DRPs - measuring your performance

Special Report

Many repairers have seen assessors authorise work from what they view as a cheaper, poorer quality shop round the corner. Work they should have got themselves. Do work providers merely measure how cheaply repairs are made, or are there other variables? Kate McDonald reports.
Most work providers still rely heavily on their on-the-ground assessors to recommend shops for their networks. Stories abound of corruption in the nomination process -- many large repairers off the record admit to having been solicited for bribes from unscrupulous assessors and because many assessors used to work within the crash repair industry, the potential for friendships and even grudges to affect decisions is significant. (The vast majority of assessors are of course completely honest.)
Added to this are the many claims from repairers that some work providers only care about costs, and even then, are not able to accurately measure costs, or do not go into enough detail, to give high quality shops a chance. Behind average cost of repair there are a world of variables: type of vehicle, type and extent of damage, cycle times, rectification levels, customer service indexes, presentation, equipment levels etc.
In a perfect world however, the most important criteria for measuring the performance of a repairer would be simple. Will this repairer return the vehicle to pre-accident condition, preserving its value while ensuring the vehicle is safe to drive?
That's in a perfect world. If the answer to the above question is yes, then the next criteria should be: is the repairer cost-competitive with other repairers providing the same value? Lastly, will the repairer help the insurer maintain a satisfactory customer relationship?
In other words, quality, cost and customer service. And that's what the majority of insurers say they are looking for in their repairers. Which comes first, however, is open to question.
According to Kevin Mark, director of management consultancy PSC International, bodyshops are chosen for DRPs on several criteria. They include location, average repair cost, appearance of shop, basic equipment and size of shop, assessor opinion, and perception of efficiency.
"The decision is tyMeasuring cost-efficiency
Insurance Australia Group (IAG) is the parent of a number of state-based member companies including SGIC Insurance in SA, SGIO Insurance in WA, and NRMA Insurance in NSW/ACT and Queensland.
According to an IAG spokesperson, each state operation has a recommended repairer scheme to meet the requirements and needs of the group's customers and the business.
"All are based on the principles of encouraging competition, improving efficiency in the smash repair industry and encouraging excellent customer service, quality and cost," the spokesperson said. "Many of the schemes also offer its preferred repair suppliers training and skill development opportunities. A sustainable smash repair industry is important to IAG and its companies.
"IAG companies require the repairer to have a minimum quality standard from MVIRC (in NSW or ACT) or a QRS-ISO minimum compliance. These standards include equipment level, competencies of tradespeople and licensing. We also look at overall historical performance data in terms of customer service, quality and cost of the job."
When it comes to measuring the performance of repairers within a DRP, quality, customer service and cost are the primary criteria, IAG said. "Most repair jobs differ and often the market will set the price, as in other industries. We regularly conduct customer satisfaction surveys, system and quality audits. Sophistication in measuring the severity of the impact, and type of vehicle such as prestige models, forms part of the mechanism for determining cost efficiency."
Tendering for DRPs
There has been a lot of controversy within the industry recently over the tender schemes by SGIO and SGIC. Several bodyshops were left scratching their heads as to why they missed out.
According to IAG, a tendering process generally encourages competition and helps ensure that high quality repairers will be successful. "Many repairers haven't been faced with a tender process before, because for years they have operated in an industry where competition has not been promoted for success," the company said.
"Depending on business and customer needs in different markets, generally as long as a smash repairer meets our customer service, quality and cost efficiency standards, we would consider working with them."
IAG said that if a DRP-allied repairer was very cheap to use but was cutting corners or using inferior parts, this would be a breach of contract and termination of agreement may occur.
AAMI policy
According to AAMI's national manager for corporate communications, Ralph Johnston, the AAMI car insurance claim and repair process does not constitute a direct repair program in the accepted use of the term.
The AAMI process involves a damaged car being delivered to an AAMI Customer Service Centre, where the company normally obtains two independent, competitive quotes from repairers it recommends. The customer is free to choose a repairer to provide one of the quotes.
The assessor reviews the quotes, including any quote from a repairer the customer chooses, and reviews what is necessary to properly repair the car. "We select the repairer who has submitted the more competitive and complete quote," Johnston said. "That will be the repairer who repairs the car. In areas not covered by an AAMI Customer Service Centre, we arrange the repair of the car in consultation with our policyholder."
According to Johnson, with the above proviso regarding AAMI and DRPs, the company currently works with around 600 repairers nationally.
"We are principally concerned with working with our repairers to deliver the highest standards of customer service," he said. "We have set performance targets around areas of cost, quality and timeliness, with each of these being equally important. We provide our repairers with a monthly report on their results to help them manage their own performance.
"The repairers we work with on a regular basis are required to observe the AAMI Accident Repair Standards and Code of Practice, introduced progressively in 2000/2001. These documents detail our expectations in terms of repairer performance and in turn what repairers working with us can expect from AAMI. We have also established an independent dispute resolution process for our repairers should problems arise they cannot resolve with our operational staff.
"Repair quality is of equal importance to AAMI as competitiveness and our policy of not using non-genuine parts is well known to our repairers. Any instances of such behaviour would be handled in line with the provisions of the Accident Repair Standards and Code."
Cradle to grave
Lexus is currently putting the final touches to its new DRP, according to Peter Strelnikow, customer service manager, Lexus Australia.
Lexus, with assistance from John Smith and Dianne Page from AARN, has developed a points rating scale for repairers to become members of the new program.
According to Strelnikow, AARN has devised a set of standards which Lexus used as a starting point.
"There are a lot of good repairers out there, but we wanted more for a prestige marque," he said. "Quality of workmanship is obviously the basic requirement. However, we also wanted to look at facilities and processes, and customer service standards."
Work on the new program began 18 months ago, with all existing Lexus repairers able to nominate for consideration. Lexus also asked its dealers to nominate repairers they would recommend.
The points system acted as a scaling measure to look at the top number of repairers. "It is a relative scale rather than an objective one," Strelnikow said. "We broke it down by state, because while a bodyshop might be the best in one state, it might not make the grade in another."
The criteria used for selection is based on Lexus' "cradle to grave" approach to its customers, he said. "We want to provide a seamless experience from buying to servicing to repairing. Lexus prides itself on its customer service and uses this to differentiate itself from Mercedes-Benz and BMW. With a prestige marque such as Lexus, the customers have a certain expectation of customer service from the dealership. The repairer is part of this extension."
The DRP is also being devised with the repairer's needs in mind, Strelnikow said. "They are expecting certain things from us as well. It is an economic proposition for them. They must be able to see a degree of profitability before investing in new equipment or premises. If they only see two Lexus vehicles a year, it will not be a profitable move. For those wishing to enter the program, we will obviously provide things for them like ongoing training and marketing assistance."
According to Strelnikow, there will be some repairers who will not be offered a renewal of their contract in the program because their facilities are not up to scratch. "There will be a small number who are not quite there, but who have the potential to join. We will say that we are interested in working with you if you bring your facilities or processes up to standard. We will also promise not to look at anyone in your geographical area for six or 12 months before opening it up to competition."
Strelnikow said the company had a rough number of repairers in mind. "We looked at the national Lexus car park and decided we would need x amount in Sydney and x amount in Brisbane etc, but we have not yet finalised the number."
Repair more, replace less
To become a member of a DRP, bodyshops need to attract insurers, according to Kevin Mark.
In his experience however, the average bodyshop manager feels that while his team is working harder, the shop is making less profit. Primary blame for this is usually directed towards the insurer's hourly rate.
Best practice bodyshops however, don't care about hourly rates, he said. "They just want volume." Mark recommends that bodyshops don't concern themselves about hourly rates. "[They should] fix their own problems first and they will soon see that there is more profit to be had on existing rates."
Mark believes that bodyshops should be aiming at the industry best practice labour efficiency of 120 to 140 per cent, rather than the average 75 per cent. He also says that it is possible to gain 15 to 20 per cent net profit, as opposed to an average of three to four per cent.
"To join a DRP, bodyshops need to attract insurers," he said. "[They need to] lift labour efficiency to 120 per cent and above, repair more and replace less, and deliver lower average repair cost, but not at the expense of their own profit."
While paint companies prefer to remain peripheral to the debate, the majority have set up programs to assist bodyshops wanting to join DRPs and to remain competitive.
"We focus on helping our shops to be as competitive as possible through cost control and shop floor efficiencies," Tim Loden, general manager of Akzo Nobel said. "Our Acoat program is currently helping a growing number of Australian shops in areas such as layout and design, improved labour efficiencies, shop management techniques, work flow scheduling and material cost control.
"For shops that wish to pursue DRP relationships, we provide help by evaluating the impact of the DRP on the business, and by helping to develop marketing tools to win the relationship."
Fair for all
It is never easy to pit one shop against another in order to decide which one gets the work, but it would be a shame if the systems being used by work providers were not at the least, fair to all. To be fair, they have to take into account a wide range of variables and it is not clear that this is the case with every provider at the moment. Perhaps it is up to repairers to persist in putting their case for inclusion forward. Coherent and logical proposals might make some providers look again at their networks and wonder whether costs should be the only criteria.