EagleMMS Blog

The Cost of Doing Business

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It's time to dispense with the idea that material costs are just the cost of doing business

The phrase "cost of doing business" gets misconstrued and often misused doesn’t it? More recently it is the go to tag line by adjusters everywhere to deny a materials portion of a claim. They’ll say "we don’t pay for that, it’s the cost of doing business". However this is completely and categorically wrong because without the use of certain materials the production of a job is impossible. Commonly this debate takes over abrasives, which it is worth noting that DA sander sheets on most lines are at $1.50-$2.00 per sheet at wholesale cost. However not only is it difficult to do a job without paper, it is outright impossible, what are adjusters advocating? Are we to sand down and scuff material with our fingernails? So if they are essential to the completion of a job why are they lumped into the cost of doing business? The answer is because it behooves insurance to keep claim severity low even if the statement itself is false. It is false because the cost of doing business involves, property taxes, insurances, occupational licensing, payroll, benefits, sales taxes, income taxes, equipment costs, building costs, depreciation of assets and other unavoidable expenses in the pursuit of legitimate business establishment, everything else is the cost of repairing a vehicle, not the cost of business. The line needs to be redrawn in this industry between expenses to keep your doors open vs. expenses to get a repaired vehicle out the door.

Another common claim by adjusters is that the only materials that should be paid for are materials that leave with the car. This is also categorically false. Whether or not it leaves with the car does not indicate that it is essential to the repair, nor that the material is free. Can you imagine telling your paint supplier you won’t pay a portion of your bill because abrasives and grinding discs never stay on the cars? You would be laughed out of business. So why are such bogus claims accepted from the side of reimbursement by insurance? You cannot do a quarter panel repair job without a spot weld drill bit, and that bit is likely to burn and dull out by the jobs end, so why isn’t eligible to be billed? It cost the shop money didn’t it? I find here however that the counter claim can be made by the shop that "Ok since you only pay for materials that leave with the car, we will put all used sandpaper, rolocs, masking, scuff pads, mixing tips, brushes, razors, cleaning supplies, tack rags, drill bits, cutoff wheels and everything else, in a box in the trunk. That way it leaves with the car." It's Crazy the hoops we jump through to get paid.

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There is no other repair, or heavy industry in the world that would accept these assertions made with the deliberate goal of reducing a shop's bottom line. So why do we? While these pressures may not have been so great long ago when inflation was more predictable/under-control, rates were better, and hours more plentiful, but because times have changed it is also time for shop administrators to raise long standing questions about what and how they are reimbursed and materials is a great place to start. There is no justifiable claim to let categories of materials walk out the door for free when they cost you money. It is not the cost of doing business, it is the cost of vehicle repair.

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