The shocking truth: you don’t want it!

The repair industry has had some funny times, but when it had the chance to get real, it appears to baulk at the idea, as Fraser McEwing reports.

I was flabbergasted at the results of the Paint & Panel recent survey which invited repairers to vote and give their views on the move away from funny time, funny money (FTFM) to real time, real money (RTRM).

The reality is that the majority of the repairers don’t want to get real. After years of meetings, explanations and consultations with insurers and trade associations, the repairers appear to be choosing to stay in the old, funny world.
Of course, their preference may not be what it seems. Some observers believe that the repairers are expressing a rejection of the current RTRM formula rather than a preference for FTFM. If this is the case, then we are still waiting for Moses to come down from the mount with a fresh set of tablets.

One popular myth is that the rank and file repairers don’t understand real rates and times. But if there’s one thing I learned from being involved with the industry, it is that smash repairers are not stupid. They know very well what RTRM is all about.

Richard Nathan, the leading light in the move away from the financially choking days of FTFM hasn’t given up, but unless he can get a lot more support than he has now, he may never see his dream realised.

The conclusion must be that, for all their grizzling, repairers want to keep FTFM.

Let’s take a look at the Paint & Panel survey that exposed their preference. The survey was conducted via the magazine’s internet newsletter. Its findings were: 25 per cent of respondents wanted to adopt RTRM, 66 per cent said they wanted to stay with FTFM, five per cent said they didn’t use FTFM and four per cent didn’t care one way or the other.

That’s a pretty devastating win for the funny camp. I see the reasons as these:

First, the funny business is entrenched. Almost every estimator and manager in the panel industry has been trained on it. It is their language. The outside world may laugh at it but it unifies those inside the industry like a craft guild.

Moving to RTRM is like having to learn a foreign language.

Second, the way the distorted hours and rates work in FTFM leaves room for negotiation between repairer and insurer that cannot be matched with RTRM. Say, for instance, a job takes 30 hours at $30 an hour in FTFM – totalling  $900. In RTRM that translates to 10 hours at $90 an hour – also totalling $900. The big difference between the two is the room left for negotiating. If the assessor nips three hours off the FTFM quote the job nets a maybe liveable  $810 but if he nips three hours off the RTRM quote the job only nets an unacceptable $630.

Logically, the assessor and the repairer know that the types of hours differ but when it comes down to the wire the lines become blurred and the negotiation narrows – to the disadvantage of the repairer.

Third, although there may eventually be consensus on times for every facet of a repair, shop rates will never be seen to be equitable. Repairers and insurers each believe the other is trying to claw back more money than they’re entitled to. Repairers ruin the corporate profit results of insurers while insurers take the bread from the mouths of repairers.

Shop rates are a can of worms. City versus country overheads; levels of efficiency through equipment and training; the availability and cost of technicians; degrees of intimidation and greed: they all contribute to a shop rate.

NRMA has tried to formulate shop rates to bring some semblance of a reliable quantum to the quoting process but, deep down, neither side is happy with it or, if they are now, they won’t be for long.

The big insurers want to use their buying power to squeeze the repairers while the repairers want to exercise their animal cunning and some public protest to winkle an extra dollar out of the cruel insurance giants. That’s the game and it’s played on the field of funny time, funny money.

In a perfect, free market world, insurers would offer every job to every repairer and the best quote would win. But you can forget any semblance of the free market when it comes to smash repairs. It is overlaid with codes of conduct, customer choice of repairer; insurer preferred repairers: car makers’ approved repairers, and a repairer’s ability to return a complex car to its original safety standards.

Any attempt at freeing up the market, such as AAMI’s two quote system or NRMA’s quote-by-photo operation are not liked by the industry at large, even though repairers participate in them.

When you take a top-down view of the smash repair industry it is one big, bloody mess that cannot be sorted out by regulation.

What is THE ANSWER?

Right now, insurers have the upper hand because there are too many repairers. Adopting RTRM won’t alter this. If there were half the number of repairers, RTRM  would not be necessary. Supply and demand would see to it that repairing was profitable, and the better the efficiency of a shop the more profitable it would be.

The UK has been through a dramatic shakedown in the number of repairers. Hundreds have gone to the wall – and there are more to come. But the end result will be improved profitability for those who survive the slaughter.

And that, awful as it is, will have to happen here. The message is: ‘get good or get out’.