February 20, 2012

Paint and Material Compensation and Cost Study

Executive Summary

The Paint and Material Compensation Cost Study is based on a peer-contributed panel of over 65 collision industry professionals. A cross-sample of representatives were interviewed to articulate their perspectives on the issues surrounding paint and material compensation from the viewpoint of their respective constituencies.

If requested, future topics will be discussed with the panel and feature a wide range of data, ideas and expertise. We anticipate the study will generate further discussion and introduce new evidence and ideas that
evolve in the collision repair industry.

Study Topic: Paint and Material Compensation Methodology

Innovative advances in paint and material technology have undoubtedly improved the quality of collision repairs in the United States. For some Repairers, receiving proper compensation for these advances have not presented a problem. For others, the lack of properly negotiated rates or alternative compensation methods have presented some serious challenges.

Although profitability on paint and materials may not be viewed as the most significant driver of a shop's success, it could be an inhibitor if not permitted to keep pace with future concerns.

On July 20th, 2011, in Salt Lake City, UT, the Collision Industry Conference (CIC) Refinish Committee, comprised of: Moderator, John Bosin, (Fix Auto), Doug Kelly, President, (CynCast), Aaron Marshall, CEO, (Marshall Auto Body), Joe Mattos, CEO, (Pro Finishes Plus) and Richard Palmer, CEO, (ComputerLogic), presented the topic: “Improving Paint Shop Efficiency in a Consolidating Market”. A segment of the presentation included the impact on the current methodology for paint and materials compensation in consideration of existing or potential new technology.

Due to time constraints, the panel had only a limited opportunity to fully discuss the topic during the scheduled session. To further explore the challenges related to this compensation methodology issue, panelist Richard Palmer commissioned this independent study.

In the interview process, key individuals and organizations have been identified to interact with the CIC Refinish Committee and continue the discussion.
Study Objectives

1. Consider the opinions of a representative cross-sample of constituencies to clarify the
profitability/performance dynamic of multiplying the number of refinish hours/units by a specified
dollar rate as a primary method of compensation for paint and material usage.
2. To identify the different methods of paint & materials compensation being used and estimate their
prevalence in the industry so that the CIC Refinish committee can recommend alternative solutions
based on the advantages and disadvantages of each method.
3. To identify the strengths and weaknesses of the different compensation methods relative to their
accuracy, fairness and ease of use.
4. To encourage suggestions from study respondents and consider factors important to the acceptance of
alternative compensation methods/systems by the insurance carriers.
5. Build an environment of collaboration by harnessing the power of the collective efforts of selected
individuals considered to be influential in future collision repair discussions. 4

Study Questions

1. What is your opinion of the current methodology used for paint and material compensation?
2. On a scale of 0 to 10 with 0 being “not important at all” and 10 being “extremely important”, where would you rate Paint & Material Compensation on the list of other issues that you're monitoring? Why would you rate that number to the issue?
3. What different methods of Paint & Materials Compensation are you aware of? What would you say
are the advantages and disadvantages of each method?
4. If it were up to you, what method would you use to address the P&M Compensation issue?

This report attempts to provide decision-makers with a third-party view of what a broad spectrum of industry stakeholders consider most important in the paint and material compensation discussion. It offers successfully proven alternative methods of compensation being used today and collaborative insight to add flexibility with fairness to insurers, repairers and suppliers in addressing the issue.

To see the full report, please click HERE

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