It has been a couple of months since we were given the opportunity to hear from some of our service department clients who presented a brief but pointed “report card” on how we are doing as an industry and what we could do better (from their viewpoint). I am referring to the panel discussion at the Vehicle Service Contract Administrator’s Conference (VSCAC) in Las Vegas titled “A Customer’s Perspective – From Service Directors.” Has anyone brought new insights back to their administration as a result of the feedback?

For the past five years we have been gathering at the F&I/VSCAC Conference and Expo for a variety of reasons including, but not limited to, networking opportunities, launching new products and partaking in workshops and presentations by industry experts in an effort to gather new ideas to take our businesses to the next level. We have talked to other industry professionals, allied industry experts, a variety of technology vendors, parts providers and inspection agencies.

And yet, while we continue to do a lot to grow and improve our products and services, it seems that we don’t really ever ask our dealership clients how our service and performance rank from the perspective of the service department. Even while acknowledging that an unhappy service department can get us tossed out of a dealership at warp speed, we somehow tend to ignore this very important partner.

During the planning of this year’s conference, the VSCAC Advisory Board (comprised of the principals and high-level executives from several prominent TPAs, underwriters and technology providers) proposed the idea of inviting a panel of service directors to the conference to ask them the following: How are we doing? What can we do better? How can we add value for you and our product offerings?

I was thrilled when David Gesualdo and the folks at Bobit Business Media involved in developing the conference contacted me to ask if I would be interested in recruiting and moderating a panel of this nature. The concept suited me as I have been a longstanding advocate of developing cooperative, all-inclusive relationships versus those that exclude any of the key members of the business organization.

However, we wondered if this would be the right environment for this type of discussion and whether any of the conference attendees would be interested in listening to service department folks possibly “complain” about how we treat them? We talked about how the VSCAC had always been limited to those in or directly affiliated with the business of selling and/or administering vehicle service contracts and other related products. Now we were contemplating opening the conference up to our dealer clients. Could we be running the risk of divulging some of our “secrets” concerning industry claims adjudication methods, or worse – would we be creating a potentially hostile environment?!

Furthermore, would we be able to find anyone from a dealership service department that would be interested in taking the time from their busy schedule to participate in such a panel? We pressed forward thinking that more positive than negative results could come from this fresh concept. Heck, we might even learn something new!!
Through combined efforts we were able to find four willing participants to come and talk with us: Bill Buckley, Roger Camperi, Paul Knotts and Scott Ramer.

We polled the Advisory Board and came up with a number of topics of interest:

• Online/electronic claims submission
• Service drive sales and menus
• Training and technology
• Independent inspections
• Claim reimbursement levels

Although the panel session was scheduled for 45 minutes, there was so much interest that we ran long (thanks to David Trinder and F&I Solutions for sharing their sponsored break time). A number of attendees indicated that we could have spent even more time delving deeper into some of the more salient subjects. As a matter of fact, after the hour-plus session concluded, five or six attendees “rushed the stage” to engage the panelists and ask further questions.

An overview of our panelists’ viewpoints relating to some of the more notable topics is listed below:

Online/Electronic Claims Submission

It was widely accepted that online claim submission would be the best overall solution compared to some of the traditional faxing or phone methods used today. However, while the dealership representatives agreed that they were able and willing to proceed with this method of claim reporting, no administrators that they do business with are currently offering this technology. The primary advantages from the dealership’s point of view were:

1. More accurate and confirmed claim submission; when claims are faxed the repair facility is never really sure the fax was received and if the fax was legible.
2. Faster and more accurate tracking of the claim status and/or payment status; the time savings for both parties would be tremendous if the dealership could go online and view the status of the claim.

Service Drive Sales and Menus

The timing couldn’t be better for offering service contracts and other products from the service drive considering people are keeping their vehicles longer (9.4 years average age for cars and 7.2 years for SUVs according to Ramer) and they are looking for ways to minimize their risk by purchasing extended coverage. Ramer said his dealership has recently placed a dedicated sales representative on the service drive to act as a greeter and to lead the customer into conversations about these types of products. They also have notices and reminders posted that these products are available.

The other panelists whose dealerships offer service contracts on the service drive revealed what most of us already know: the absence of consistent sales/marketing and compensation plans usually causes this venture to falter or fail completely. Additionally, the lack of effective training and technology creates issues when trying to establish an on-going endeavor in this arena.

The panel indicated that the most important thing to remember when implementing any service drive program is to make sure that all parties in the dealership involved in the process are informed from the very beginning as to what the arrangements and agreements are and buy in to the concept. It is especially important that information relating to procedures, responsibilities and commission arrangements is communicated to the proper parties.

Training and Technology

There was universal consensus that the service department is most often forgotten when it comes to training, especially in the area of service drive sales of service contracts. While their agent may come to visit on occasion or work with them when claim issues arise, there isn’t much attention in the way of training or ongoing support. It would be a welcomed change if the agent and/or administrator offered the service department personnel some additional guidance.

Independent Inspections – Dealer Self-Inspections

While the current inspection system works relatively well, the processes could be greatly enhanced according to Knotts. Under current procedures, the downtime varies dramatically depending on the circumstances but it is always a significant disruption.

While most inspectors possess satisfactory mechanical knowledge, issues can arise when they are questioning a technician that is fully trained on specific vehicle makes and performs repairs on them on a daily basis. In some cases, claims are denied due to deficient inspections. The possibility of an inadequate decision is greatly increased if the inspector arrives when the technician is not present and the inspector makes a decision without any communication with the technician regarding diagnosis or teardown.

The issue of inspectors’ attitudes was also mentioned. Camperi said he has had some of the best and some of the worst experiences with inspectors. The biggest hurdle is trying to find someone to contact about inappropriate attitudes and behavior.

The introduction of a dealer self-inspection process would be beneficial as it would certainly help to decrease service bay downtime and the length of time the customer’s vehicle is in the shop. As new car/truck dealerships, this is they are already accustomed to performing factory warranty repairs in this way. However, comments from an administrator attendee indicated that a self-inspection program would not be desirable as it could be like the “fox watching the henhouse” and an independent assessment would be necessary to satisfy their underwriter’s requirements. Certainly more discussion on this subject is warranted.

Claim Reimbursement Levels

Reimbursement amounts for parts, labor and sublet items are acceptable and dealerships are generally satisfied with the various pricing arrangements, according to Buckley. The main issue in this area occurs when administrators insist on the dealership using aftermarket parts. Most dealerships understand the need to save money and they would be willing to discount their OEM parts down to factory warranty pricing but they shouldn’t be forced to install non-OEM parts they can’t warranty. However, if this pricing structure is going to be required, it should be set up in advance so the dealership doesn’t have to call in for every claim and negotiate with the administrator.

The dealers have a valid point; however, I am not recommending that we discontinue claim cost savings initiatives such as the reduction of parts and labor reimbursement levels when dealing with loss control issues. I am proposing that when remedial action or loss control plans are implemented, it is done only after the appropriate due diligence is performed to determine all the factors involved in causing the unacceptable loss experience. It is also important to communicate the plan of action to the service department management and let them know that they can and will go back to normal reimbursement levels when the losses come into line. This communication will make them true partners in your efforts and will remove some of the adversarial attributes of implementing these cost reduction initiatives.

In closing, I wonder if anyone has modified their approach or any of their procedures or philosophies as a result of the feedback from these service professionals. Did any of it make an impression? Are you planning to amend any processes relating to communication with your service department client partners?

Should we conduct a similar panel during the 2011 VSCAC to expand on some of the topics discussed this year? Should we add other topics? I welcome your thoughts and your feedback will be forwarded to the VSCAC advisory board, which will allow us to remain involved in creating the agenda for our next conference.

The vehicle service contract industry has been serviced by the independent inspection industry for many years, but issues still plague inspection agencies, service contract administrators, their clients and contract holders. A call for greater accountability is in order.

Vehicle service contract administrators require independent inspections prior to making decisions about the validity of claims for a variety of reasons and circumstances. Some of these reasons include

• verifying the vehicle’s odometer reading
• verifying that an actual covered “failure” occurred
• determining the extent and the cause of damage
• confirming there are no vehicle modifications, commercial use or physical damage

While these are all legitimate grounds for interrupting the flow of the claim process, the assignment of an inspection has historically been viewed as a cause of considerable disruption, expense and loss of productivity for the customer, the dealership/repair facility and the administrator.

There is no questioning the validity of the occasional call for a second set of eyes and ears to verify reported findings, substantiate that the vehicle hasn’t been abused or confirm that some other non-covered condition exists. However, many in the industry have been questioning whether something can be done to further enhance the process to make it more dependable and efficient.

The matter of turnaround time is only one frustration related to independent inspections. Another issue is the credibility and qualifications of the independent inspectors of today. The reality is that not all inspectors are created equal.

As mentioned in previous articles and presented at various trade gatherings, the automotive industry has experienced tremendous technological changes and growth in the last 10 years. These changes have made the world of automotive mechanical repair a much more challenging environment than it ever has been. Service contract administrators often depend on a third party to help them evaluate reported conditions and the reported cause(s) of failures to determine whether a covered breakdown has occurred.

This process can be derailed when an under-qualified inspector is assigned to assess the situation. Sometimes the culprit is a lack of technical knowledge and other times it may be an indifference or inability to produce a quality report of their findings. Either way, the administrator, the repair facility and the consumer are usually caught in an untenable situation when the inspector fails to perform effectively.

Many factors can cause an inspection to go awry and some have nothing to do with the inspection assignment process, the inspection company or the inspectors themselves. In some instances, poor preparation or insufficient processes within the administrator can be blamed. In other cases, it can be the result of poor communication with or from the repair facility.

This occurrence is most prevalent in the area of diagnosis when component disassembly is required and information relating to the level of diagnosis or the stage of disassembly is miscommunicated by the repair facility or the administrator.

In other words, a number of factors can make the inspection process a positive or negative experience.

However, when the snafu is the result of an under-qualified inspector, administrators typically feel they have little recourse. They depend on the inspection agency that assigned the job to instigate corrective measures. In many cases, the agency has little or no leverage over the independent inspector.

When inspection agencies try to hold an inspector accountable (sometimes monetarily), they sometimes hear the following: “I just won’t do any inspections for that (service contract) company anymore” or “I don’t need to work for you anymore, because no one else beats me up like you do”.

Ineffective or sub-standard results in any other trade would certainly result in remedial action and/or loss of work. Apparently this does not necessarily hold true in the inspection industry.

Inferior Inspectors Give All a Bad Name

We certainly have indications that not all inspectors are created equal. However, it should be made clear that there are many very qualified inspectors working in the industry. The point is that the industry lacks standards or criterion to gauge the credibility and qualifications of an inspector.

Inspection agencies can inquire about whether the inspector applying to do business with them is “ASE Certified;” however, that measure alone is not sufficient to identify undesirable candidates.

While the agency is responsible for producing a quality final product (i.e., a written inspection report) that reads and translates correctly and represents the facts by painting an accurate picture, the theory of “garbage in-garbage out” does come into play.

In addition, standards relating to the manner in which inspectors conduct themselves and communicate with the administrator’s dealers and repair facilities must be spelled out and considered as well. Industry experts and inspection agencies largely agree that little can be done and little is done to regulate and control independent inspectors.

As a matter of fact, almost anyone can decide to perform inspections for a living. They can “hang a shingle” and start their business as an independent mechanical inspector. It is likely that hundreds of inspections are being performed every day by less-than-qualified individuals.

Until some sort of certification process is put in place, the overall quality of inspections will continue to decline. This industry needs a sanctioning body similar to the Association of Finance and Insurance Professionals (AFIP), which serves this function for the F&I industry.

Certification will instill the ethical guidelines, training and ongoing support that is necessary. This foundation is tremendously important to the service contract administrator’s bottom line because this is truly where the claim disbursement process starts in many cases.

As in other trades, a certification program would include requirements the candidate would have to meet to become an inspector. This would eliminate someone with limited or no automotive mechanical experience from becoming an independent inspector. Depending on the criterion, applicants may have to apprentice under an existing certified inspector for a period of time.

Short of creating a national inspector certification program, which would require cooperation from a number of service contract administrators and inspection agencies, a recognized industrywide “do not use list” could be developed. An independent group would need to be formed that would establish the benchmarks, review and monitor who and why an individual would be placed on this list.

In addition to independent inspectors, not all inspection agencies are created equal either. About seven to nine major inspection agencies serve the automotive industry, as well as a number of smaller entities that are typically start-ups by former independent inspectors.

As one would expect, some of these start-ups may lack the capital and infrastructure that a larger agency has in place and they often operate under informal processes and procedures. Considering almost all of the inspection agencies use the same pool of inspectors, the real differences from one agency to the other are in the controls, expectations and accountability each agency implements and enforces within their business model.

Technology Supports Value-added Services

While technological advances have certainly improved and sped up the inspection process, the next step is to create more timely and consistent methods to communicate credible inspection findings and other information to the administrator.

We are on the threshold of having the ability to communicate with inspectors while they are still on-site at the repair facility and review the photographic evidence in real time rather than waiting for the pictures to be uploaded to the inspection agency’s website the next day.

The technology is available and only waiting for the infrastructure to be implemented and embraced. In addition to a number of procedural benefits and the reduction of substitute transportation expenses, advances in this area could eliminate the need for certain re-inspections that will result in the savings of thousands of dollars.

Additionally, first-class technology and advanced processes are the initiatives that really allow inspection agencies to rise above the others and enable them to provide more accurate information in a timely manner. This is where agencies can seize opportunities to develop and provide value-added services that reduce the disruption factor, downtime and additional claim expenses that are part of the current inspection process.