Posts Tagged safelite solutions

20 Years Ago

Twenty years ago today the United States subsidiary of Belron International Ltd. (Belron) operating under the trade name of Windshields America (WA) merged with Joe Kellman’s U.S. Auto Glass (USAG)/Globe Glass & Mirror (GG&M) companies to form a company named Vistar. The second and third largest automotive glass repair and replacement (AGRR) businesses merged on February 26, 1996. If memory serves me WA had 274 stores in 43 states and the retail arm of Kellman’s two companies, GG&M had approximately 200+ locations in maybe 20+ states. USAG was the network call center arm of the business covering all 50 states. The merger provided Belron with a majority shareholding in Vistar, but management control fell to USAG/GGA. WA had annualized sales at the time of approximately $ 225,000,000+ and USAG/GG&A had annualized sales were approximately $ 200,000,000+ so as one sales totaled $ 425,000,000+ with approximately 500 store locations.

At the same time Safelite Auto Glass (SAG) was the largest AGRR company in the United States both in the number of stores and total sales. SAG had well over 500 stores and sales of approximately $ 500,000,000+. So if you had been able to combine the largest AGRR company together with the second and third largest AGRR company’s sales would have been over approximately $ 925,000,000 in 1996. A very tidy sum by anyone’s measure. The race was on two determine who could become the true market leader in the United States AGRR industry.

Lo and behold just two and one half years later on December 17, 1997 the shareholders of Vistar and SAG decided that they could achieve their market goals better together than apart so they agreed to merge. SAG at the time was owned by the Boston based private equity firm Thomas H. Lee Partners. When the merger took place Belron received the largest shareholding followed by Thomas H. Lee Partners and Joe Kellman. After the merger Vistar was absorbed by SAG with SAG and Thomas H. Lee Partners holding management control.

As you would expect, when in just 1 year 9 months 21 days the three leading companies in any industry merge, attempting to bring together three distinctly different cultures would be a big challenge. Especially when the largest and smallest shareholders of the new SAG didn’t have management control even though they had considerably more experience in operating AGRR companies than the shareholder with control. I’m not going to delve deeply into what happened next, but the newly formed company lasted just 2 years 5 months 23 days before heading into bankruptcy via a Security and Exchange Commission filing on June 9, 2000. As reported at the time a SAG spokesperson said,

“In papers filed in U.S. Bankruptcy Court in Wilmington, Delaware Friday, Safelite, based in Columbus, Ohio — with 500 U.S. locations — listed $ 559.2 million in assets and $ 591.4 million in debts. A spokeswoman for closely held Safelite, Dee Uttermohlen, said the Chapter 11 filing was related to a debt-load from an acquisition three years ago–but added that the company has been renegotiating debt with creditors.”1

So with that bit of historical background of the two mergers that took place in 1996 and 1997, along with the fallout from those mergers with the subsequent bankruptcy in 2000; I read with interest the 2015 financial results released by Belgium based D’Iteren n.v., majority shareholder of Belron International (and its subsidiary SAG). SAG’s 2015 sales, as per a SAG press release from February 3, 2016 (follow link), are $ 1,500,000,000 ($ 1.5 BILLION). That certainly sounds like a lot of sales doesn’t it?

Looking back to the total sales of WA plus USAG/GGA plus SAG in 1996 ($ 925,000,000+) and reading the sales that was reported today for SAG (remembering that the company now comprises WA, USAG/GGA and SAG) I found it surprising. Very surprising. DollarTimes.com calculates the value of a dollar in one year and adds the cost of inflation to determine that value to today’s dollar. Using the DollarTimes calculator you will find that $ 1.00 in 1996 would equate to a value of $ 1.54 today. The site shows an annual inflation of 2.18% or a total inflation of 54.09% over the past 20 years. When you calculate the 1996 value of $ 925,000,000, today’s value is worth $ 1,425,313,518. So when you look at SAG’s reported 2015 sales against the 1996 sales you see a real growth of 5.24%.

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There has certainly been a lot that has happened in the AGRR industry in the United States over the past 20 years. While SAG has faced a number of challenges over the past 20 years they have always come out somewhat unscathed. Bankruptcy, legislative issues, what have you they seem to always come out on top. But in real dollar growth they’ve seen a 5.24% increase in sales. Seems small doesn’t it?

But arguably there is a problem if you only look at the growth in sales dollars over the past 20 years. Sales figures really don’t take into consideration calculating the effect of the large increase in windshield repairs that existed in 1996 versus today. Nor does it take into consideration the price compression that was wrought on the industry in the late 1990’s and early 2000’s by the insurance industry. Determining what those two factors have in the calculation of real sales growth is difficult as it requires you to look at both the industry’s and SAG’s 1996 mix of products sales and customer versus that mix today. SAG and Belron unquestionably know what those factors mean to the performance of the company, but I’ll leave that for speculation and debate by you.

In my looking back over the past 20 years I’m taking a positive spin as you can see that today there are competitors both old and new that are busy chasing SAG. Be they local, statewide, regional or national competitors; there are countless companies working hard to take on SAG and its position in the AGRR space. There are AGRR retailers, alliances, networks, collision and glass companies, internet platforms chasing after consumers, insurers and commercial customers alike that need the services that the AGRR industry provides. Competition abounds and although it is always difficult to take the throne from the market leader, you’ve got to continue to try at the local, statewide, regional or national level if you want your company to find success in the industry with you’ve chosen to compete.

So when you look back 20 years ago to today at the AGRR industry and at what the landscape was like then versus what it is like today, what comes to my mind is a joke about a pony attributed to President Ronald Reagan.

“Worried that their son was too optimistic, the parents of a little boy took him to a psychiatrist. Trying to dampen the boy’s spirits, the psychiatrist showed him into a room piled high with nothing but horse manure. Yet instead of displaying distaste, the little boy clambered to the top of the pile, dropped to all fours, and began digging. ‘What do you think you’re doing?’ the psychiatrist asked. ‘With all this manure,’ the little boy replied, beaming, ‘there must be a pony in here somewhere.'”

I admit that I’m an eternal optimistic and I always see the pony in the room, but I think that opportunities abound for those who want to take on any leader in any industry. Never give up. Never.
Just sayin’.

 

1. Desert News article titled “Safelite Glass files for bankruptcy after listing $591 million in debts”

2. http://www.tomfishburne.com / http://www.marketcartoonist.com

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Hobson’s Choice (a Free Choice or No Choice at All?)

I recently read the argument that attorneys for Safelite Group Inc. (Safelite) made relating to Connecticut’s Public Act-13-67(c) (2) in a glassBYTEs.com article. They argued that,

“it puts appellants Safelite Group Inc. and Safelite Solutions to a Hobson’s choice….”

Hobson’s choice[1] refers to a businessman by the name of Thomas Hobson who ran a livery in Cambridge, England in the 1600’s. Hobson required that every rider asking to hire one of his horses to always take the horse nearest the door. If a patron didn’t want to use that particular horse no other horse could be used. A “take it or leave it” choice. As another source on the origins of the phrase states[2], “A Hobson’s choice is a free choice in which only one option is offered.” I thought using “Hobson’s choice” in this particular instance an interesting one considering the origins of the term. More on that later.

This link to the summary of the act that was first introduced in the Insurance and Real Estate Committee of the Connecticut House and ultimately signed by the Governor of the State of Connecticut required that in the handling of any insurance auto glass claim in the State of Connecticut that:

“The act requires that a glass claims representative for an insurance company or its third-party claims administrator, in the initial contact with an insured about automotive glass repair services or glass products, tell the insured something substantially similar to: “You have the right to choose a licensed glass shop where the damage to your motor vehicle will be repaired. If you have a preference, please let us know. ” By law, appraisals and estimates for physical damage claims written on behalf of insurers must have a written notice telling the insured that he or she has the right to choose the shop where the damage will be repaired (CGS § 38a-354).”

Fairly straightforward.

A public radio program called “A Way with Words” talked about Hobson’s choice on one of the program segments. One of the hosts of the radio program, Martha Barnette tells us:

“The phrase Hobson’s choice goes all the way back to 17th-century England. For 50 years, Thomas Hobson ran a stable near Cambridge University. There he rented horses to students. Old Man Hobson was extremely protective of those animals. He rented them out according to a strict rotating system. The most recently ridden horses he kept at the rear of the stable. The more rested ones he kept up front. That meant that when students came to get a horse, Hobson gave them the first one in line—that is, the most rested. He’d let them rent that horse, or none at all.”

Perhaps you see where I was thinking that Hobson’s choice was an interesting phrase for the attorneys to use in their argument. First, Public Act-13-67(c) (2) is a duly enacted Connecticut law so their client really doesn’t get a choice in deciding whether they wish to follow it or not. As is their right, they can dispute the law which is obviously why the company is filing the appeals to the act which provides Connecticut consumers a choice in what company repairs or replaces their damaged auto glass. It’s just that at his stable Hobson didn’t want the same horse(s) being used each time by his patrons. Hobson wanted his patrons to use only the horse(s) that he wanted them to use. You can understand why Hobson wanted to rotate his horses so that each got equal use. Safelite wants Connecticut consumers to only use the auto glass repair and replacement (AGRR) company that Safelite wants them to use. In this case it would appear that Safelite is Hobson.

By enacting Public Act-13-67(c) (2), the State of Connecticut took steps it deemed appropriate to protect consumer choice for residents of the state. There are any number of AGRR companies operating in the State of Connecticut for consumers to use when they sustain auto glass damage. So is it “A Matter of Self-Interest or Consumer Choice”? Isn’t it Safelite that is attempting to provide Connecticut consumers with a Hobson’s choice?

Just sayin’.

Take it or leave it

Another example of a Hobson’s choice would be from Henry Ford’s book titled My Life and Work and written in 1922 referencing options available for the Model T Ford.

Any customer can have a car painted any colour that he wants so long as it is black.”

 

[1] Merriam-Webster.com meaning of Hobson’s choice

[2] Wikipedia.org description of Hobson’s choice

Other sources:

http://www.glassbytes.com/documents/07302014SafeliteLettertoCourt

http://en.wikipedia.org/wiki/Hobson’s_choice

http://www.merriam-webster.com/dictionary/hobson’s%20choice

 

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Just Sayin’ Blog – A Matter of Self-Interest or Consumer Choice

Dominos

 

Last June 3, 2013 Dannel Malloy, Governor of the State of Connecticut signed a bill that was passed by Connecticut’s House and Senate the previous month into law. This link to the summary of the act that was first introduced in the Insurance and Real Estate Committee of the Connecticut House states,

“The act requires that a glass claims representative for an insurance company or its third-party claims administrator, in the initial contact with an insured about automotive glass repair services or glass products, tell the insured something substantially similar to: “You have the right to choose a licensed glass shop where the damage to your motor vehicle will be repaired. If you have a preference, please let us know. ” By law, appraisals and estimates for physical damage claims written on behalf of insurers must have a written notice telling the insured that he or she has the right to choose the shop where the damage will be repaired (CGS § 38a-354).”

This law seems to be a reasonable approach to provide and ensure consumer choice to the residents of Connecticut.

As it appears on the State of Connecticut’s General Assembly bill tracking web site the law – Public Act Number 13-67 – states,

 “AN ACT CONCERNING AUTOMOTIVE GLASS WORK.

To require an insurance company doing business in this state, or agent, adjuster or third-party claims administrator for such company to provide additional disclosures to an insured regarding such insured’s right to choose a licensed repair shop or glass shop where such insured’s motor vehicle physical damage or automotive glass work will be performed.”

Again, this language also seems to be a reasonable expectation for residents of the state. Everyone believes that consumer choice is a good thing right?

The signing of the law was reported by number of industry publications (glassBYTEs.com, Autobody News, Automotive Fleet) due to the dramatic effect that it would have when fully enforced on insurance companies claims management programs, as well as automotive glass repair and replacement (AGRR) industry players (Harmon Solutions Group, NCS/Netcost Claim Services, TeleGlass/Strategic Claims Services, Gerber National Glass Services, PGW Lynx Services, Safelite Solutions)  that provide network and/or Third Party Administrator (TPA) services to the insurance industry. AGRR networks and/or TPA’s tend to steer business to either company owned stores and/or to affiliated network repair or glass shops that conform to the pricing or service requirements of the network and/or TPA. That has been a long standing business practice of networks and TPA’s and it’s not hard to understand the financial benefit to these companies to continue doing so. The passing and subsequent enforcement of this law requires a pivot away from the long-standing AGRR industry practice of placing the decision of which company provides the repair or replacement into the hands of the consumer needing service and out of the hands of a network and/or TPA that has always been heavily involved in the decision. This also seems to be a positive for consumer choice. Again, everyone believes that consumer choice is a good thing right?

In order to protect its network and TPA business Safelite Group, Inc. and Safelite Solutions LLC (the Plaintiffs-Appellants) have gone to court against GEORGE JEPSEN, in his official capacity as Attorney General for the State of Connecticut and THOMAS LEONARDI, in his official capacity as the Commissioner of the Connecticut Insurance Department (the Defendants-Apelles) in hopes of overturning the law. The law clearly prohibits the steering of Connecticut consumers to specific repair shops by TPA’s and/or auto damage appraisers so one can understand the self-interest involved. Connecticut’s “Department of Consumer Protection” web page states that:

“Ensuring a Fair Marketplace and Safe Products and Services for Consumers”

The purpose of this government department is pretty obvious by its title. Public Act Number 13-67 protects the interests of consumers in the state and their “right to choose”; and the State of Connecticut unquestionably is within its rights to enact such a law, right?

If the State of Connecticut prevails in its defense of the constitutionality of Public Act Number 13-67 through the appeal process, as Safelite continues to fight to overturn the law, the future landscape of networks and/or TPA’s that provide AGRR services to consumers in the state will forever be changed. And if this law stands it will have an effect on the landscape of the AGRR industry in the entire United States. You can be sure that similar consumer protection bills will be introduced in state assembly’s’ across the country. Is that why Safelite is so strongly fighting this law duly enacted by the State of Connecticut?

If you visit the Safelite web site you will find that the company describes Safelite Solutions LLC as providing:

“….complete claims management solutions for the nation’s leading fleet and insurance companies.

The company currently serves as a third-party administrator of auto glass claims for more than 175 insurance and fleet companies, including 19 of the top 30 property and casualty insurance companies. Safelite® Solutions manages a network of approximately 9,000 affiliate providers and operates two national contact centers in Columbus, Ohio and one in Chandler, Arizona.”

The Connecticut law could serve to undermine a business practice that has existed in the AGRR industry since the late 1970’s. The genesis of call centers (a.k.a. a network or TPA) was when Joe Kellman, former owner of Globe Glass & Mirror, visited an auto glass call center facility in Bedford, England operated by Belron’s Autoglass and brought the idea back to the United States starting the U.S. Auto Glass Network. Since then, the impact, influence and control of consumer auto glass losses by networks and/or TPA’s operating in the AGRR industry has continued to grow each and every day. The networks and/or TPA’s obviously work hard to control and steer auto glass repairs and replacements to either company owned stores or to glass companies that agree to join and follow pricing arrangements that benefit the goals of the network and/or TPA. A business practice worth fighting for right?

The State of Connecticut is interested in protecting consumers in the state, who are in need of auto glass repairs or replacements, from being steered by a network and/or TPA. This law seems like a reasonable next step action in a state where those that are engaged in the AGRR industry are required to be licensed by the state (in my last blog I wrote about “Is it Time for Licensing?” in the AGRR industry). The Department of Consumer Protection oversees the licensing flat glass and automotive glass work.

We will have to wait for the appeal process to work its way through the courts to find out if this law stands, is amended or falls. But whether you believe that the law is a positive development for Connecticut consumers or you believe that the law violates free speech in commerce, the fight will continue as the stakes are too high. If the law passes through the appeal process and stands, it could be the tipping of the first domino and could be the beginning of big changes for the AGRR industry.

So where do you stand on Public Act Number 13-67? Are you on the side of consumer choice or on the side of the networks and/or TPA’s? Perhaps it depends on your own self interest.

Just sayin’.

 

Dominos

 

 

Associated Articles and Reference Material:

Zauderer’s Scope (page 589) https://www.law.upenn.edu/live/files/1566-keighley15upajconstl5392012pdf

http://www.autobodynews.com/news/regional-news/northeastern-news/item/7277-connecticut-governor-signs-anti-steering-bill-into-law.html

http://www.nldhlaw.com/content/uploads/2013/07/UpToSpeed_July2013A.pdf

http://www.glassbytes.com/2014/04/connecticut-officials-file-brief-in-support-of-anti-steering-law-in-appellate-court/

http://www.glassbytes.com/newsConnAutoGlassBillGoestoGov20130523

http://www.glassbytes.com/newsConnecticutSteeringPasses20130606

http://www.glassbytes.com/documents/03192014SafeliteSecondCircuitBrief.pdf

http://www.glassbytes.com/documents/04232014SupplementalIndex.pdf

http://www.glassbytes.com/documents/04232014JepsenBrief.pdf

http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=5072&which_year=2013

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Just Sayin’ Blog – Inconvenient Truth(s)

An inconvenient truth is a truth that no one likes to admit, but it is the truth nonetheless. A number of these inconvenient truths exist in the auto glass repair and replacement (AGRR) industry and everyone in the industry deals with them every day.

 

 

Over the years it has become more and more difficult to find success in the AGRR industry. Once upon a time, anyone could own a retail auto glass company and survive, but I think that has changed. One inconvenient truth is that some in our industry aren’t going to survive. As an owner you’ve got to master many new tasks that didn’t even exist 10+ years ago and some owners just aren’t capable of doing so. As a business owner you’ve got to figure out how to attract customers, especially in a time when the weather, the economy and miles driven are working against your business.

As we entered the new millennium, who in our industry really would have seen the need to understand the concept of search engine optimization (SEO) for a “website”? Who would see social media sites such as Facebook™, Twitter™, Craigslist, etc. becoming such an important way to market and communicate with customers; or that the Yellow Page Book™ that we once relied on would become a relic of the past?

Who, other than Steve Jobs, the co-founder of Apple®, would have thought that you could ask someone called Siri, the lady that lives inside my iPhone to list the “closest auto glass shops” near where I live in Chicago. Siri told me “Careful with the broken glass, David,” and then she gave me a listing of fifteen AGRR shops with two names (Safelite® Auto Glass and Gerber Collision & Glass) you’d easily recognize in the market because both are big advertisers in the local media. I also told Siri I was looking for “auto glass in Chicago” and she told me “I found fifteen glass repair shops in Chicago:” followed by a slightly different list of companies, but including the same two names aforementioned. Somebody is paying attention to their internet strategy aren’t they? Are you?

How convenient you make it for your customers to interact with you online will contribute to your future success. If you’re not willing to embrace innovative ways to grow your business in the ever changing marketplace you compete, you will not attract the customers willing to pay you the best price for the products and services that you provide. The truth is that if you’re going to survive and thrive as an AGRR retailer or as a network, you have to know that no one is going to turn the clock back to make it easier for you to be successful in your business. You have to compete in the marketplace with the hand that is dealt to you each day and if for some reason the way business is done changes tomorrow, you’ve got to figure out how to deal with it.

 

Another inconvenient truth is that AGRR networks provide great value to the clients that utilize the various services offered. As much as those who don’t participate in networks complain about the existence of them; clients vote with their feet and they obviously perceive value in the bundled services that networks provide. Can, or will, that change? Certainly it can change, but in the absence of a client deciding to take back direct responsibility for managing its AGRR losses (or a new platform that could take the place of the current networks that operate in the AGRR industry) it’s unlikely. We could certainly see movement of clients from one network to another network in the coming year(s) of course; and depending upon the relationship that your company has with the network that “wins” a new client you can hope that more profitable jobs come your way. But if that hope is what you need to make your business successful you might look for another source of jobs that you have more control over.

 

And staying on the topic of networks; I don’t think that a network that utilizes a “buy/sell” or “spread” (when the network “buys” the glass repair or replacement from an AGRR retailer providing the repair or replacement and then “sells” the repair or replacement to its client at a higher price) pricing model for its clients can continue to exist long-term in the marketplace. Relying on the AGRR retailers who actually do the repairs and replacements to accept lower and lower prices, while continuing to provide high quality repairs and replacements has to someday hit a wall. At some point AGRR retailers will push back and the networker that only makes profit on the “spread”  is going to have difficulty providing its clients with the same levels of service other competitors can provide in the marketplace. Those networkers must know this.

 

You can’t really find the greatest success in your business without surrounding yourself with the best people you can find. Basketball legend John Wooden was quoted as saying,

Whatever you do in life, surround yourself with smart people who’ll argue with you.” 

Sound advice from a true winner.

If you’ve been in the AGRR industry for a while you’ll remember one of the true gentlemen that help build it –Larry Anderson, President of Harmon Auto Glass back when it was a part of Apogee Enterprises, Inc. On his office desk in Minneapolis there was a small sign that read “Delegate Authority. Ruthlessly.” Larry surrounded himself with many of the best in the industry. There are some owners in the AGRR industry who don’t value the people that work for them. You can’t be successful if you don’t take care of those who work for you and let them have a voice.

 

Yet another inconvenient truth is that just because you have money, it doesn’t mean that you’re going to find success in the AGRR industry. History has proven that businesses owned and managed by those who have direct experience in the industry find the greatest success. Sadly, those that don’t have the experience, regardless of the size of their checkbooks, historically have tended to not be successful.

 

In writing my blog posts over the past year I’ve tried to raise issues about which I think those in the AGRR industry (or are associated with it) should give thought. I know that there are more inconvenient truths regarding the industry that no one likes to admit that I’ve not touched on, so please let me know what yours are.

Just sayin’……

 

  

 

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Just Sayin’ Blog – Network Participation Agreement – “Special Update”

  Cartoon courtesy of TomFishburne.com

 

“Can’t tell the players without a scorecard”… an old school expression but those words seem particularly relevant today, as one looks at recent events surrounding the subject of auto glass networks.

In my recent blog titled “Network Participation Agreement” from August 6, 2012, I discussed the ADDENDUM announced by Safelite® on July 20, 2012 regarding its www.SGCNetwork.com Network Participation Agreement.  It stated in the last sentence of Section 1.10 of the ADDENDUM, “Further, Participant shall not offer, directly or indirectly, to any insurance agent or its personnel anything of value in consideration for the referral of work paid for from the proceeds of an automobile insurance policy.” 

In that post, I also asked “do you think that Safelite® is also a participant, having signed the Network Participation Agreement and having to follow all of the sections of the agreement? If yes, then Safelite® has to follow the same rules as everyone else. That seems fair right?”

I guess that question entered the spotlight sooner than I could have imagined with the publication of the glassBYTEs.com™ article from August 23, 2012 titled “Safelite Funds Allstate Windshield Repair Marketing Material” written by Casey Neeley.

In that story, an Allstate consultant is quoted as saying, “Safelite approached us about creating marketing material for our agents to distribute and the first run of such materials was funded entirely by Safelite and provided to our agents”.

Now we get to the scorecard part because I have to wonder “which” Safelite it is that is funding promotional materials. Would that be Safelite® Solutions LLC, the self-proclaimed “third party administrator” of glass claims, or Safelite Auto Glass®, the self-proclaimed “largest vehicle glass repair and replacement organization in the U.S.” After all, both those entities are involved – but as noted in the prior blog, it is just not very clear about the role that Safelite® Auto Glass plays in the equation, either with the insurance carrier or its agents. If you follow the link at the end of this sentence, Safelite® refers to all of its organizations as “A Family of Companies” (*referenced from http://scheduling.safelite.com/companies.jsp).  

While this distinction, or lack thereof, is not at all apparent from any public information I find on this subject, one thing becomes crystal clear – the auto glass repair and replacement (AGRR) industry could certainly use a whole lot more transparency. In fact, one could make the case that much of the recent legislation efforts have been focused on creating such transparency in auto glass claims transactions, with particular attention, rightly or not, on Safelite® and its “Family of Companies”.

From the view of this blog, transparency only serves to benefit consumers in making informed claim decisions, making their policy dollars work to their fullest, and identifying safe auto glass replacement services.

I guess I have to rephrase my original blog question to now ask, “Do you think that Safelite® [Auto Glass] is also a participant, having signed the Network Participation Agreement and having to follow all of the sections of the agreement?”

One can only hope that in the interest of transparency and consumer informedness, the players involved make it quite clear about the roles and participation as pertain to Safelite® Auto Glass, an entity portrayed as separate and distinct from Safelite® Solutions LLC. And there is one organization that could answer that question today.

For the rest of us, the best course of action might be to continue to focus on the customer and provide exceptional value with outstanding transparency.

In the meantime, not a bad idea to keep the scorecard close by to recognize the players on the other team, and act accordingly.

Just sayin’……

 

 

 

 

 

 

 

 

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Just Sayin’ Blog – Auto Glass Networks – Part 1

 

In my last blog I wrote about Safelite® Auto Glass and its SGC Network, which is one of the networks (or third party administrator -TPA) that operates in the auto glass repair and replacement (AGRR) industry in the United States. Safelite® released a new addendum to its Network Participation Agreement that outlines new guidelines or requirements  on AGRR companies that either participate in the SGC Network as sub-contractor’s that Safelite® uses to do repairs and replacements for Safelite® or those AGRR companies that are forced to invoice work they do for certain customers through the Safelite® SGC Network. A reader of that blog suggested that I write about networks in general, so here goes.

While Safelite® is the largest AGRR network it is by no means the only one. All AGRR networks share some similarities, but each is unique in how it operates. Since there is no single AGRR company that covers every square mile of the United States providing services solely through its own AGRR technicians to consumers, every network must attempt to aggregate the services of thousands of disparate AGRR service providers into a single “quasi-retail” service entity. Each of the networks attempt to replicate a full service AGRR company that looks like it is capable of servicing each and every consumer with a single price and service offering that suits the needs of every insurance or fleet company customer it has in its network. That’s where the problems begin.

The first problem a network has to manage is the reality that each of the AGRR companies that participate in its network are not under its control, so a network has to deal with inconsistency of service levels to its customers. That is an issue; a really BIG issue. Currently, a network attempts to counter inconsistencies by stipulating increasingly detailed and specific guidelines in its effort to create some semblance of uniformity amongst a very large, broad and diverse set of participants. How do the networks accomplish that? It takes a great deal of work to try to herd all those cats.  Some do it poorly while some are more accomplished at the task.

It’s quite the challenge though, and perhaps never so clearly indicated as by Safelite®’s recent addendum whereby it now seeks to go beyond standards of repair and replacement practices to actually regulate the business conduct of its participants. By venturing into this area it may seem as a case in point that the network may be leaning into “too big to fail” territory, as it tries to corral a wide range of participants into a single product offering. It is likely to be very difficult, if not impossible for a large network to monitor and enforce all of the stipulations on which it seeks agreement from its numerous participants.

It makes me wonder if the newest Safelite® addendum might actually be showing off some of the real challenges that at least one of the largest network entities is experiencing in trying to solve a problem and meet its entire customer needs.

As I mentioned, every AGRR network must attempt to cobble together its own group of AGRR service providers (participant) attempting to provide a service model that it hopes attracts its targeted customer(s).

That’s the networks strategy. Now how about your decisions as an independent AGRR retailer?  It’s probably best to make your own assessment of how network participation fits into your overall marketing and sales strategy. You may not be able to avoid networks altogether, as most insurance companies require that billing for the service provided be processed through a network. But remember, in all cases, it is the choice of every AGRR company to decide whether it will or won’t participate in the opportunity to receive repairs or replacements from every AGRR network. As an AGRR retailer, you may prefer to do work for one or more of the networks because the network provides value to you in exchange for the value you provide. Some AGRR retailers choose not to agree to the pricing or service requirements that a network has on participating. That again is the choice of the AGRR retailer. It’s probably not a good strategy if you’re relying on a network for your repairs and replacements, but if you do you should be consistently working on lowering your costs as you can be assured that the network will be looking for you to lower the value you receive for repairs or replacements.

Networks are an established part of the AGRR industry and they aren’t going to go away. Legislative initiatives may be attempted state by state to help regulate or moderate how networks operate, but networks do provide value to the customers that use them. Whether or not the networks that operate today will be in business five years from now will be determined by the value, service and quality that it provides to its customers. Only the strong will survive. More on how networks operate in a future blog posting.

Perhaps the best advice for today’s AGRR retailer is simpler than we all have been thinking: “focus intently on the customer, listen to what they need, and set about to do the right thing.” A very simple and straightforward concept.

Sam Walton is quoted as saying,.

 

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

Stay focused on your customer and provide value to them and you should do okay.

Just Sayin’….

 

 

 

 

 

 

 

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Just Sayin’ Blog – Network Participation Agreement

On July 20, 2012 Safelite® announced through its www.SGCNetwork.com an ADDENDUM to its Safelite Network Participation Agreement/Safelite® Solutions Network Participation Agreement which effectively lays out the rules between Safelite Solutions LLC (Safelite®) and what they call the “notified party” or “participant” (participant). A participant refers to auto glass repair and replacement (AGRR) companies that repair or replace damaged or broken auto glass for insurance policyholders whose insurance companies or fleet companies use Safelite® to administer auto glass losses. The addendum is fairly straightforward and if you are a “participant” it is binding upon you unless you notify Safelite® within 10 days that you object to the changes in the new addendum. Of course, if you object to the addendum you effectively terminate your participation in the Safelite® network.

As reported in glassBYTEs on July 31, 2012 in an article titled “Safelite Releases Addendum to Network Participation Agreement”, Section 1.10 of the ADDENDUM states:

“1.10 Participant shall comply with each applicable insurance and/or fleet company’s program requirements or marketing guidelines, whether communicated by the company or by Safelite Solutions orally or in writing. Notwithstanding, Participant agrees and acknowledges that unauthorized use of insurance or fleet company trademarks, logos, or other intellectual property is prohibited. Further, Participant shall not offer, directly or indirectly, to any insurance agent or its personnel anything of value in consideration for the referral of work paid for from the proceeds of an automobile insurance policy.” 

The section seems reasonable. If a participant wants to do work for either insurance or fleet companies that utilize Safelite® for handling glass losses, the participant shall comply with the “requirements or marketing guidelines, whether communicated by the company or by Safelite Solutions orally or in writing” for those companies that Safelite® provides administrative control over glass losses. How would Safelite® ever prove “requirements or marketing guidelines” that were communicated “orally” to a participant? It’s the last sentence in the addendum that I’m writing about today. 

I find it interesting that the last sentence of Section 1.10 appears limited only to “any insurance agent or its personnel” by stating:

“Further, Participant shall not offer, directly or indirectly, to any insurance agent or its personnel anything of value in consideration for the referral of work paid for from the proceeds of an automobile insurance policy.”

My first question is do you think that Safelite® is also a participant, having signed the Network Participation Agreement and having to follow all of the sections of the agreement? If yes, then Safelite® has to follow the same rules as everyone else. That seems fair right?

I was also just wondering why the language of Section 1.10 refers only to “any insurance agent or its personnel”. Does the last sentence mean that you can provide something of value to an employee of a fleet company? Perhaps I’m missing something.

What I don’t understand is why Section 1.10 is limited only to insurance agent(s) and those who work for an insurance agent if what the section is attempting to do is to stop influencing auto glass repairs and replacements for insurance companies. Does Safelite® operate under the same rules that are laid out in Section 1.10?

Section 1.10 of the new addendum just doesn’t seem all that clear. Or maybe it is.

Just sayin’……

 

 

 

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Just Sayin’ Blog – Interview with Marc Talbert – Guardian Auto Glass

Today I’m talking with Marc Talbert, Vice President and Managing Partner with Guardian Auto Glass, LLC.   Marc was formerly the president of PGW Auto Glass Wholesale, LLC until he left the auto glass manufacturer and wholesaler in late 2009. In the Fall of 2010 Marc, along with Jim Latch (a former executive with PGW Auto Glass and PPG Industries, Inc.); and Jerry Ray and Neil Smith (who passed away on June 17, 2011) who together were founders involved with Glass Pro and Elite Auto Glass formed a partnership titled LRST LLC. The four equal partners joined with Guardian Industries and LRST was given the management responsibilities of Guardian Auto Glass, LLC. This unique partnership was formed to grow the number of stores under the Guardian Auto Glass banner. The goal is for Guardian Auto Glass to provide automobile glass repair and replacement (AGRR) services using a local ownership/management model. The model looks very similar to the one that Wes Topping and his partners (including Jerry Ray and Neil Smith) used to rapidly grow Elite Auto Glass across the western United States before selling to Belron in 2005. Guardian Industries Corp. had owned the platform for years.  At this time Guardian Auto Glass operates over 90 stores in Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, Virginia and West Virginia.

DR:  I know that you and your partners have been busy the past two years working on growing Guardian Auto Glass and I appreciate you taking the time to talk with me today Marc.

MT:  Thank you for the opportunity to participate.

 DR:  What year did you get your start in the AGRR industry and what was your first position in the industry?

MT:  My ARG (automotive replacement glass) experience began in 1994 as manager of PPG’s branch distribution centers in Dallas/Ft Worth.  I started my career with PPG in 1980.

 DR:  What were the positions and responsibilities you’ve had since you first started in the industry in 1994?

MT:  I relocated to Southern California in 1995 as manager of PPG’s western distribution locations, then to Pittsburgh in 2003 with responsibility for PPG Auto Glass, LLC.

 DR:  Which of those jobs did you find most interesting and why? And which was the worst one and why?

MT:  Honestly all were equally interesting because they presented increasing challenges and responsibilities.  Working in the field for the first 23 years of my career I anticipated the move to PPG’s corporate office would be the most intimidating, but I was fortunate to work with some very good people who made the transition much easier, and even enjoyable.

 DR:  You left PGW Auto Glass in 2009 as a President and your responsibilities at PGW included wholesale sales and distribution for the company. What made you jump from the wholesale side of the AGRR industry to retail?

MT:  I had the opportunity to partner with Jim Latch who I had worked with at PPG and two of our long-time customers Jerry Ray and Neil Smith.   Jerry and Neil brought significant and successful retail experience along with a proven business model, and together we saw an opportunity to partner with a company like Guardian to expand their retail business.   There remains quite a gap between the largest US retail provider and the next largest and one of our goals is to try and reduce this gap.

DR:  About a year after you entered the LRST partnership Neil Smith sadly passed away. Did his passing change the plans you’d made in your goals at Guardian Auto Glass?

MT:  Neil’s passing was certainly a shock to us and we miss his experience and counsel every day, not to mention his humor.  Our plans to grow Guardian Auto Glass will be more difficult to achieve without Neil but we have not altered our plans.

DR:  What are your key responsibilities at Guardian Auto Glass?

MT:  Jerry and I share the responsibilities for new market growth and acquisitions, and Jim has responsibility for managing the legacy Guardian locations and our administrative support center in Worthington, Ohio.  We all share responsibility for the management of Guardian Auto Glass.

DR:  Did you find the retail side of the AGRR industry a little harder than you had expected it to be?

MT:  I think you ultimately have similar issues with retail and distribution, or any business for that matter.  As you effectively pointed out in a recent blog you try to attract the best people and provide enough support for them to succeed without bogging them down with non-value added work.  That is the focus of our business and the core of our local ownership model, and what we believe differentiates Guardian Auto Glass in each of our markets.  Having local owners with a stake in our collective success changes many aspects and costs of traditional corporate management, and we believe is the key to growing profitably. 

The primary difference we’ve learned in retail is the need in some cases and with certain third-party administrators to retain customers who have chosen a Guardian Auto Glass location to complete work we’ve already sold through our local marketing and customer relationships.   This is a dynamic we did not face in distribution and one we are increasingly concerned with.

DR:  How many brick and mortar locations did Guardian Auto Glass have before you partnered with Guardian on this new venture versus the number that the company has today? How are you doing on achieving the strategic goals that were set for the first two years of the venture?

MT:  We currently pay rent at over 90 locations and I believe Guardian had 25-30 locations when we started.    The economy and lack of weather is certainly not generating a tailwind for us this year but we have continued to expand as anticipated and build a competitive infrastructure.

DR:  Many in the industry are waiting for Guardian Auto Glass to do something with the call center/third party administration (TPA) that you operate, especially with Jim Latch participation in the partnership. Does Guardian Auto Glass have any plans to become a bigger factor in the call center or TPA side of the industry?

MT:  Guardian’s network is not part of Guardian Auto Glass and is not operated by LRST.   As you point out Jim’s experience in this area provides a unique opportunity for us and we anticipate working with Guardian’s network to help expand both businesses. 

 DR:  What advice can you offer other retailers on how to successfully compete against Safelite®?

MT:  I don’t think we are in a position to provide advice to anyone, but we are concerned as I’m sure many ARG retailers are with maintaining access to our customers who have chosen to have their vehicle glass serviced by one of our Guardian Auto Glass locations.   We will continue to direct our efforts and investments in building our local customer relationships, and retaining access to those customers will be an area of increased focus for us going forward.

 DR:  Where do you see Guardian Auto Glass in 5 years? What will make you and your partners feel that it will be a success?

MT: Our mission is to grow profitably through our local ownership model and to continue our expansion, so we will need to see how we measure up at the end of our 5th year.   We remain excited about the opportunities in the ARG retail market and will continue to seek strategic partners and existing businesses in all markets to help us reach our goals. 

 DR:  How’s your golf game coming along? I know that in some circles you’re considered to be a tough guy to beat in a game.

MT:  Must be very small circles, however I would welcome a rematch with you and others free from the constraints of customer golf.

DR:  Perhaps. I look forward to the opportunity to a rematch. Some of my team members I’m going to change out, as I would guess you will too. Loser pays?

Thank you again for taking the time to talk with me Marc. I know that many in the industry are looking for someone, some company to step up and take on Safelite. Perhaps Guardian Auto Glass can be one that does. Good luck in achieving the goals that you have for Guardian Auto Glass.

Just sayin’….

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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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