Are bodyshops being fairly compensated for paint and body supplies?
Column by TOM BISSONNETTE
In the intricate dance between insurance providers and bodyshops, a delicate balance is supposed to be maintained. Yet, beneath the surface, a stark reality often emerges—that of bodyshops feeling short changed when it comes to compensation for the materials they utilize in repairing vehicles. It’s a tale of underappreciation and undervaluation, where the true costs incurred by these essential service providers are often overlooked or discounted by their insurance partners.
Last year, in Saskatchewan, our provincial insurer Saskatchewan Government Insurance (SGI) commissioned a study on bodyshop materials because they felt they were paying too much. The plan was to get 20 shops to job cost five jobs each for a total of 100 reports. Unfortunately, for various reasons, the uptake was dismal and only 26 jobs were processed—and poorly at that. The results showed that SGI was paying more than double what material was used.
To verify this result, I contacted a shop that is using the Eagle MMS materials pricing software https://eaglemms.com/ and ran 13 of the 26 jobs through the software. I came up with a $2000 shortfall from what SGI had allowed! After seeing this result, I ordered a subscription so that I can run more jobs and check to see if these results are accurate. In addition to bodyshop supplies, I intend to review paint shop materials and “shop supplies” that do not touch the vehicle—things like booth filters, cleaning supplies, recycling and garbage pickup.
At the heart of the matter lies the discrepancy between the actual costs of body and paint materials and the reimbursement rates set by insurance companies. While insurance policies typically cover the expenses of repairs, including materials, the rates at which these materials are compensated may not always align with the market prices or the quality of the products used.
INSURANCE COMPANIES MUST RECOGNIZE THE INVALUABLE CONTRIBUTION OF BODYSHOPS AND ACKNOWLEDGE THE TRUE COSTS ASSOCIATED WITH QUALITY REPAIRS.
One of the primary issues stems from the reliance on standardized pricing models by insurance companies. These models, while convenient for streamlining processes, may fail to reflect the fluctuating prices of materials or variations in quality. As a result, bodyshops find themselves grappling with inadequate compensation that fails to cover the expenses incurred in sourcing and utilizing high-quality materials essential for delivering satisfactory repairs.
Furthermore, the negotiation power often tilts heavily in favor of insurance companies, leaving bodyshops with little room to demand fair compensation. In many cases, bodyshops are pressured into accepting reimbursement rates that barely cover the cost of materials, let alone the labor and overheads involved in the repair process. This not only undermines the financial viability of bodyshops, but also compromises the quality of repairs, as corners may be cut to minimize costs.
The repercussions of this imbalance are far-reaching. For bodyshops, it translates into diminished profitability and sustainability, forcing some to resort to cost-cutting measures that could compromise the safety and integrity of repairs. Customers, on the other hand, may unknowingly bear the brunt of subpar repairs or hidden costs passed on by bodyshops struggling to make ends meet. Addressing this issue requires a collaborative effort from all stakeholders involved. Insurance companies must recognize the invaluable contribution of bodyshops and acknowledge the true costs associated with quality repairs. This entails revisiting reimbursement rates to ensure they accurately reflect market prices and account for the use of premium materials. Similarly, bodyshops need to advocate for themselves and assert their worth in the repair ecosystem. By fostering transparent communication and leveraging collective bargaining power, they can push for fair compensation that upholds industry standards and safeguards the interests of both parties.
Ultimately, achieving equitable compensation for bodyshops is not just a matter of financial parity but a testament to the integrity and professionalism of the automotive repair industry as a whole. It’s time to shine a spotlight on the unseen struggles faced by bodyshops and work towards a future where their invaluable contributions are duly recognized and compensated.
I will be happy to share my results of Eagle MMS in a future article.
