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How Your Insurer May Impact the Quality of Your Car's Repairs

How Your Insurer May Impact the Quality of Your Car's Repairs
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By Friday, 02 March 2018 12:35 PM Current | Bio | Archive

It happened: You’ve just been involved in a car accident. You’re feeling scattered and stressed about what steps come next.

Whether your vehicle has minor or major repair needs, finding an auto repair shop that provides quality work will be near the top of your to-do list, after taking care of any people involved.

Most drivers already have a repair shop they trust, but you find yourself steered elsewhere by your insurance company. Should you go to the insurance company’s preferred shop?

How do insurers and auto repair shops work together?

It is tempting for some drivers to use the insurance carrier’s suggested auto repair shop. Especially since they are referred to as “preferred” shops and typically don’t require waiting for an adjuster to review the damage and provide a settlement check first. But why do insurance companies have a list of preferred auto repair shops? And do these arrangements provide the best results for customers?

Insurance companies have established direct repair referral programs (DRPs). Approximately 90% of auto repair shops participate in a DRP. In exchange for referrals and a promise of increased business, auto repair shops agree to discount their rates. This is a significant win for insurance carriers, because they decrease their auto claims expenses, which increases their bottom line. But with lower payouts come tales of shortcuts being made.

Do insurers negatively impact repair quality?

When an insured decides to use one of the preferred shops, the carrier typically gets a say not just in the cost, but in the method for repairing the vehicle as well. Even if the auto repair shop doesn’t agree with the recommendation, it has to follow the carrier’s course of action. Otherwise, the auto shop won’t get paid.

Insurance companies impose strict guidelines on DRP members. These guidelines can include:

  1. Required use of salvaged or non-original equipment manufacturer (OEM) parts
  2. Limited brands of paint and materials
  3. Discounted labor rates
  4. Discounted parts rates

Since the cost to repair a vehicle isn’t lower for these vendors, the question becomes how repair shops still make a profit. The truth is the auto repair shop industry is struggling. It’s suggested that the strict guidelines carriers impose on DRP members compromises quality and safety of the vehicle after repairs are completed.

In some cases, there have been reports of owners taking their vehicles to another shops after repairs are completed and finding that the insurance company’s preferred shops lied about the work completed.

Recent issues resulting in lawsuits

While agreements with insurance carrier sound promising, they don’t always work out for the auto repair shop. In some cases, the extra liability they take on by following the insurance company’s requirements puts them in the middle of costly litigation.

John Eagle

Texas Auto Repair shop, John Eagle Collision, owed $31.5 million for their role in a couple being trapped in a burning car. While it may seem far-fetched, the shop failed to make proper repairs to the couple’s vehicle. Instead of welds, the repair shop used glue to replace the hail-damaged roof on the vehicle. This decision arguably saved them a few dollars initially but endangered the lives of their customers.

Nick’s Garage

New York body shop, Nick’s Garage, filed a lawsuit against insurance leaders Nationwide and Progressive, alleging the carriers refused to pay necessary charges to properly repair insured’s vehicles. The lawsuit reasons that the carriers refused to pay for necessary steps, didn’t allow enough hours and refused to adjust the time afterward. The case has just been reopened by the New York appeals court and a final judgment has not been reached.

Leif’s

Leif’s Auto Collision recently filed an antitrust lawsuit against GEICO citing unsafe repairs and cutting corners as the allegations. According to Leif, insurers force auto repair shops to cut corners and make unsafe or incomplete repairs to save the carrier money. He also alleges that more carriers than just GEICO are putting unsafe cars on the road to pad their bottom line.

If you’re involved in auto accident, it may be a good idea to shop around before going with the insurance company’s preferred list of vendors. This way you can be sure that you’re getting quality repairs and continue driving a safe vehicle.

Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.

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Most drivers already have a repair shop they trust, but you find yourself steered elsewhere by your insurance company. Should you go to the insurance company’s preferred shop?
insurer, car, repairs, impact, quality
754
2018-35-02
Friday, 02 March 2018 12:35 PM
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