How should you view writing supplements?
Who can write supplements?
Relationship with the insurance companies.
Do you need permission to ask for a supplement?
During high school, I took a course in auto body. My favorite part was estimating and supplementing. At the time, 24 years ago, the flat rate was $17 per labor hour. Today its $40 and inching up.
I remember being baffled by the discovery that not all shops charged the same amount for repairs. How could this be? Same flat rate, same repair process, same crash estimating manuals, how could there be a difference?
“Some shops don’t write supplements. Either they don’t know how, or they choose not to,” was my instructors’ reply.
From then on, I could see that supplements had power. The power to make a profit or not. To get paid to do proper repairs. Yes, the power to ask for and get the money that I and that job are worth.
Who can write a supplement?
From the outside in, a new PDR shop or even body shop owner might be intimidated. “I don’t have the equipment or certified techs that XYZ shop has. I can’t ask for more.”
Really any shop that presents itself as a legitimate business can ask for more money for repairs. All that’s needed are a tax id number, a fax machine and a little courage.
To illustrate, I owned a body shop with a partner years ago. It was just us two in a shop where there was a room with a fan at one end and filters at the other that we called a paint booth. We had no frame machine (farmed it out) and no crash estimating software.
One of our first jobs was a hard front end hit. We tore it down and wrote it right and the adjuster was happy to pay us the $8400 it needed to repair. We presented ourselves as professionals and he never blinked.
What has this got to do with paintless?
Everything. Your willingness to ask for and do what it takes to deserve a supplement can mean the difference between profit and loss. Yes, even success and failure.
If you are not in a hail region, you might fall asleep here. Listen, this could prove useful when someone brings a repair to you with an insurance bid. Its happening more and more on minor dents.
Being willing to write a supplement is even more crucial for hail repairs than it is for collision damage. Why?
Your obligation is to ask for more
Here’s inside information from a manager with American National Insurance: “Every year we keep a very close eye on our supplement to claims ratio. If the supplements don’t reach ten percent of total claims made for that storm, we figure we were too generous and write lower on the next hail storm.”
Why would they do this?
Hail damage is the one kind of claim where big insurance knows for sure not every car will be fixed. There’s always the element of people who will live with dents in their car so they can spend the big check on themselves. In some storms where the damage is light, as many as half the cars won’t be fixed.
Last thing an insurance company wants to do is pay out more than they have to. To them it is the art and science of giving just enough to the non fixers to make them go away. Trouble is there’s almost no feedback from the non fixers. All they know is the check was cashed.
So the only benchmark they have to determine if they paid too much is you. Here’s where all your fear of supplements should fade away. They actually want you to ask for more. In fact, they are fully aware that an adjuster often can’t write an accurate estimate in the sun in the car owners’ driveway.
Add to that, many adjusters will bid a car low on purpose if they sense its a non-fixer.
Though few would admit, if they feel the car won’t be fixed, they will spend as little time as possible doing the estimate. Especially is this so in large catastrophes with many claims.
What about the claimant who demands more even though they don’t plan to fix it?
This is a good question as they will likely come to you wanting another (free) estimate. Should you blow fifteen minutes on a job you’ll never get? You’ll want to be discerning.
They might have a cousin who will fix their car. So if it leads to a referral then yes.
I like to test out each customer as I walk around their car. As you point out spots and tell them what might be trouble you can tell where they stand by their response. I will often ask without being confrontational, “Do you think you’ll get her fixed?”
I’m surprised just how candid people are, especially when they feel short changed.
“I’m just going around getting more estimates. Would you believe they only want to give me $1200 for this?”
You already know what the adjuster told them, but still its good to ask, “What did they say to do if more money is needed to repair your car?”
“Well, they said the body shop could call them if more was needed. But I’m not going to fix it, I just want what’s coming to me. I’ve been paying my premiums all these years, they owe me.”
This is where I stop writing the bid. Let’s leave this for a moment.
Insurance plays to win
Here’s how the insurance companies have set themselves up to win in a hailstorm. You already know their goals. Round up all the damaged cars, bid them, write checks and close the books on this loss. Its all about the numbers.
You know they write low checks on purpose. Here’s how they use the bank as a silent partner.
Because most cars sold today are financed, insurance companies have a fiduciary responsibility to protect the banks’ interest. In other words, the bank has used the car as collateral to loan money for the car’s purchase. Last thing they want is hail damaged or wrecked collateral.
Imagine them loaning $15,000 on a car now worth $2000 because its wrecked.
When a hail claim is made and the car owner gives the policy number, the name of the bank is right in the policy.
Can you picture the non fixer who thinks they just hit the jackpot being handed a check with his name on it…
right underneath the name of his bank?
“Why’d they put the banks name on there? I’m the one making the payments and paying all the premiums.”
Oh yeah. This is a first hand look at the entitlement based thinking of society today. I know you don’t think this way.
So Mr. non fixer who thought he was going to see a payday now stands before you wondering what to do. It is for this reason you want to be a legitimate business, at least in the eyes of the insurance company. If there’s a chance the customer will fix it, I offer to stand in for the bank.
I tell them, “If you want to fix it, we can send the check back in and ask them to put your name and my company’s name on another one.”
You must be careful here. This power can be misused. Remember the insurance company will want your tax ID number when they switch the check. You will get a 1099 tax form from them, whether you get paid for fixing it or not.
Some shops will commit fraud and give the check back to the customer minus a percentage for the taxes. If you plan on being around for a long time, be aware that many local governments love to pounce on this, even going back several years.
Stay on the safe side and remember the banks name was there for a reason. Now you stand in their place and can make some money while still protecting the banks’ interest.
Is there a way to fix a car and still get paid even though the bank’s name is on the check?
Yes, to avoid being issued another check and waiting for it to go through all the channels, I will hold a personal check until the bank clears it for them. Some banks need to see the car or will ask for it to be taken to a dealer. Other banks just need a copy of the invoice and then they will release the funds. The customer will then call me to tell me the check is good.
I do this and know it is not the best practice. I’ve never been burned.
The only time I was cheated was when I let the car leave without being paid. Once the car leaves you don’t have much recourse.
I told you the insurance company sets themselves up to win by leveraging the banks name on the check. Now I’ll show how you fit into this picture.
Remember the customer standing before you wanting to know how they can get all of what they feel is coming to them?
Can they get more?
Unless you or some other shop fixes the car, the insurance company is not going to give any more money to the insured. There are exceptions but usually it takes a great amount of grief on the insured’s part to do it. I know I’m not going to jump in and help them.
Sure you could make the argument that the check should be for the full amount needed to repair it. Big insurance knows all they really have to do is show good faith, which they’ve done by 1) giving a check and 2) using the supplement procedure to allow for more if needed.
From this, I hope you can see how you as dent technician and business owner are a most important part of this process.
A lot of noise has been made in the industry about keeping prices up. Being ready and willing to write and fax in a supplement is an important part of this too.
Think about the dent companies trying to fly under the radar and not be visible. They are stuck trying to work with whatever amount the original check was written for minus the deductible.
I must tell you it was a crazy world ten to fifteen years ago when the insured got a check for 5000 to paint his car and we would fix it for 2000. Flew all over me knowing the customer made more than I. Now the pendulum has swung the other way and we are back in control.
Paul Tobin asked this excellent question:
How did you guys strike up a mutual win-win relationship with the bodyshops? How do you keep them from feeling like you are taking work away from them?
This question is a good one because it fits in with the fear of writing supplements. Paul is really asking about overcoming the body shop’s fear of us as competition.
I must say, I was blissfully naive about this when I started in 1992. I once believed every body man or painter would also want to be a Paintless tech. Over the fifteen years I have met a number who have tried it. Some still have tools. Ironically, these are the guys who become my biggest supporters. They know its not easy to learn and they know they decided not to stick it out. Also, they love doing body work and they’re good at it.
I have seen shop owners and workers who did feel threatened by it. At the same time, they would call me to fix what they missed or a dent they caused.
When big insurance made it the default repair process for hail, more and more shops now embrace it.
I believe it will always be a source of contention to some body shop guys when they see minor repairs done by used car lot guys or minor dents done by us. If they are wise, they will put their customer’s needs and best interests ahead of their own.
Consider an estimator who sees a small ding in a door with a buffable scratch. Should he write it up for 300 or go ahead and try and schedule it and let you or I fix it for 125? Should he ask the customer to leave it with him for 3 days so he can paint it or call you and only have it for half of a day?
Our point of view might be biased, but still it is a moral dilemma. Bottom line is this: does the shop care more about short term profits or long term relationships with his customer base?
I like Paul’s question more because it shows what is at the heart of so many changes. Fear of how it will affect other’s perception of us.
We all want independence and the ability to make decisions for ourselves. Then we become self employed and yet continue to act as if we need permission for everything.
It is the secret motivation to being certified. It is the reason we join a trade organization or follow the forums. So we can see what the “industry” is doing.
Frankly, you need to liberate yourself from this self inflicted limitation. The minute you come up with a good idea you will feel resistance as you think about the negative reaction you might get from “them”. Fill in the blank on whomever them is for you. Please, trust me on this. Your imaginary friends and their imaginary approval ain’t making you any money.
Neither is the belief we all seem to have that if you do good, someone else must therefore have to suffer. Very few things in life are zero sum games where there is one winner and one loser.
Even if you or the body shop you work for feels you are taking a job from them, you’re not. Instead, you are saving their customers time and money which they are then free to go and spend somewhere else on something else. If your body shop is smart, they will find ways for that money to be spent with them.
Come to think of it, find a mirror and look into it and congratulate yourself for the contribution you are now making to the economy and yes, even the well being of your community.
When you save time and money using Paintless repair everybody wins and nobody gets hurt. You could well be in one of the few true win- win -win businesses of all time.
Till next time,
Tim