What’s the Cost of Doing Business?

Not getting paid in full for parts, time and labor is easily one of auto glass shops’ biggest grievances when it comes to working with insurers and Third Party Administrators (TPAs). This, at least, is according to a recent survey conducted by AGRR magazine.

The cost of living varies greatly across the U.S., and for some rural or small-town auto glass shops, what TPAs are willing to pay doesn’t cover all of the costs associated with operating a business.

“Most TPAs do not take into consideration the higher expenses of the more rural shops, travel time and expenses,” one survey respondent noted. “The operating costs go up and all the TPAs do is look out for their bottom line without consideration for the shops. Example, where else in this country can you get shop labor rate of $35 per hour and nothing extra for shop materials and such?”

And he’s not alone; it’s an issue body shops are dealing with as well. According to an ongoing multi-state lawsuit against several major national insurance companies by auto body shops, State Farm has allegedly determined a method to set a market rate for repairs.

The lawsuit says State Farm uses a “half plus one” method, which calculates the total number of employees or work bays (whichever is fewer) in a market area and lists the shops from fewest employees or bays to the shop with the highest. After the list is totaled, the half number, plus one, is chosen to set the market rate.

Therefore, if there are 10 auto repair shops in a market area, the shop listed at number six would determine the market labor price. However, the document states it is unclear how the method defines a market area.

“All TPAs treat those of us who are serving outlying rural communities as if we are in the city,” said another auto glass shop respondent, “rarely taking into account increased cost of doing business due to distance from suppliers.”

Another commented, “Insurance companies say they have surveyed the labor and material rates in our area. They are not the least bit accurate. We operate in rural Colorado, and they try to classify us with the front-range rates. They need to be more accurate on their surveys.”

To read more on how insurance companies and TPAs stack up against each other, according to those in the auto glass industry, as well as additional comments, look to the January/February issue of AGRR magazine.

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