State Farm To Announce Change In Deductible Handling in 5 States

[Delta Kits]

Quote From Glassbytes:

Car insurance company State Farm is expected to release a long-anticipated announcement regarding new car policy language and a change has the potential to significantly affect the auto glass repair industry. The insurance giant is rolling out a pilot program in five states that begins this summer, eliminating the deductible for auto glass repairs.

Starting with Kansas and Oklahoma, the program, still in the testing phases, begins June 1, 2005 and will be followed by Arkansas and Missouri on July 1 and Louisiana on July 15.

It gets interesting though, from State Farm (with our comments):

We have numbers from Claims that show that over the past few years, the average cost to repair is about $55 and the average cost to replace is about $350. (Note: This figure would be company-wide.)

Last we had checked, the average cost to repair was approximately $50, so the cost has gone up.

What we don't know is what the rate effect will be of the decision to no longer waive the deductible for glass repairs. As an example, suppose a policyholder has a $200 comprehensive deductible and a damaged windshield that's repairable. First of all, it will still be the policyholder's choice as to which way to go. Will that policyholder choose to repair, paying about $55 out of their own pocket? There is no way for us to know what most policyholders will do, so we can't estimate the rate effect.

Basically, according to other documents, this will be a trial to see if the costs go up. Also, they are not attempting to dissuade people from choosing repair.

If a policyholder has a windshield repaired and the repair fails, the cost of repair will reduce the amount of the deductible the policyholder pays to replace the windshield.

* Example: Insured pays $55 to have the repair made, the repair later fails and the insured needs a new windshield. The insured has a $250 comprehensive deductible. The amount owed (deducible) out of the insured's pocket would be $195.

This is a key point. Although the customer now pays out of pocket, this will still give us insurance reasons for repair versus replacement. Technicians can say "Since your deductible is $250, you might as well try a repair. It only costs $55, and if it doesn't work, it will be free to you when you replace your windshield." Now, we all know that these repairs won't fail, but your customer still saves money, and they don't have to worry about wasting money in the event that it does crack out.

Also, another key point, they will reduce the amount of the deductible by the total amount charged for the repair. Nothing says the repair has to be $55 only. Seems that whatever is charged will be "reimbursed" if the windshield needs to be replaced.

So, this is not nearly as bad as was originally thought. Trial program, 5 states, and still ammunition left for selling repairs (on top of all the other reasons we already use of course).

I know there's some out there that think this (or any insurance change) is the end of the world. We don't feel that it is. Let's discuss it, but let's make points and not let this denigrate to "sky is falling" type of posts.

[Repair1]

mmm... No the sky's not falling but what cloudy day we have, this could be interesting we will have to sit back and see what happens. Till then I'll keep repairing windshields the right way! I won't have to worry about charge backs.

Happy Repairing


Brian

[Layne]

Hmmmm--and you can bet that the insurance premiums will not go down!

[maxryde]

I don't see any language there in reference to how they will track repair failure's or applying the amt charged in the event of a failure toward replacement, I.E. Mr. customer pays x dollars for a repair on 5-1-05. Repair is reported as a failed repair 6-1-06. Dollars spent during the previous fiscal year is then applied to the replacement? I think not, they appear to be looking for loopholes to avoid providing coverage, as usual. They, (State farm) are leading the way on how to keep as many dollars in their pocket as is possable while limiting the customers value at the same time!! If they see this as a success you can expect the other insurers to be looking on to see what the outcome will be. If I were in one of those areas I would contact all of my previous customers and make them aware of the changes and advise them to repair prior to the change comming into effect and then to consider a change if they wish to continue having this kind if coverage. Of coarse it would need to be done on the QT so as not to get yourself involved in any more litigation!!

As far as sales are concerned I prefer to tell my customers that what we do is the same as an oil change, preventetive maintinence. If you maintain the shield or your engine it will last as long as the vehicle, barring a real bad hit. I get folks all the time who just had a new shield installed and wham a rock chip. Kinda like a murphy's law thing!! While replacement has it's place so does repair. I also hope the folks at State farm wake up and smell the true roses instead of ponying up numbers to validate a claim whether correct or not in this matter!! Scott

[StarQuest]

Jeff,

After reading this I already see one problem here where State Farm could be taken advantage of by all the replacement shops.

* Example 1: Customer walks into a local replacement shop and windshield is non-repairable? It's a 100% replacement job! Problem is insured has $200 deductible and isn't to happy about forking out that much money. "Sales person then says no problem...we can help you out. Will can do the replacement and you'll only have to pay $100"

*Example 2: Customer walks in with a repairable shield and only has a $100 glass deductible! Replacement salesman now tells the customer why repair when we can cover the whole deductible for you and it's free!!!

How can they do this? Simple! They just write customer a phony cash WSR receipt for $55 (which customer turns into insurance as a failed repair) and then gives out $45 more discount off deductible. Glass shops will eat this up and State Farm will still lose. Many of those shields that where supposed to be repaired out of insureds pocket will now be free at State Farms expense;)

[Delta Kits]

Starquest,

It's a possibility, but it's black & white insurance fraud at that point. Hopefully there won't be too much of it going on.

[BushWacke]

I called State Farm Glass Services (LYNX) about this issue, and they were shocked to even hear this and said i was the first to have ever told them this, which they believe is untrue. I then called a few local agents and they gave me the same answer.

[Dave M]

In the first paragraph of the State Farm quote it mentions eliminating deductibles for auto glass repairs. Later it mentions not knowing what the effects will be of no longer waiving deductibles for glass repair.
How can they not waive a deductible if there is no deductible for glass repairs?

[Delta Kits]

In the first paragraph of the State Farm quote it mentions eliminating deductibles for auto glass repairs. Later it mentions not knowing what the effects will be of no longer waiving deductibles for glass repair.
How can they not waive a deductible if there is no deductible for glass repairs?

This quote isn't from State Farm, it's from AGRR/Glassbytes, so i'm sure they just messed that up.

[StarQuest]

Jeff,

Your absolutely right about that scenario being flat out fraud but how could State Farm ever control it from not happening? Have to remember once they open the door to cash only repairs there's no way for them to monitor who the customer goes to for his damage or contest the repair was even performed.

I suppose they could restrict their $55(failed repair)discounted waived deductible to repair only shop submitted invoices and not to glass replacement/repair shops to prevent this from occurring. Highly unlikely though. Seems to me like a real possibility.