What can a customer do when an insurance company’s “customer brand promise” slogan doesn’t foot with reality, and the customer gets cheated in the end? Consumers are being fleeced. Or, hey, maybe they don’t have the right to have their cars and trucks repaired to pre-accident condition using original genuine OEM parts.
What you don’t know can cost you - We spent over two years researching the entire collision-repair industry. As part of our research we delved into the psyche of the unsuspecting body shop customer. What we found was astonishing. More than 75% of consumers expect their vehicles to be repaired to the “exact” pre-loss condition. Nearly 90% expect to have OEM or “the best” parts available used to repair their vehicle. Most consumers want the right to select which parts are used for repair, and believe that OEM parts are typically higher quality. However, most don’t know that non-genuine, lower quality parts can be used to repair their vehicles in the event of a collision.
What else don’t consumers know? How about the fact that when they are involved in a vehicle accident and their insurance company tells them to “take your vehicle to xyz body shop”, the insurance company has already completed the arm wrestling to ensure that the shop will comply with insurance company “part use” policies. This is typically where the customer gets sold a bill of goods about the quality of “alternative” parts – they mean non-genuine. Or, even better, they aren’t even told the repair parts are non-genuine.
The myth of the high quality aftermarket part - To dispel consumer concerns over low quality product, collision industry trade groups have developed “certification methods” for identifying “quality” collision parts manufactured by companies in Taiwan. Most of these efforts are nothing more than fancy acronyms like “CAPA certified” with no teeth for making any real or sustainable part quality improvements.
For example, Keystone/LQK (LQK is the largest supplier of non-OEM and salvage parts) has come up with the collision industries latest “quality” acronym, “AQRP” or Assured Quality Replacement Parts. Based on press releases and company comments about the program, Keystone/LQK appears to have jumped into the pocket of insurance companies to help push greater use of alternative parts onto collision claims.
Interestingly, research by Collision Week shows that few body shops (less than 7%) willingly use non-OEM parts, because of their concerns about poor quality and safety. Hey, what do those guys know anyway? Quality is a thing that is now legislated or outsourced … it’s not personal anymore.
The myth of Keystone/LKQ high service levels - For years we’ve heard the myth that fast delivery performance and high fill rates, provided by companies like Keystone/LKQ to their body shop customers, drive down collision repair costs for consumers. However, according to latest NASPC Parts Manager Satisfaction Survey this just ain’t happening.
While Keystone/LKQ was listed as a Top-4 non-OEM supplier by dealers, we see that very few dealers actually prefer buying from Keystone. While the non-collision aftermarket (AM) suppliers (NAPA, Carquest, O’Reilly) clearly excel in order-to-delivery time (OTD), Keystone excels at bupkis (i.e., nothing). So why would body shops purchase from a poor supplier … unless they were being forced to?
So what do we do about it? From the consumer’s perspective, we’d love to pull a “Network” and have everyone yelling “I’m mad as hell and I’m not going to take it anymore.” Realistically, however, until a consumer crusader like Ralph Nader steps forward to unclothe the Insurance Industry Emperor and educate consumers about the use of low-quality parts in collision repairs, the aftermarket parts companies will continue to capitalize on the uninformed consumer. And body shops will continue to be required to purchase lower quality parts from the poor service provider.
From the OEM’s perspective, the unwary consumer needs the information required to defend him or herself. As a consumer in our collision focus group said, “If I knew better, I would make an educated decision.” As long as the battle continues to be fought in the back hallways of court rooms and political offices, “what’s best for the consumer” will never include the customer voice. An aggressive marketing and communication effort is necessary for broad change:
- Aggressively pursue organized lobbying efforts to promote laws of full disclosure of part use, both when writing the insurance policy and at the time of repair.
- Conduct ongoing “voice of the consumer” research and use it to “show ’em the facts”.
- Get the word out by organizing broad consumer awareness efforts – using every means possible, educate the millions of customers – elementary school begins at your owners’ centers.
Afterward: What About Medium and Heavy Truck? The focus of this blog is primarily on light vehicles, but the concepts discussed are relevant for big trucks as well. Depending on the source, Carlisle estimates the collision parts market for heavy truck to be about $2.8 billion a year in replacement parts and that total accidents range from 150,000 to 225,000. The impact of the insurance industry on decision-making is less significant at this time. Owner Operators generally buy insurance and face many of the same challenges with their insurers as car owners do. Although, due to the complexity of trucks and the need to get them on the road quickly, relationships between adjusters and body shop managers still impacts parts sourcing. It is not all cost driven like auto. Furthermore, many fleets are self insured and thus there is no third party in the decision-making process. So far, DRP (Direct Repair Provider) shops are rare in heavy duty body shops. Notwithstanding all these differences, in 2009 Carlisle measured salvage and aftermarket market share of body shop repairs for a major Class 8 truck OEM over a three-year period. We found OEM share shrinking, while salvage is growing. We believe insurance practices are a key driver of this trend.