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GlassBYTES: State Farm ups labor rate for glass to $38 — but wants higher list price discount

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Business Practices | Insurance | Market Trends | Repair Operations
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State Farm has given glass network shops in midsize and major markets until Sept. 19 to accept a new market rate for glass replacement but receive less in relation to the National Auto Glass Specifications list price, glassBYTES reported Tuesday.

The rate of $38, up $3 from the $35 currently offered, will be proposed to rural-market “Zone 3” shops too, but they can keep receiving NAGS list price on the windshields, according to glassBYTES.

The magazine cited a copy of a Sept. 1 letter from State Farm to all National Glass Program shops and quoted a State Farm spokesman who confirmed the insurer was “adjusting” its glass rates.

That proposed glass replacement rate of $38 is now less than $10 from the average auto body repair labor rate reported in 2015, based on CCC Crash Course data, and from five of the 11 state body rates tracked quarterly by Mitchell as of the second quarter of 2016, up from one (Florida) last year.

Shops in Zone 1, which has the highest population, must decide if in return they’re willing to concede State Farm a price of 32 percent off Mitchell’s NAGS list price over the current 25 percent, according to glassBYTES and the letter. Zone 2 shops are expected to give State Farm a 24 percent break off list, up from 15 percent.

“There are no changes to the O&A contract at this time,” the letter states. “No action is needed from you to continue as an O&A participant shop. Your continuation in the O&A Program is an acceptance of the pricing changes.”

Learn more about labor rates, insurer reimbursement at Repairer Driven Education

Collision repair professionals seeking advice on labor rates and insurer reimbursements should check out “You Charge ‘How Much’ Per Hour?!” with Tim Ronak of AkzoNobel Automotive and Aerospace Coatings and “Who Pays For What? Interpreting the results for your business” with Michael Anderson of Collision Advice. The sessions are part of the Society of Collision Repair Specialists’ Repairer Driven Education Series from Nov. 1-4 during SEMA. Register here.

Glass repairers might still want to try to renegotiate the contract, however, as State Farm still seems to be renegotiating it unilaterally. (“Pray I don’t alter it any further.”) Experts have encouraged collision repairers to similarly consider negotiating a DRP contract rather than sign one without comment.

On Wednesday, the magazine offered a variety of reactions from glass shops, and it’s interesting to see the perspectives as well from the lens of the sister collision repair industry. One shop argued the rate should be $45 an hour, another welcomed the reimbursement pay raise, and another pointed out that other insurers are worse.

The last of these somewhat bears out Collision Advice-CRASH Network “Who Pays for What?” findings that State Farm is among the better insurers — though in this case, best is relative — in terms of reimbursing for auto body shop repair line items.

The most comprehensive was probably American Mobile Glass President Patrick McKernan. From glassBYTES:

“We currently offer customized pricing to State Farm, so our discounts are higher than the new rates are anyway,” he explains. “As far as labor goes, it is $3 per hour higher, which I don’t think will be making or breaking anyone. What they’ve done is taken more of a discount off the NAGS list price, and tried to supplement somewhat in the cost per hour labor. Unfortunately, it still decreases the overall pricing for many glass companies nationwide, which will ultimately continue to put pressure on our industry.”

Everyone wants a safe and proper installation, but unfortunately no one wants to pay for it, he says. “Sooner or later consumers are going to have to realize that there is value in quality installations and not just base it on the price, particularly as windshields become more feature enhanced,” McKernan says. “Just like our industry though, the insurance industry is consumer-driven, and when the customers’ main priority is price, that gets passed down to vehicle repair facilities such as ourselves, so we understand State Farm’s position in having to alternate the pricing.”

Read more on glassBYTES and see the letter through the links above and below.

More information:

“State Farm’s Offer and Acceptance Program to Change and the Offer Is Going Down”

glassBYTES, Sept. 6, 2016

“Will Shops Accept the ‘Offer?'”

glassBYTES, Sept. 7, 2016

State Farm-National Glass Repair shop letter

State Farm via glassBYTES, Sept. 1, 2016

Featured image: State Farm has given glass network shops in midsize and major markets until Sept. 19 to accept a new market rate for glass replacement but receive less in relation to the National Auto Glass Specifications list price, glassBYTES reported Tuesday. (liorpt/iStock/Thinkstock)

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