Unmasking the “Cost of Doing Business” Myth
by Alana Quartuccio
Third party-payers are infamously known for their frustrating utterances.
Topping the list, of course, is the all-too-popular: “We don’t pay for that” – often followed by the old adage: “That’s just the cost of doing business.”
Let’s stop and think about that last one for a second. What exactly does the cost of doing business actually mean?
“The cost of doing business and your operating expenses are one in the same,” suggests Michael Giarrizzo (DCR Systems). “The cost of doing business is every cost that the business will incur if they never took in a car. Things such as rent, utilities, your subscriptions and staff. It’s those daily operating expenses that go into the business. Any cost we incur specifically related to a vehicle is a cost we would not have if that vehicle was not in our shop – that is not the cost of doing business, but rather the cost of the repair.”
“A lot of insurers put this downward pressure on everything they don’t want to pay for by throwing this blanket statement of ‘that’s the cost of doing business, so we don’t owe for it,’” observes Justin Lewis (Accurate Auto Body; Redmond, WA). “The fundamental difference between operating a collision repair business and repairing individual vehicles is that our overhead is our responsibility, but the expenses required to restore a damaged vehicle safely and properly are part of that specific repair,” Lewis explains. “Calling those repair costs the ‘cost of doing business’ simply shifts the cost of an insurance claim from the insurer to the claimant; that is not how indemnification is supposed to work.”
Masking costs associated with necessary steps like pre-wash or consumable materials is more or less a ploy in insurers’ bag of tricks to get shops to absorb those costs and look the other way. But these are real costs of the repair and they should be accounted for.
“Some of the things they push back on the most are consumables like drill bits, or different body supplies like wire wheels and erasers,” states WMABA President Kris Burton (Rosslyn Auto Body; Alexandria, VA). He also points to things like buffing materials that are needed in the paint process. There is also consistent push back from insurers on steps like pre- and post vehicle washing.
“They claim it’s a service but it’s not just a service. If we didn’t have that vehicle in the shop for repair, we wouldn’t have to wash it. We wash the vehicle two or three times: when it arrives, in the middle of the repair and at the end.”
Burton stresses the importance of this step, not only to decontaminate the car but also to identify damage. “Once the vehicle is clean, you can really see everything. Also, you don’t want to introduce a dirty vehicle to the facility as that can translate into a dirty workplace. It also protects tools and equipment, and your technicians appreciate working in a clean environment. It’s good for culture and morale; it’s the right thing to do.”
Lewis agrees that consumable materials like liquids and costs associated with pre-and post-repair washing of the vehicle are among the most popular things insurers claim to be “the cost of doing business.”
Protecting the vehicle after disassembly is another procedure insurers often try to pass off as the cost of doing business.
“Protecting the interior and trim panels are costs associated with the repairs and they need to be identified,” adds Giarrizzo. ”They have to be accounted for somewhere. It doesn’t necessarily have to be a billable line item, but the cost has to be associated with the repair in some way.”
Post-collision safety inspections are another crucial step in the repair process manufacturers require but most bill payers won’t want to reimburse for this unless an airbag or a seat belt is actually found to be compromised.
Giarrizzo equates it to the medical field. “There isn’t much you can have done in the medical world that doesn’t ultimately become a cost for care.”
Another procedure most insurers don’t count as a cost of repair is measuring. “Because of the way vehicles are made to absorb kinetic energy, they need to be measured first.
A lot of bill payers don’t want to account for the cost of measuring unless there was movement or alteration of the structure. I use the analogy of an X-ray. The medical industry expects to be paid even when the X Ray is negative. It is a necessary precaution because the risk of not uncovering an issue can be serious.”
Giarrizzo believes many shops unfortunately may easily fall for the pushback. “Unless you really think through it and realize the difference between the cost of doing business and the cost of the repair, many shops may feel as though they need to absorb the costs, like with pre-wash. It is part of a proper repair process. It’s a decontamination pre-wash. We look to remove any oil or grease on the outside of the vehicle. It’s a sterilization process.
“It’s often misunderstood, because the bill payer will try to convince a shop that it’s a cost of doing business and that no one else will identify that cost on a billable line,” Giarrizzo continues. “But today, you have to account for everything you do in a repair. In most cases, shops are working at a labor rate that is lower than what you’d pay to get a vacuum cleaner repaired. Technicians, repair planners, shop managers go through extensive training to repair vehicles that are technically safety machines on wheels. When you look at the difference in those standards, it just doesn’t make sense.”
At Rosslyn Auto Body, no exceptions are made if an insurer pushes back because the facility insists on performing no less than safe and proper repairs. “We are 100-percent OEM on parts, procedures and safety,” Burton relays. “We won’t compromise. Insurance companies pay according to whatever policy the customer has selected and that doesn’t always jibe with our certifications. An insurer may disregard all that and insist on a cheaper part they found in Georgia. So we’ve had more customers pay out of pocket and more vehicles towed out of our shop this year.”
Lewis agrees. “A the end of the day, every job is a customer pay. Whatever is not covered by insurance is essentially pushed onto the consumer.”
To help customers understand, Giarrizzo says the shop will often ask them where they get their oil changes done, pointing out that the labor rate for that service is likely double the reimbursement rate for collision repair work. “You can make a strong argument that the work being done in collision repair is far more intricate, far more concerning and carries much more liability than some of the mechanical service work. So you have to be able to account for those costs that go into that repair in a very detailed fashion because in most cases you are dealing with a substandard labor rate than other industries.”
Many variables come into play when it comes to involving the customer and passing costs their way. Ultimately, the shop has to convey to the bill payer the costs involved in order to get that policyholder reimbursed, Giarrizzo says. “It should be easy to convey that these are costs associated with the repair and they have to be put someplace. If not noted as line items, perhaps they can be added to administrative costs or repair preparation costs. There has to be an allowance there, otherwise these costs will have to be absorbed. We can’t afford to do that in today’s world.”
“Shops need to determine what their no demarcation line is, what they are not willing to compromise,” Burton offers. “Sit down and determine what things you aren’t willing to deviate from. It may be easier said than done and it can be hard. It can take years to build a business to that point.”
Repair documentation and management software like DCR Systems’ CollisionClarity can help shops document every step. “It can help make things much easier to explain,” Giarrizzo says. “It wouldn’t guarantee a policyholder will get reimbursed, but it makes it easier to understand. When things are easier to understand, it increases your chances of getting that policyholder reimbursed.”
Even the research that goes into the entire diagnostic process is a cost associated with the repair. “It’s not just research. It’s just not pulling up procedures,” points out Giarrizzo. “It’s actually reading it and interpreting it. These are costs we’d not have if the vehicle wasn’t in the facility.”
Lewis reiterates that the cost of doing business is keeping the lights on and paying for utilities, insurance and employee benefits. “Those are the costs of doing business. Anything that’s tied to an individual repair is the bill of operation. Whether we fix one car or a 100 cars, the operating expenses to keep my doors open, with or without those vehicles, is the cost of doing business. Anything else would be associated with the repair or the claim.”
Once that vehicle is in your shop, all items related to that repair are billable. Think about that the next time a third-payer tries to make it their business to tell you otherwise.
Want more? Check out the August 2026 issue of Hammer & Dolly!