the networks, they’re going to keep dropping the price. You either have to make the decision not to accept the network pricing and go on your own and go for the fight, or you have to stay on and keep your employees working. We don’t want to lay off our workers. So, we’re stuck in the mentality that: any work is better than no work,” Stephens added. “But it’s not going to stop until enough people get off the networks and we’re told that as long as the majority of shops are on, we’re going to keep driving down the prices. I decided to beat the rush: get off. Yes it hurts. Yes we took a hit. Yes we’ve still got the doors open. We’ll survive. We’re diverse enough and we have minimal overhead. We’ve used every way we can to cut costs. We even keep the lights off as often as possible. It’s sad. If I go out to lunch or do a mobile job, I have to send the phone calls to … I can’t even keep a full-time secretary. It’s a downhill spiral. It’s going to collapse the industry. It’s got to–if everyone stays on it, everyone is going to go broke. I don’t know how else to word it,” he stated.

Will steering ever be eliminated? Few who were interviewed were optimistic.

“Steering, absolutely, positively could be eliminated. The underlying fundamental principles of a network operation are all illegal. If the industry hired a small group of economist, lawyers, former Commerce Commissioners, etc., to study the auto glass industry and find a solution to level the playing field, they would come to the same exact conclusion the IGA yells from the roof tops, i.e., the insurance industry and their surrogate hatchet men could not be getting away with what they are without violating the law,” said Marc Anderson, executive director of the Independent Glass Association (IGA).

“In fact, the very purpose of a network is to violate law and keep the insurers clean and free of such dirty work. One minor, but critically important example is that most states require claims adjusters to be licensed. Even the most ignorant among us knows the TPAs, all of them, are adjusting claims. It cost nothing to get a legislator in your state to formally request the attorney general in your state to issue a legal opinion on this. That then becomes the first hole in the dyke. That is underway in several states. Mail that legal opinion to every media outlet and legislator in your state. From there, the strategy will explain itself,” he added.

Other Options
Anderson wants companies to know that going to court isn’t the only way for shops to battle what they perceive as steering efforts.

“There are other options, beyond litigation, like figuring out if being on the networks is really in your long term best interest. That’s an individual business decision, but if you are eventually going to be put out of business, and you are, what do you real accomplish by delaying the inevitable? Some people think being on the networks is rather like accepting a stay of execution in exchange for not eating—or taking any action. When glass shops used to call our office to complain, I felt like I was talking to prisoners on death row who were afraid the guards might try to hide a whoopee cushion under their seat. The auto glass industry seems to be one of the few in the country that adamantly refuses to pool resources and protect itself,” said Anderson.

“Until legislators really see the problems and understand the problems we’re going through, then they’ll make the decision to help the shops face the problems we’re facing,” said Stephens. “I do believe that more shops are using more alternative ways of billing and pushing for their own pricing and sticking to it.”

“Not enough shops will step up and stop it. The [TPAs] that are steering have a lot of resources and just simply flaunt it. They don’t really care. That’s my opinion,” said Nathan Hemperly. Even Paul Gross, who is president of Harmon Solutions Group, an Eau Claire, Wis. based third party administrator, doesn’t see steering going away any time soon.

“Only if our competitors take the same deliberate efforts to take the root cause out,” he said.

“The root cause of steering being the relationship of running a TPA and owning a glass retail shop or being in the glass manufacturing business,” he said. “I don’t see that happening. The traditional TPAs were born not to serve their customers. They didn’t wake up and say ‘how can I do a better job to serve my customer?’ like most companies in America. They were born to serve their primary glass interest,” he added, noting that it is his customer, the insurance company, that can and will have to step up to affect change in the industry. 

“The only way it’s going to get solved is if the insurance companies decide that they want to do something about it. When they don’t want to be enjoined in the court battles. Right now it’s the shops that are fighting it. The Diamond-Triumph v. Safelite case is between Diamond Triumph, Safelite and all the carriers. One day the insurance companies are going to wake up and say ‘I don’t want to be here anymore.’ But that will happen when they think they’ll be treated fairly by the independent glass companies,” he added.

Hypothetically Speaking
What would happen if steering—in all its forms—were eliminated? Speculation runs the gamut. Some visitors to the AGRR message boards have hypothesized that the TPAs would disappear. Others have predicted that the independent market would dissolve. 

“If steering were eliminated, the independents would flourish, because without steering the playing field would be level and Safelite, for example, would have job volume based on the consumer’s perception of the quality, service and price, which many in the industry think is near zero,” said IGA’s Anderson. “Currently, the market barely allows for any acquisition cost.

Even Safelite has to move its call center to Somoa to survive the depressed prices it has created. If steering were eliminated, you would have what we, in America, are suppose to have—free and open markets which auto glass shops would compete with each of on service, quality, and price,” he added. 

Others think that without steering, the industry as a whole would change and become more respectable.

“Overall quality would improve. I believe the industry as a whole would work together better, and that’s good for everyone, especially the consumer. Currently, work is being done in the fastest, cheapest way possible, and some companies thrive on quantity to stay afloat. Consumers would benefit the most from quality installs,” said Stephens.

It would also create the level-playing field that others in industry think is missing. 

Brigid O’Leary is a contributing editor for AGRR magazine.

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