Archive for June, 2012

Just Sayin’ Blog – Hopes for the New Year (Summer Update)

Image courtesy of Digital Cosmonaut

Is your glass half empty or half full in 2012? It depends upon your point of view.

Last January I wrote a blog titled ‘Hopes for the New Year’ and in March I updated the blog with how events were influencing that blog posting. In the original blog I offered the hope that 2012:

“turns out to be a great year for those in the automotive glass repair and replacement (AGRR) industry (or if great is too high a bar to set at the very least better than 2011)”.

I’ve talked to a number of people across the country and, by virtually every measurement, the first two quarters of 2012 certainly have not been seen as very favorable to the AGRR industry, especially when compared to 2011. So far this year it has been a bust for the vast majority for most in the industry.

There are a few exceptions of course. With one of the warmest winters on record, 2012 has started out with little help from one of the three key driver’s effects the AGRR industry – weather. During the second quarter a few markets have had some favorable bad weather. If you happen to have a store(s) in markets that have had hail storms this year such as the greater Dallas metropolitan area that was battered by big storms earlier this month business has probably been GREAT. The storms in Dallas could cost insurers up to $ 2 billion in automotive body and glass damage as suggested by the Southwestern Insurance Information Service and reported by www.propertycasualty360.com. Those hail storms in Dallas, along with large storms in the greater Saint Louis, Louisville, Denver and Indianapolis metropolitan areas, as well as those in a few other marketplaces scattered across the United States have certainly provided a welcome benefit for some in the industry.

The second key driver for the AGRR industry is the economy and by most reports that’s not working to our advantage either. A number of United States economic metrics as reported by CNNMoney shows that:

  1. consumer confidence is at a five month low
  2. home prices are at the lowest level since 2002
  3. the annual Gross Domestic Product in the first quarter of 2012 is down versus the fourth quarter of 2011
  4. in May the U.S. manufacturing growth has slowed, the May jobs report shows that hiring has slowed and unemployment rose for the month
  5. after taking out the lowering cost of gasoline, retail sales grew by 0.1% overall in May and
  6. inflation was down .3% in May, but after taking out the impact of gasoline and food inflation was up .2% for the month trending at an annual rate of 2.3% year-on-year.

None of these economic metrics provide very much good news for how the rest of 2012 will fare.

Additionally, as reported by Bloomberg.com the Federal Reserve Chairman Ben S. Bernanke announced last Wednesday that if the job outlook didn’t improve in the near term that the Federal Reserve would move to further stimulate the U.S. economy and then last Thursday the U.S. Labor department announced that unemployment claims were trending up over the past four weeks versus falling during last fall and winter. The nonpartisan Congressional Budget Office reports that the United States could slide back into a recession based on economic performance. The Federal Reserve Bank of Philadelphia announced last Thursday that “manufacturing conditions, the diffusion index of current activity, fell from a reading of -5.8% in May to -16.6% (in June), its second consecutive negative reading”. None of these reports point to an overabundance of positivity looking forward for the U.S. economy.

The U.S. isn’t alone in the world as the difficulties that we face on the economic front pale to the issues faced in Europe and if they don’t resolve their problems they could ultimately affect our economy. The European powerhouse Germany reported that manufacturing output was at its lowest level in three years, certainly not a good sign for the rest of Europe and anyone in the AGRR industry that compete in the European markets (i.e. Belron). And to add to the economic woes of the world, in June China hit a seven month low in manufacturing activity as reported by HSBC Group.

One key driver – miles driven – has been showing improvement. Earlier this year the price of gasoline was predicted to hit $ 5 per gallon with the rising price of oil, but with oil prices continuing to drop due to the poor world economy the national average price of a gallon of regular gasoline on June 18, 2012 was $ 3.533 as reported by the U.S. Energy Information Administration (AAA Daily Fuel Gauge Reports shows the national average price of a gallon of regular gasoline at $ 3.411), consumers have been given welcome relieve. There was more good news for continued increases in miles driven as reported in an article titled ‘Gas prices could hit $ 3 a gallon by autumn’ that was published last Friday in USAToday. In a blog post in mid-March I included the picture below left of a sign at a service station at the corner of LaSalle and Ontario in downtown Chicago, Illinois. The picture below right was taken yesterday at the same station and as you can see the price is well above the nation average.

March 19, 2012                                                                                                                   June 25, 2012

The U.S. Department of Transportation – Federal Highway Administration had reported that the cumulative miles driven year-on-year through March 2012 are up 1.4% or 9.7 billion more miles driven. The graph below shows how miles driven historically have grown since 1987 until the downward trend that started in early 2006.

Increased miles driven obviously turn into more opportunities for auto glass to be repaired or replaced, but only if the “do nothings” actually do something. Sadly, figures on miles driven out yesterday for April 2012 versus April 2011 point to a reversal in the trend that we had been seeing in miles driven with the month of April being down .4% year-on-year. Not a good sign.

While taking with someone in the industry recently I suggested that you could add another key driver that affects the AGRR industry besides weather, the economy and miles driven. That fourth driver would be Safelite Auto Glass. With Safelite’s capture of the second largest insurer earlier this year, the majority of the U.S. AGRR retailers found a dramatic fall-off in repair and replacement opportunities for Allstate Insurance Company insured’s.

Safelite’s continued dominance in AGRR markets across the country and its constant advertising campaigns that are seen and heard via its television and radio commercials is proof that Safelite is working hard to continue to grow market share. Many AGRR retailers have been curtailing their own sales and marketing spend because of the slowdown in repairs and replacements. You can be sure that Safelite’s non-stop advertising during this slowdown will certainly pay big dividends when economic conditions do begin improve in the future.

I left Safelite in late 1989 and my boss at the time used to talk a lot about “the pendulum swing”. He was referring to a business adage – when sales are good the sales departments of a company rules and has the most influence so the pendulum swings to their side, but if sales are bad the accountants rule and the influence of sales departments wane. I’m not sure how that adage is playing out at Safelite today with my former boss at the helm of the company, but I’m pretty sure that accountants are certainly influencing the decisions being made in many companies today and that’s not good for the people who work at those companies or for the long-term success of those companies.

How’s business where you work? Are you seeing sales improving or are sales falling behind? How are sales affecting you?

In a previous post I wrote:

People are the ultimate key driver to any successful business. Companies that don’t recognize the incredible value that attracting and then keeping the most talented people undoubtedly will suffer when weather, the economy and miles driven have a negative impact on the business. Recognizing that employees are the key driver that helps every organization find ways to innovate, increase customer service levels and create value for all stakeholders will allow it to flourish and remain competitive in the marketplace.”

With all that’s happening and effecting in our industry today, “Be Smart in 2012” and take special care of the ultimate key driver in your business – your people……

Just sayin’……….

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Just Sayin’ Blog – Auto Glass Repair & Replacement Industry Legislation in South Carolina ***UPDATED***

 

I have been following with great interest the legislative initiative that has been taking place over the last two years in South Carolina. HB 4042 is attempting to lay out the rules of engagement for all stakeholders (consumers, auto glass repair and replacement (AGRR) companies, third-party administrators (TPA) and insurers) of the AGRR industry in the state. Since HB 4042 was first introduced on April 6, 2011 in the South Carolina House and in the South Carolina Senate on May 24, 2011 the bill has gone through several versions. Now that the bill was passed in its final form by the General Assembly on June 6, 2012, it awaits Governor Nikki Haley’s signature to become law. If the governor signs the bill it will take effect on January 1, 2013.[1]  ***UPDATE*** On June 20, 2012 Governor Nikki Haley signed the bill into law.

The bill as passed is meant to:

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 39-5-31 SO AS TO MAKE IT AN UNFAIR TRADE PRACTICE FOR A MOTOR VEHICLE GLASS REPAIR BUSINESS THAT ADMINISTERS INSURANCE CLAIMS FOR MOTOR VEHICLE GLASS REPAIRS TO HAVE AN INSURED’S GLASS REPAIR BUSINESS REFERRED TO ITSELF OR TO USE INFORMATION TO SOLICIT BUSINESS.

Legislation typically requires compromise to reach agreement for passage and to be signed into law. The final version of the bill that was passed by the House and Senate chambers of South Carolina last week does just that. When stakeholders attempt to “improve” and influence legislation to provide their constituents their desired goals that they hope the legislation will achieve, legislation is generally weakened from the original version that was presented. That too happened. Is this bill a win win for everyone?

When you read through the bill and try to determine the sum of the parts, it appears that everyone got a little something. If you were a consumer you probably didn’t take any notice of the fight over this bill, but consumers did receive rights and protections to choose the provider they want to use if they file an auto glass loss with their insurance company. When a loss occurs many insured’s are looking for a recommendation as to what AGRR company they should use when they need a glass repair or replacement. If you’re a consumer insured by a direct writer (an insurance company that solicits and services business directly with the public through its own employees rather than through local agents[2]) and you have a glass loss you’re probably going to be directed to the AGRR company recommended by the TPA, even if it results in the TPA’s related AGRR company doing the work. Another positive section of HB 4042 is that when an insured makes a call to their insurance company claims department 1-800 number to report an auto glass loss; and the phone is answered by a TPA, the TPA that answers that call on behalf of the insurer must immediately tell the insured that the TPA is acting on behalf of the insurance company.

If you’re an AGRR company operating in South Carolina you certainly did receive some relief in the bill as there are restrictions on a TPA’s ability to attempt to steer your customer on a 3-way conference call. The bill does come with some reasonable restrictions as to the business practices that AGRR companies must follow when a consumer files a glass damage claim when insured in South Carolina. The bill has a number of important sections that restrict how an AGRR company markets to consumers who have insurance coverage for an AGRR loss. Some of the restrictions will place limits on the sales and marketing methods used by some AGRR companies who compete in South Carolina.

In the bill insurers received new mechanisms to protect its insured’s from those who attempt to improperly influence claims and the bill imposes penalties for those that are found using improper methods as defined by the bill. There is also language in the bill giving insurers the ability to pay only what is “fair and reasonable” for an AGRR claim and insurance companies may inform its insured that the insured could be responsible for paying any cost of an AGRR loss over what the insurer feels is a “fair and reasonable” price. There are additional provisions in the bill that would appear to benefit insurers regarding how auto glass losses are billed in South Carolina. I’ve detailed all of the provisions at the bottom of this blog post. Time will tell whether the insurers are happy with the final version of the bill.

TPA’s may refer an insured with a glass loss to any company that is a member of the TPA’s approved shops (including its own AGRR company) if the insured does not have a provider of choice at the time they file the claim. The TPA can require an inspection of damaged glass prior to replacement, but the inspector cannot refer or attempt to influence who the insured chooses to use for the repair or replacement during the inspection. If the insurer or TPA does not own a ten percent or greater ownership interest in an AGRR company the provisions of the bill do not apply. As with the insurers, TPA’s have a number of new rules that they must follow in the handling of auto glass claims for insured’s in South Carolina. Some TPA’s will have issues with this bill while others may not. A June 4, 2012 article in glassBYTE’s quotes a senior corporate counsel for Safelite as saying,

“We are very pleased with the compromise reached in the South Carolina Senate on HB 4042. We are hopeful that the House will concur and that it will be signed by Governor Haley,” says Brian DiMasi, senior corporate counsel for the company. “In the end, all parties came to the table and worked very hard to address their respective concerns. Safelite has always honored customer choice, and this compromise not only preserves that choice, but protects consumers by addressing the rampant fraud in the vehicle glass industry in South Carolina.”    

While many may have an opposing view to Mr. DiMasi’s comment regarding Safelite having “always honored customer choice”, I was surprised by what he said at the end of his comment where he stated that the bill “protects consumers by addressing the rampant fraud in the vehicle glass industry in South Carolina.” Rampant? Really? The bill certainly offers fraud protection for South Carolinians, but when you look up rampant in the dictionary you’ll find definitions such as “profusely widespread”, an “absence of restraint” and “growing wildly: growing strongly and to a very large size, or spreading uncontrollably”.

Does fraud exist in the AGRR industry? Does fraud exist in South Carolina? Certainly instances of fraud are committed by some in the AGRR industry, but rampant? I think that Mr. DiMasi’s statement is a grossly unfair characterization of the vast majority of AGRR companies that attempt to fairly compete in South Carolina by providing consumers who need auto glass repairs or replacements with excellent AGRR services at “fair and reasonable” prices.

I’m sure that one or more stakeholders see something in South Carolina HB 4042 that turns the advantage their way. With the passing of this bill in South Carolina the battle lines are drawn and there is a panoply of those interested in what’s next. Next year could bring another attempt in South Carolina to gain further advantage for one or more of the stakeholders, but the success that some see with the passing of this bill will help embolden legislative efforts to curb the activities of one or another stakeholder in other states.

Depending upon which side of this debate you support, all should give thoughtful consideration what it is you want. As the saying goes, “Be careful what you ask for,..” as to be sure there are always winners and losers in legislation passed into law and it’s possible that “…you might just get it”, but then again you might not get the outcome you were looking for.

Just sayin’……

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Additional information on HB 4042:

In its final version the legislation provides little wins for all stakeholders.

1.    Consumers get in the bill (or law if and/or when its signed):

a.    When filing an AGRR claim through their insurance policy the opportunity to choose who they want to do their AGRR claim and they can’t be required to use a particular provider. Both the insurance company and the TPA are covered under this provision.[3]

b.    Insured’s must be informed by the TPA that it is acting on behalf of the insurer and that the insured is not taking directly to their insurance company.[4]

c.    Once the insurer or TPA verifies coverage, both must find out if the insured has a preferred provider of choice for their AGRR claim.[5]

d.   If the insured’s provider of choice IS an approved vendor for the insurance company or TPA, the insurer or TPA must assign the claim and provide a claim number or reference number to the insured’s provider of choice.[6]

e.    If the insured’s provider of choice IS NOT an approved vendor for the insurance company or TPA, the insurer or TPA must confirm that the insured’s provider of choice will perform the required work at the insured’s rate of reimbursement for the work which is “fair and reasonable”. If the provider refuses the “fair and reasonable” reimbursement the insured may be told by the insurer or TPA that the insured is responsible for any amount over the reimbursement rate. The insured must be informed that they can use the provider of choice. The insured must not make statements about the warranty of provider of choice and refer any questions the insured may have regarding any warranty to the insured’s provider of choice.[7]

 

2.    AGRR companies get in the bill (or law if and/or when its signed):

The right to have an insured use them without interference if the customer chooses them as the provider of choice and they follow the rules laid out in the bill. The rules are:

a.    The AGRR company or anyone remotely associated with them must not:

                                          i.    Threaten, coerce or intimidate the insured into filing a claim;

                                        ii.    Engage in unfair or deceptive practices;

                                       iii.   Induce an insured to file a claim if the damage is insufficient to warrant a repair or replacement;

                                       iv.    Perform a repair or replacement for an insured without the approval of the insurance company;

                             v.   Suggest or represent that the windshield replacement could be free under the insured’s insurance policy or

                   vi. Market or advertise to consumers that could be insured’s who have an AGRR loss in virtually any way that their replacement could possibly be free under their insurance policy. [8]

b.    File a claim on behalf of an insured for a repair or replacement.[9]

c.    The insurer or TPA can require an inspection of the loss if they want by the representative of the TPA the representative cannot offer to repair or make suggestions as to who could do repairs during the inspection.[10]

d.    Violations of this section are subject to the provisions of the South Carolina Insurance Unfair Claim Practices Act.”[11]

e.    Notwithstanding the provisions of this chapter, the insurer has the right to inform the insured that the insurer will not guarantee the work performed by a provider that is not in the network of the insurer or third party administrator.”[12]

 

3.    Insurers and TPA’s get in the bill (or law if and/or when its signed):

a.  When an insured does not request to have covered glass repair work performed by a specific provider of choice, the insurer or third party administrator may refer the repair to a vehicle glass repairer who is a member of the insurer’s or third party administrator’s preferred network of providers.”[13]

b.   Strictly limits who can file an insurance claim for an AGRR loss.[14]

c.   The insurer or TPA can require an inspection of the loss if they want by the representative of the TPA the representative cannot offer to repair or make suggestions as to who could do repairs during the inspection.[15]

d.    The provisions of this section do not apply to insurers or third party administrators who do not have a ten percent or greater ownership interest in a vehicle glass repair business.”[16]

e.   Violations of this section are subject to the provisions of the South Carolina Insurance Unfair Claim Practices Act.”[17]

f.    Notwithstanding the provisions of this chapter, the insurer has the right to inform the insured that the insurer will not guarantee the work performed by a provider that is not in the network of the insurer or third party administrator.”[18]

g.     It is an unlawful practice for anyone that sells, repairs or replaces vehicle glass to:[19]

                                          i.    submit a claim to either an insurer or a TPA if the glass was not damaged prior to the claim being submitted;

                                              ii.    if the services were not provide;

                                          iii.    use a location to bill for the repair or replacement other than the one that the repair or replacement was actually performed in an attempt to charge a higher price,

                                             iv.    have authorization from the insured to do the repair or replacement;

                                              v.    show any date other than the actual date of the repair or replacement or

                                            vi.    make any material misrepresentations related to the repair or replacement.

h.  An AGRR company cannot advise a policyholder to falsely the date of the damage done to a vehicle that needs a repair or replacement.[20]

i.  An AGRR company cannot falsely sign on behalf of the policyholder any document regarding the repair or replacement.[21]

j.  An AGRR company cannot intentionally misrepresent the cost to the policyholder for a repair or replacement or tell the policyholder that the insurance company or TPA has authorized a repair or replacement.[22]

k.   An AGRR company cannot represent to an insured that the repair or replacement will be paid entirely by the insured’s insurance company.[23]

l.     An AGRR company cannot do further damage to the glass that is to be repaired or replaced in order to increase the scope of the repair or replacement or encourage others to do further damage.[24]

m.  An AGRR company must repair or replace the damaged glass back to the pre-loss damage and use approved and customary AGRR techniques.[25]

n.    An AGRR company cannot offer rebates or something of value to the insured who files a glass claim.[26]

o.    An AGRR company cannot misrepresent their relationship with the insured’s insurance company.[27]


[1] SECTION 3. Section 1Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (E)”

[2] As defined by Merriam-Webster.com Dictionary

[3] SECTION 1.  Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(A)”

[4] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(B)”

[5] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(C)”

[6] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(D)”

[7] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(E)”

[8] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(G)”

[9] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(H)”

[10] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(I)”

[11] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(L)”

[12] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(M)”

[13] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(F)”

[14] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(H)”

[15] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(I)”

[16] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(K)”

[17] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(L)”

[18] SECTION 1. Chapter 57, Title 38 of the 1976 Code is amended by adding “Section 38‑57‑75.(M)”

[19] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (A)”

[20] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (B)”

[21] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (C)”

[22] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (D)”

[23] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (E)”

[24] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (F)”

[25] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (G)”

[26] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (H)”

[27] SECTION 2. Chapter 5, Title 39 of the 1976 Code is amended by adding: “Section 39‑5‑170. (I)”

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