Negotiating with Insurers for Better Relationships
Wednesday, Oct. 31, 2007
By Rachael J. Mercer, Contributing Editor
Clark Plucinski (left), executive vice president, True2Form Collision Centers, and Roger Wright (below, right), vice president claims, Material Damage, AIG, began their presentation on negotiating with insurers by emphasizing some characteristics about business that each owner and manager should know.
“Know your numbers,” they encouraged. “Know what numbers you need, where you can find them, what is the benchmark, and whether you are competitive. Then look at what changes you can make to be competitive.”
The presenters discussed profit measures with participants, stressing that they should know about gross profit – including parts, labor, materials and sublet – and then knowing expenses and fully understanding overhead costs. They emphasized severity, and talked about drivers of severity: “There are many drivers of severity. Two that impact cycle time also are ‘Repair versus Replace and Recycled Versus OEM.’”
To be sure attendees understood cycle time and how it can be employed to gain a competitive edge, they asked questions of the audience such as “What is cycle time –when does it start and when does it end?” After discussion and defining the principle of cycle time, they discussed how owners and managers can convert cycle time into dollars.
After reviewing numbers and characteristics that are vital to shops when negotiating with insurers, Plucinski and Wright moved their focus to insurance companies, specifically discussing critical drivers for insurers. They began by defining “combined ratio,” a formula used by insurers to relate premium income to claims, administration and dividend expenses. Ultimately, the results from combined ratio indicate the profitability of the insurer’s operations by combining the loss ratio with expense ratio.
To be sure attendees understood the components of the combined ratio, Wright and Plucinski defined the loss ratio and discussed loss adjusting expense, allocated claim expense, unallocated claim expense, frequency and severity. To complete this section of the presentation, the presenters worked through factors that drive insurance company profitability, touching on each component involved in overall profitability.
In the third section of their presentation, the presenters moved into the area of negotiating, and began teaching attendees why they should negotiate and how they should go about the process of negotiation. Plucinski pointed out that owners and managers should not “bargain over position.” He went on to explain that arguing over position can lead to unwise agreements, and it is inefficient and endangers an ongoing relationship with an insurer.
Instead, he offered an alternative: “Begin by separating people from the problem; focus on interests-not positions,” he said. “Generate a variety of possibilities before deciding what to do, and insist that the result of the negotiations be based on some objective standard.”
Today’s participants learned:
• Identify the difference in insurers versus shop initiatives to remain profitable.
• Learn how to overcome differences between what corporate says versus what happens in the street.
• Find agreeable solutions to friction points.
Wright talked about ways in which owners and managers involved in negotiation can work around roadblocks to the process. “What if they won’t negotiate?” he asked. “In that case you should recast an attack on you as an attack upon the problem. Continue asking questions, and pause before making a decision.”
Plucinski recommended the book “Getting to Yes: Negotiating Agreement without Giving In,” written by Roger Fisher and William Ury, to session participants.
Together Plucinski and Wright summarized their session, and then encouraged attendees: “The most important thing for you is to have a strong understanding that you have the ability to negotiate and work with insurers. You can reach a level of consensus that works for you both.”