Volume 9, Issue 1 - January/February 2007

Insurance Slowdown

Glass shops see fewer jobs
By Les Shaver 

Pick up a phone book, call any independent glass shop, ask one simple question, and there’s almost a 100 percent chance you’ll hear the word “yes.” It doesn’t matter where you are. You could ask the question any where across the country—from tiny towns like Butler, Pa., Perham, Minn., and Cedar City, Utah, to large cities like Denver and San Francisco. And, the shop you get could have one location and a couple of employees or it could be part of an international conglomerate. 

Just what is the question, you ask? Simple. Are you doing fewer insurance jobs than you have in the past?

“I would say that the number of jobs that come from any of the network sources (on rotation) are smaller and smaller,” said Michael Connolly, owner of Glass Plus, a glass retailer in San Francisco.

While insurance jobs have fallen off, the number of cash jobs many (but not all) shops do has risen—keeping the overall amount of work steady for a number of companies. For those shops that haven’t seen more cash business or would like to gain an even larger share of that market, there are solutions. But none of them are easy.

Root Causes
As CEO of Belron Inc. USA in Denver, Wes Topping has a different perspective on the glass market than many of his colleagues. Yet, he sees many of the same trends that people like Connolly do.

“In general, it’s primarily insurance claims that are down,” Topping said. “I would assume it would be because the insurance companies are discouraging claims by use of several different mechanisms or raising deductibles above the price of glass.”
The higher deductible argument is one that carries a lot of weight in auto glass circles.

“If the deductible is $500 and the claim is under $500, as most claims are, the person doesn’t file with his carrier; he purchases the glass himself,” Topping explained.

Often Connolly finds that customers don’t even know what their deductible is when they walk in. This sometimes means his employees are bearers of bad news.

“A lot of customers find out what their deductible is when they come in and we have to tell them there is no claim unless they have other damage to their car,” Connolly said.

If they change their coverage, they may be forced to pay out of pocket. Clyde Stephens, owner of Vision’s Glass in Perham, Minn., is seeing much more of this trend.

“People are less and less likely to take comprehensive coverage and are going with liability only,” Stephens said. “If the car is paid for, it’s usually liability only.”

That goes along with Topping’s feeling that insurers are trying to get their customers to make fewer claims. “I think overall insurers are discouraging claims, whether it be on your home or business policy,” he said. “When they do, if they also cover your automobile, then you are going to think, in general, that you shouldn’t be filing a claim.”

In fact, Stephens thinks customers fear alienating insurers. This concern makes them susceptible to the dreaded S word—steering. Like many shop owners, Stephens thinks steering is as prevalent as ever. 

“There’s so much control on the auto glass industry right down to first notice of loss and steering,” Stephens said. “Steering is huge. Steering happens, regardless of what the insurance companies, Safelite or LYNX say.”

And, when a customer is steered by a network, he or she is more than likely to end up at a chain auto glass retailer, which pulls more business from independents.

“Ninety percent of people think they’re talking to insurance companies and they aren’t,” Stephens pointed out. “They pretty much go along with what the networks suggest because of fear. They have the fear factor that, if they don’t do what the insurance company wants, they will get dropped or their rates will go up.”

A Net Loss?
While glass shops agree their insurance work has declined noticeably over the past few years, another bigger question lingers: Has the overall number of jobs gone down? There’s no consensus on this.
With insurance companies being the biggest provider of business to most glass shops, it seems, at first, difficult to fathom that total business could indeed rise. But when vehicle owners need a windshield replaced, it’s often something they can’t put off, regardless of whether they have insurance or not. That’s why many glass shops see cash business rising to compensate for the decline in insurance work.

“It does appear that customers are getting windshields replaced because everyone I have talked to says their cash component is up,” said Dave Taylor, COO of Cindy Rowe Auto Glass, which is based in Harrisburg, Pa. 
Not surprisingly, Taylor also has been seeing this in his own shop.

“Almost every single month for the last three or four years, the cash sales have been better,” Taylor said. “The cash customers are clearly and measurably becoming a bigger slice of the pie. Our insurance sales are down some, but our total sales are up slightly. The other segment of our business is car dealers, body shops, reconditioning shops, auctions and fleet accounts. That is the other component that operates like the cash market.”

Topping has also seen cash business increase in the Rocky Mountains. “We have noticed an uptick in cash in about all of the locations that we operate in,” he said.

In Utah, Kelli Dimick, auto glass supervisor for Jones Paint and Glass, a six-chain business based in Cedar City, sees the same thing. “I think insurance is going down because we’re getting a higher number of people that pay out of pocket,” she said. “I do think because of higher deductibles and cash prices being so low, most people just pay out of pocket.”
But the stories Taylor, Topping and Dimick tell aren’t necessarily universal.

“I would have to say that overall auto glass work has been declining,” Stephens said. “More and more, we’re seeing a decline.”
As a general rule, Scott Levin, owner of L & L Glass and Paint in Butler, Pa., sees much of the same thing. “It’s dead,” he said. “It has been a gradual thing over time. We used to do three or four jobs a person per day and it has gone downhill. I tend to think all of the little guys are dead from what my wholesalers says. It’s a vicious market circle.”

Adjusting On the Fly
While he’s definitely lost business, Levin hasn’t folded. Instead, he’s developed a tighter focus. “You’ve got to find a niche where you can get paid,” he explained. “Our niche lately is in trucks. The dealers used to do urethane because the windows were roped in. Now they are so large and are urethaned in. If they screw one up, it costs them a lot of money.” So Levin is trying to exploit this gap in the market.

“I’ve positioned myself to go for the top end customer—those who want a glass shop that knows what it’s doing,” Levin said. “I’m doing specialty business.”

For other shops, the emergence of cash business is forcing them to put more efforts into advertising. One of those is Safelite.
“In the last six months, Safelite has started a major campaign to create brand awareness,” Taylor said. “They’re all over the television in many markets. What they’re pushing is name awareness. They have upgraded their website dramatically and they have entered the consumer market.”

Mark Placenti, the company’s vice president of marketing and business development confirms there has been an increase in Safelite’s advertising. “We have increased our advertising presence this year. However,” he added, “our goal is to continue to build a strong, brand image and experience across all of our business segments—not just cash. Advertising is just one part of our multi-faceted marketing strategy to support the Safelite brand.”

Dimick’s small chain has also focused on advertising. 

“This month we’re running Rain-X—a glass coating—promotions,” Dimick said. “We try to do something all the time to get cash customers in.”

Other companies are working harder to get into the corporate glass accounts that are out there.
“We’re still making our regular sales calls, but we’ve decided to advertise a little more,” Connolly of Glass Plus, said. “We definitely call on dealerships, body shops and small companies. We try to hustle a little more, although it gets harder and harder every year.”

In this new era of cash business, calling customers is important. But it should be only one aspect of a company’s new business plan for surviving in a market that is seeing cash sales go up and insurance sales go down. 

First Voice is the Deepest
Dave Taylor of Cindy Rowe Auto Glass contends that how a shop answers a perspective buyer’s call is critical in today’s increasingly cash market. That’s why Cindy Rowe is upgrading its customer service representatives (CSRs). In the old days, according to Taylor, his customer service representatives just took information from insureds. Now, they have to sell the auto glass retailer’s service to cash customers who may be seeing better prices from other shops. If the CSR just recites a price (and the company doesn’t have the lowest prices around), they’ve probably lost a customer.

“If your concept of competing in the marketplace is anything other than doing the cheapest of the cheap, you better figure out real quickly how you answer your phone,” Taylor said. “You better think about every single word that is said and every sentence and component of the call. You better start planning how you get the proper outcome from the phone call. Customers will pay for value, but they have to understand they’re getting value. It has to be explained to them in a proper manner and in an understandable manner.”

It can often be easier to sell that cash customer if a shop maintains a good standing in its community, as well. 

“A lot of our customers are people we know and neighbors and friends,” Clyde Stephens of Vision’s Glass said. “We’re in an area where we know each person around here, everyone knows who I am. They all know Vision’s Glass. We’re in the parades and we do so many things within the community. We do projects with the county fair, Lions Club and Chamber of Commerce. That’s what has kept our doors open. Most of our customers are loyal to us.”

Stephens will have to continue emphasizing his community activism to compete against the bottom feeders in the world of cash business. Taylor eventually sees his business ratio being a 50/50 split between cash and insurance. If smaller shops don’t emphasize sales techniques, marketing, community activism and customer service, they could be in trouble.

“If you are talking about a one- or two-shop business with 15 or fewer employees and a lack of sophistication in marketing and operations, the cash market will be a disaster,” Taylor said. “They’re going to have to learn how to compete on a different level. They’ll have to compete at the initial point of contact. They’ll have to have CSRs answering the phone and brand name awareness. Some will do it. Others won’t and they won’t be around.”

Les Shaver is the editorial director of AGRR Magazine.

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No reproduction of any type without expressed written permission.