Are DRPs Doomed to Go Extinct?
by Chasidy Rae Sisk
The concept of a direct repair program (DRP) seemed pretty great when insurers first introduced it: They’d refer claimants to a contracted shop in exchange for certain concessions, such as reduced labor rates or free storage. But over the decades, insurers’ efforts to control costs led to shops giving more…and receiving less.
At the same time, advancing vehicle complexity far outpaces the rate at which insurers adjust their contracts – and their willingness to pay for necessary procedures – limiting many shops’ ability to keep pace with the future that’s raging around us. Are DRPs too archaic to survive the Big Bang of technology that’s racing toward the collision repair industry? Is it time for DRPs to go extinct?
“DRPs were okay when they first started,” recalled Matthew Gibbs (Turner’s Body Shop, Inc.; Luray, VA). “Back when we took Polaroids or sent rolls of film, insurers got the information they needed, and the shop received payment as soon as the repairs were complete. But with all the concessions they now demand, it’s degraded to the point that it’s detrimental to the shop.”
As of 2019, Turner’s Body Shop participated in six DRPs, but when a particular insurer refused to negotiate the contract and yelled, “You’ll never work for us again,” Gibbs had had enough.
“We were still working at rates that had been written 10 years earlier. We couldn’t charge for storage, and they wanted to dictate the repair. But what they think doesn’t matter because we have to follow the manufacturer’s guidelines. Then they started coming after our parts discounts, and the writing is on the wall for paint and materials. We’d send documentation in triplicate, and they’d still deny it. They want you to give it all away and try to make it up in volume, but we won’t play their games – they can pay our rates or the customer can.”
Since then, Gibbs has “reduced business relationships with them down to just two smaller insurers that are still willing to negotiate fairly, but if that changes, we’ll reevaluate those relationships as well. The bulk of my experience with DRPs has been give, give, give, but they never give back. Personally and professionally, I would never sign up for another DRP again.”
When Criswell Collision Center (Annapolis, MD) first opened in 2008, the shop was “pretty DRP-heavy because that was the thing to do – get into a relationship with insurance companies so they can ramp up the volume,” explained Body Shop Manager Kevin Marvin. “As we learned more about OE procedures and processes directly from the OEMs, we became the outlier in the market with higher average severity because we insisted on doing everything the manufacturers recommend to repair the cars properly. Insurers started pushing back and refusing to pay for certain items.”
Their attempts at bullying didn’t yield the response they’d hoped for. “When they threatened to remove us from the program, we told them, ‘Go ahead.’ We didn’t play their game. Although we now know that DRPs aren’t profitable, originally, we didn’t know what we didn’t know,” Marvin acknowledged. “As we got more involved with the manufacturers and realized the scope of what was involved in training, tools and equipment – and quickly realized insurers didn’t want to pay for that, even when their formal position says they will – discontinuing those relationships just happened organically until we now only have a couple left that are relatively reasonable.”
Greg Cline (Greg Cline Automotive; Winfield, WV) shared a similar story.
“We used to participate in many DRPs, including most of the major carriers, but we’ve now eliminated all but one when we made the transition to OEM certifications. About five years ago, we saw a trend that they were taking more and more freedom from the shops regarding parts and procedures. DRPs are not profitable at all if you want to repair the car right. Now, it can be profitable if you’re willing to cut corners, if you’re fine with accepting the initial estimate, working strictly off of that and covering up some damage. The customer only knows the car looks good; they have no clue what’s happening underneath the body…and that’s what will kill you.”
Shops identified a plethora of challenges associated with DRPs, all of which begs a single question: What’s preventing more shops from migrating to a non-DRP model? For many owners, it’s simply fear – fear of being steered against, fear of making less money, fear of losing their business.
“It was very scary when we lost our first DRP,” Cline admitted. “I was frightened, but a representative for that company told me flat out that, within six months, I would realize it was the best decision I’d ever made…and he was right. Most of our customers weren’t coming here because we were a DRP shop; they were coming here because of our reputation.”
“We get the work anyway because of our 13 certifications,” Marvin agreed. “If the manufacturer tells them to have their vehicle repaired by a certified repair center, they’re willing to pay the difference to come here and get it fixed right.”
“You’re not going to lose business if you provide good service and have loyal customers,” Gibbs offered. “We picked up more – and we actually get paid a reasonable amount for the work we do. Insurers like to threaten that you’ll never see their work again, but the same day we removed our first DRP, we received 14 open assignments from that insurer. Because it’s not up to them. The customer decides where to have their car repaired.”
Dedication to consumers and their safety largely contributed to all three shops’ decision to eliminate some DRPs, and none of them are shy about explaining the facts to a customer.
“We like to involve our customers a little in the repair process and explain their options,” Cline stated. “Sometimes, their complaints make a difference in the insurer’s willingness to pay for OEM parts and procedures, but the most important thing is performing a safe repair and being transparent with them. We always follow OEM procedures; if the customer doesn’t want to pay for it, we won’t fix their car because it’s not worth the liability.”
“Educating them up front that their carrier may not pay for certain items, which they’ll be responsible for, is vital,” Gibbs agreed. “Customers don’t necessarily like paying beyond their deductible, but they want their car repaired to pre-accident condition. We explain that it’s like healthcare: sometimes, there’s a deductible and a co-pay. We hate charging the customer, but we cannot keep taking those losses.”
“Sometimes, an insurance agent will tell our mutual customer that I’m not on the program anymore, and that gives me a chance to explain why,” Cline noted. “I tell them why I use OEM parts and why certain processes are necessary. Now, we can have an educated discussion, and they’re better equipped to make a wise repair decision on their vehicle.”
Because the OEMs design and test their vehicles, manufacturers are typically seen as the authority on restoring vehicles to their safe and proper pre-accident condition. Shops that pursue OEM certifications often express similar sentiments about their reasons for withdrawing from insurer contracts, and many shops believe that OEM certification may be the meteor to end the reign of DRPs.
“You CANNOT do both,” Cline stressed. “I know shops that claim to do it, but if you’re truly following the OEM repair procedures, you can’t be successful on the DRP because the corner-cutting and use of aftermarket parts would prevent you from doing an OEM-certified repair. There’s no way that you can follow the guidelines for both a DRP and an OEM.”
Although Cline picked up several certifications around five years ago, his market does not support the expense of investing in a plaque on the wall. “It’s not a big sale in our market, but I can understand how it would make a much bigger difference in a more populated area. Our customers are coming to us regardless; being certified didn’t change that…and dropping the certifications didn’t change the way we do repairs; we still stringently follow the procedures set forth by the OEM.
“All shops should be fixing every vehicle properly, whether you’re certified by that manufacturer or not,” he continued. “Shops that do the right thing will ultimately be successful, but our industry needs to remember that we are the repair professionals, not the insurance company. And we are the ones who are responsible for protecting our customers and restoring their vehicle to pre-accident condition.”
“After we got our first certification, we tried doing the balancing act between proper OEM repairs and placating the insurer, but we soon saw that the two were never going to work well together,” Marvin recounted. “We had to pick sides, and our volume has never been higher, despite our DRP volume being its lowest. Those concessions eat you up. I look at my financial records and can see it in black and white – there’s an obvious correlation between eliminating DRPs and becoming more profitable. Meanwhile, how much money did we lose over the years by trying to be diplomatic with someone who was stealing from us?”
“DRPs had their place at one time, but they’re no longer the ones in charge,” Gibbs insisted, predicting, “You see the writing on the wall, and it’s going to get to a point where you can’t work on certain vehicles without being certified because you won’t have access to the parts. If you’re not working toward certification, you’re out of business; you just don’t know it yet.”
Want more? Check out the November issue of Hammer & Dolly!