My Costs Aren’t the Insurers’ Business!

by Kevin Gallerani, AASP/MA President

I recently presented an invoice for seam sealer to my customer’s insurance company. The invoice reflected my list price, but refusing to pay that amount, the insurance adjuster asked to see my cost. “That’s none of your business,” I told them. And it’s not! 

Back in November 2005, the Auto Damage Appraisers Licensing Board (ADALB) issued a ruling on this matter. It states that the Board “unanimously adopted the following resolution: ‘No appraiser may demand an automatic discount from list price.’ Further, the Board ordered that this letter be sent to all licensees to remind them of their obligation under this resolution.” That adjuster obviously didn’t get the memo. Rather than accept the list price included on my invoice, they wanted to know my cost so they could apply what they consider to be an appropriate markup. Why should the insurer benefit from any volume discount I may have earned through my volume purchases? If they want to share in my volume discount then I think it only fair they share in helping to cover the increases I have experienced in running and maintaining my business! I don’t care what they think the markup should be; I’m entitled to my list price. 

If a part or material was installed or used on the vehicle – especially if it left my shop with the vehicle – and I have a list price for that item, I believe the insurer should pay that amount. The adjuster and their supervisor both emailed me several times to ask what my cost is and offer a 25 percent markup, which would be a discount from my list price. Why should I give them a discount just so they can save money on the job? I’m curious to see what the ADALB does with the complaint I’ve filed since it contradicts their 2005 ruling. 

Over the past 25 years, the cost of paint and materials (and of doing business in general) has gone up. And up. And up. And up again. Fuel charges, shipping costs, admin expenses, the need to staff more people and pay higher wages…as shop owners, we’re expected to come out of pocket for all those things, but who is paying for that? Certainly not the insurers who are trying to hold us to a 25 percent markup! What shops agreed to this, and why are they settling for it? Maybe that’s why our profit margins haven’t increased in so many years. 

At the same time, insurance companies continue to see elevated profits as they increase their rates time and time again. Progressive netted $1.9 billion in just the last quarter of 2023. Allstate had a net profit of $1.5 billion, and Travelers reported a net income of $1.626 billion.

They know our costs are going up. They’re well aware of how expensive repairs have become with the inclusion of ADAS and electronics on nearly every vehicle. They’re increasing their premiums to ensure they remain profitable, but they’re trying to hold us down by insisting on percentage markups, keeping the labor reimbursement rate as low as it is and whatever else they can do to stop shops from making the money we need to run our businesses more effectively.

Our shops are small businesses, and when we use our money on a job, our facilities are entitled to charge a reasonable markup. Insurers could pay these costs up front, but they don’t and won’t. Instead, we use our funds, which then aren’t available for other needs we may have. We’re in business to make money, not to loan it out without receiving anything in return. And if the insurers keep refusing to adequately compensate us, we have no choice but to fall back on our contracts with the customer which allow us to balance-bill the vehicle owner and let them deal with trying to be reimbursed by their insurer. 

Want more? Check out the April 2024 issue of New England Automotive Report!