I’ve heard that the the insurance wreck repair business can be profitable. I’ve also heard it can be a losing proposition if not handled correctly. What is the truth? Can it be a profit center or will insurance claim work just wreck my business?
Our answer this month comes from Don Owens, the dealer principal of Dothan Powersports in Dothan, Alabama. This large, highly-profitable multi-line dealership carries Honda, Yamaha, Suzuki, Polaris, Victory and UM products. They also do a thriving business on the collision repair side.
Don, I’ve heard that your dealership has been very successful in pursuing the insurance collision repair business. Why did you go after this business?
You know, we never like to hear of a customer having an accident on a powersports product, but we all know it is inevitable. We also know that wreck repair can be one of the most profitable kinds of work that we can perform in the service department. Since we acknowledge that wrecks happen, and that they are profitable to repair, it just made sense that we should be the dealer to repair them. We decided to become our area’s insurance collision repair "go-to" dealer. It was also a good way to differentiate ourselves from the discount stores … it isn’t their focus, so it has become one of ours.
How did you do this?
We started by contacting all the insurance companies. We let them know that we could complete an estimate and order parts within 24 hours. We provided them with a tour of our excellent facility. We built up the value of our award-winning service department. We discussed our reputation as an honest, reliable service-oriented dealership.
Don Owens from Dothan Powersports provided the answer to this issue.
What were some of the results of your efforts?
We have established a good insurance collision repair business. In fact, we have so much of this collision repair business, we have added dedicated people to help facilitate the wreck estimates and process parts orders during the busy season.
We recently signed an agreement with a major insurance company to be the regional repair facility for all of their insured wreck repairs. They have promised us a territory encompassing a 75 to 100-mile radius for doing all of their repairs.
However, this type of agreement is not given to just any dealer. You must have proven yourself to be reliable and having the ability to perform the repair quickly and completely. You have to agree to use their web-based software to report the repair status on a daily basis. An important part of this is to keep the insurance company in the loop.
Are there opportunities here for other dealers?
Yes! This company is actively looking for more of the right dealerships. This could mean a lot of additional and profitable business for your service department. All you have to do is start making phone calls and meeting with the right insurance people.
What are some of the basics that a dealer should know about this type of business?
Many dealers do not succeed in the insurance repair business because they do not charge or fail to charge enough for all their services. For example, start charging storage fees the day the unit comes into your service department. This is a normal charge for any repair or storage facility. If a tow truck takes a unit to a storage yard, they begin charging the insurance company storage fees, so why shouldn’t you?
In addition, you should capture the towing charges. You can demonstrate to the insurance company that you will cause less additional damage to the product (especially road bikes) than most commercial towing companies. This can be a profitable part of the insurance wreck business.
You can use a menu price for insurance repair estimates, or you can use actual hourly time. However, when you determine your pricing, you must ensure that your estimate fees are high enough to make this process profitable in case a unit is determined to be totaled.
The wreck repair business is very profitable work for our service department. We are paid for the estimate, we are paid to expedite the parts, we are paid storage fees and we are paid promptly when the repairs are completed. Plus, the insurance companies pay our retail price for parts and labor.
Interesting, I’ve heard not all insurance companies pay retail for parts and labor?
If they won’t, don’t take their business. Seriously, insurance companies will negotiate if you can demonstrate that you are the right dealer to be doing the work. They certainly don’t want to pay for the repairs twice. If they want to get it done fast and right, they will have to pay a premium for it.
In most cases, they need you more than you need them. In the powersports business, we’re in a better position to negotiate than the automotive dealers. In the auto industry, there are not only franchised dealers, but also independent repair facilities competing for the collision repair business. We are fortunate not to have this situation in our industry, so you should negotiate the terms that you need in order to make this a profit center for your business.