Industry
5 min read

Insurance 101

Written by
Kirk Carlisle
Published on
May 12, 2023

For as closely as insurers and shops have to work together, there are still significant knowledge gaps for each about what the other does. Unfortunately, it is not uncommon for each to make their best guess about the answer when they run into these knowledge gaps. Often these best guesses can derail what would have otherwise been a smooth process. So as a repairer, where do you fit in the process? 

As someone in the business of repairing vehicles, you're probably familiar with the general process of auto insurance claims. However, as a point of contact for your customers, it is important that you have a clear understanding of how the claims process works. Knowing the basics can give you the opportunity to help your customer through a difficult time.

An insurance claim form with the word 'claim' scribbled in blue ink, circled by colored toy cars.

When a customer comes to you with a damaged vehicle, here are the basic steps you can expect:

The customer contacts the insurance company to report the incident and file a claim.

The insurance company will initiate a process to assess the damages and determine the estimated cost of repairs. This may be based on your estimate, a virtual inspection, photos, or an onsite adjuster. 

Once the claim is approved, the insurance company will either send a check directly to your shop to cover the cost of repairs, or they may pay the customer directly, who will then pay you for the work. It is important to clarify this with all parties on the front end of the repair.

As a body shop owner or manager, you play an important role in this process by providing detailed estimates and communicating with the insurance company to ensure that repairs are completed correctly and safely. You will also need to communicate with your customers, answering any questions they may have about the repair or basic claims process.

We have looked at the basic claims process, but what about their coverage and deductible? For a shop, neither should be complicated. Here is why: Coverage is determined by the insurance company, and the deductible is the amount you collect from the customer at the end. Too many times have I seen shops try to become involved in determining coverage, only to get burned in the end. Why will a shop lose a coverage fight almost every time? Because coverage comes from a contract between the insurer and the customer. This is why I encourage shops to respond to coverage questions with “Call your insurer.” Your-shop Paint and Body is not referenced anywhere in that contract. Remember, if you say something is covered that turns out not to be, then it is covered by you. We do not get paid for that.

The deductible should be an easy part. What is the deductible? It is the amount of risk a customer assumes for the covered property. If there is a $500 deductible, that means the customer agreed to pay the first $500 of repair or replacement cost. When I was in a service advisor role, I always discussed the deductible with the customer when they dropped off their car and ensured they understood I would need to collect that amount when they picked it up. “Can you waive my deductible?” is a question we regularly hear from customers. The technically correct answer is always 100% ‘no’ because a shop can not make a coverage determination, and the deductible is part of the policy. Remember, the policy is a contract between the insurer and the customer. As we discussed earlier, you are not part of the contract. Also, in some states, ‘waiving’ a deductible may not be legal. Finally, waiving a deductible may capture the job, but is it worth it? Do you make a profit on a safe and correct repair while discounting it $500 or more? Ensuring everyone understands you’ll collect the deductible keeps it simple for all parties and will save you from the headaches a deductible can cause. 

Finally, here are some additional insurance terms commonly used in the repair process.

‘Diminished Value’ is the decrease in a vehicle's actual cash value due to being involved in an accident. How it is handled varies widely based on state laws, policies, and a number of other factors. 

‘First-party Claims’ are made by the policyholder to their own insurance company. First-party claims will generally have a deductible, and rental will often have a cap as outlined by their rental endorsement. First-party claims are often limited when it comes to seeking payment for diminished value.

‘Third-party Claims,’ on the other hand, are made by someone other than the policyholder - for example, if your customer was involved in an accident with another driver who was at fault. Third-party claim payments are limited by the First-party’s policy limits. This is important to keep in mind, as once the policy limit is reached, no further payments will be made. This is not usually an issue but can come up in larger losses. Third-party claims generally do not have rental caps or diminished value restrictions. However, like anything insurance related, this can vary by state.

‘Uninsured/Under-Insured Motorist Coverage,’ or UM for short, is a special coverage that steps in for a first-party customer when a third party is at fault but is either unknown or uninsured. It generally will function the same as a third-party claim but does usually have a deductible and can have rental limits. 

An estimator explaining repair process to a customer.

It is important to note that the claims process can sometimes be complex, and customers may have questions or concerns about their coverage, deductible, or how the repairs will be handled. As a body shop owner, you can help ease their worries by providing precise and accurate information and working with their insurance company to ensure everything is documented and the approved scope of work is understood by all parties.

Clearly understanding how auto insurance claims work is an important part of being a successful body shop owner or manager. By being knowledgeable and helpful, you can ensure that your customers have a positive experience and that their vehicles are repaired to the highest standards. Sticking to your role in the process will make the job run more smoothly and help you avoid doing work you are not paid for. Getting paid for the work you do is where Dents.co can help! With the Dents.co Damage Appraisal app, you can quickly and easily create 3D damage reports that fully details the scope of a repair. It also provides suggested repair times based on the actual damage and allows you to capture additional repair-specific operations. All this goes into a single-page report that easily imports into any estimating system. Try the app today, free for 10 days, at http://dents.co.

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