B.C.’s collision repair industry under the Spotlight

“The traditional independent shop is, to all intents and purposes, doomed unless it has a system to interact with the insurer, parts supplier, accountant and government.” Unfortunately, far too few within the bodyshop industry heard this controversial wake-up message from Dr. David Bond who spoke at the ICBC’s c.a.r.Shop conference.

Bond, who recently retired as chief economist for the Hong Kong Bank of Canada, began the conference with the theme of “Surviving Change into the Next Millennium”. He cited how property and casualty insurers have changed the way that they do business, from generating reams of paper and in the process dividing and conquering bodyshops by forcing prices down and giving short shrift to customer service. This, however, has been prompted by a new breed of insurer, “direct writer” entrants, which have driven the modernization of procedures. In turn, traditional insurers have had to respond to remain competitive in their own right, he comments.

Using computers to generate interactive real-time reports (i.e., no paper), Bond says the new way of doing business has claims going to national call centers. The nearest certified shop is located and the customer is sent to it. “Now, the shop, not the insurer, is really in the business of handling the claim from estimate to completion.” This, he stresses, is where customer service efficiency has become an essential factor for survival. And, he predicts, bodyshops will have to be not only accredited, but also audited, “if you are not on the list, then there is no business,” he warns the industry.

As a result, further consolidation is inevitable for both p&c companies and claims handlers, in this case auto repair shops. For the shops, Bond says, “this means building brands, controlling inventories, and scheduling work effectively and efficiently”. And, he speculates on the future development of the market, “consolidation is massive, inevitable and it is happening at all levels. Management skills on the shop floor will have to take a quantum jump as [these shops] become claims administrators. And it is the underwriter who will control who gets the business.”

While all this is taking place across North America, Bond remarks that the world has been a different place in B.C. “For more than 20 years, there’s been this [insurance] monopoly. This has ended and it has forced the ICBC to adapt.”

Direct writers enter the fray

The same new entrants that have prompted traditional insurers to modify their business approaches have now entered the province, Bond notes. “They focused on customer service and price competition. They want to deal with shops without paper. They want speed and demand loaners. They decide who does the work.”

This left the ICBC with two options, he adds. The corporation could ignore the competition, or respond in a positive way to protect its marketshare because the provincial government wasn’t going to continue protecting the monopoly. ICBC chose to respond, Bond comments, starting with setting standards to protect its market. The c.a.r.Shop accreditation program gives customers the confidence that their repair needs would be properly taken care of.

As to what B.C. bodyshops can expect in the future, Bond believes there will be a further push to eliminate paper, plus an increase in the auditing of the repair process in terms of costs, customer service and timeliness. He also feels that the ICBC claims centers will become a thing of the past as the corporation moves to call centers to handle claims, “just as is happening in the ‘outside world’,” Bond states. “The speed of adjustment in B.C. to these universal market forces may be slowed down by ICBC, but it will not be stopped,” he predicts.

In addition, Bond cautions bodyshop owners that time is running out to adapt, starting with accreditation. “Get a system for handling accounts, ordering parts, communicating with insurers, dealing with accountants and the government, now! Start thinking about forming an alliance or possible merger in order to reduce overhead and remain competitive.”