First, the “glass house” – Insurance Agents and Brokers Fined for Accepting Kickbacks: Accused of Accepting Gifts to Steer Customers to Specific Auto Glass Shops:
Forty-three insurance agents and brokers have been fined a total of $42,650 for accepting kickbacks, or failing to supervise staff who accepted kickbacks, to steer customers to certain auto glass repair shops, New York Insurance Superintendent James Wrynn announced Friday.
The agents and brokers work at more than two dozen different insurance agencies in Western and Central New York. They are accused of accepting gift cards in return for recommending two specific glass shops to auto insurance customers who had filed claims to have their vehicles repaired.
State law prohibits insurance agents and brokers from accepting payments to steer their customers to specific auto repair shops…
…and, the moral of that story is…in Mississippi it would be a “federal crime”…just ask former Judge Bobby DeLaughter.
Lester said the investigation was begun when Bison Glass, which operates throughout Western New York, contacted the Insurance Department and said it was discontinuing the practice because it could no longer afford to make the payments. A second glass repairer, Pat’s Glass Inc., which had operated in Wyoming County, provided additional information after it went out of business.
The fines – ranging in amounts from $250 to $5,000 — followed an investigation by the New York State Insurance Department…
There are at least two ways to resolve the problem. One comes at no cost. Insurance companies could stop taking kick backs. Duh! Likely, the cost of repairing glass would go down without the cost of kickbacks added.
The other solution would be to come up with some sort of program to cover up the lack of integrity in the industry. Naturally, the good hand in a boxing glove would be the first out with such a program.
Allstate Insurance announced last week that it will begin recording and tracking a set of “Key Performance Indicators” for auto glass shops on its Glass Claims Express (GCE) network, effective November 1. The indicators will include items such as competitiveness on pricing, a customer satisfaction index and warranty frequency/performance and will be used to “determine which providers will participate in Allstate’s Distinguished Performer” program.
Those who are selected for the Distinguished Performer program and are also GLAXIS e-scheduling enabled also will be featured on the company’s new web application, which will allow consumers to make glass claims, confirm coverage and deductibles and schedule work via the company’s website, according to the announcement.
Though the company says consumer choice will remain top priority, for those customers who do not have a preference of glass shop, Allstate will “provide the customer with the name(s) of GCE participating glass service providers who, according to their track record, are known to consistently deliver quality service to our customers.”
“Allstate will continue to honor the choices of our policyholders and claimants may have a glass service provider of their choosing, but with this new model, a model designed for increased customer satisfaction, Allstate will feature Distinguished Performers when asked for assistance by our policyholders,” writes the company.
GCE participants will be able to view their Key Performance Indicator results on the METRYX site, which also will note areas that require improvement.
Allstate requires those eligible to be placed on the Distinguished Performer program to:
- have been in the program for no less than 180 days;
- demonstrate a customer satisfaction index that “meets or exceeds the established [Key Performance Indicator] level;”
- have performed not fewer than 60 replacement jobs for GCE (or repairs for repair-only businesses]; and
- demonstrate warranty performance “as measured by Allstate at a level that meets the [Key Performance Indicator] level.”
The announcement also notes that auto glass providers must utilize NAGS parts “as a percent of total replacement parts utilized will be measured by Allstate to determine ‘Best in Class’ performance that considers local market conditions/differences.”
…Allstate is dubbing the changes “the Next Generation of Glass Claims Express.”
That certainly sounds better that “the Next Generation of Kick-backs”.
18 thoughts on “Companies that live in a glass house should not throw key performance indicators at glass shops.”
Nowdy, insurance companies do not get kick backs from glass companies, they receive discounts. They receive these discounts because they demand them and the galss companies go along. Without those discounts the cost of glass claims would increase significantly. Subsequently, rates would go up. Let me assure you glass companies are a strong lobby.
In South Carolina there is no deductibles allowed for glass claims. No deductibles mean higher payouts to glass companies by carriers which gets passed on in the rates being charged the consumer. If there was a deductible insureds would choose to have repairs made and not replace the windshield. In these cases, most carriers pay first dollar coverage for repairs. Everyone, but the glass companies win in this scenario.
So, glass companies are expected to subsidize the insurance industry? What happens when the practice puts the glass companies out of business? The two companies that spoke out in New York – where insurance companies were taking kickbacks – said they could not afford to continue the practice.
This practice obviously hurts the glass companies, how many other businesses does the insurance industry hurt?
Nowdy, I am afraid you missed the point. Glass companies should not subsidize insurance companies. Insurance companies negotiate up to 50% discounts from glass companies. Do you think the glass companies are losing money at that discount? No, their profts are reduced, but they are still making a profit. This is action by insurance companies is a benefit for the consumer because any outlays of money by carriers are eventually passed onto the consumer in the rates being charged.
Insurance companies are not designed to be money pits to the services they pay for. They hold down costs to insureds by thier business practices. The industry is very competitive and they must do this to attract and retain clients. They are like any other business in they must contain costs to remain competitive in the marketplace.
This is why I do cash work so i do not have to bribe people.
Insurance agents are insane the way they expect a glass shop to give them money very greedy.
I do not understand the last post. Is Auto Glass saying individual insurance agents are asking for money to send glass claims to them?
Most carriers participate with glass companies with a negotiated contract.
It sounds like that’s what happened in New York, Sup, except instead of cash, the glass shops were pressed to provide gift cards.
I know you’ll disagree, but I see no difference in an individual insisting on a gift card and a company negotiating discounts…both drive the cost of auto glass repair up and the cost of insurance does not reflect the discount. I imagine the glass shops see a regular increase in the cost of their coverage.
Nowdy, I do disagree because I know how this system works. Glass companies who do not participate in the discounts get “cut out” by the major carriers. There is no way one can disagree if the carriers pay out less it benefits consumers as the rates ultimately reflect what insures have to pay. Any reduction eventually benefits consumers.
You would be surprised at how much glass shops market to agents and give out all kind of “goodies” to get referrals. Most agents accept these “goodies”, usually trinkets, and go on with their business. These shops usually charge more and those costs will be passed onto the insurance consumer.
It is just part of the system.
I think consumers would be much better off with choice, transparency, and protection from conflicts of interest than with insurers manipulating every market they touch to ensure that they do not function as markets.
Brian, I have a suggestion concerning this subject. First. let us agree a windshield is a windshield and they come from just a few suppliers. Therefore, the quality of the product is compatible. So difference in cost would be cost of the installer and desired profit margin.
An insurance company says if you go to installer A we will gurantee the workmanship and product. However, if you choose installer B of your choice we will pay you what we pay our guaranteed shop and you choose to pay the difference or pocket the difference if you can get insatller B to do it for less money.
Doesn’t that sound fair? It becomes the insured’s choice. I find it intersting in this string of posts responses to my posts do not acknowledge when an insurance company reduces cost it eventually shows up in rates to the ultimate consumer.
I’ve followed this thread and I agree with Sup on the glass issue (not agents extorting glass companies but insurers negotiating volume discounts). I do question whether the savings are passed along. For such a niche topic I am surprised by the traffic this post has generated.
No, Sup, it does not sound fair at all – it sounds like insurance trying to run other businesses to the advantage of their own..
How many insurers seeking such discounts offer these service providers a discount on their insurance?
If – or rather when – there is transparency, we’ll be able to see insurers passing savings on to their customers. I gather no one has seen it at this point or they’d comment.
Nowdy what is being done here is one industry which does NOT have to conform to antitrust laws are extorting money out of anouther industry which DO have to abide by those laws. Same thing they do to consumers.
This is how it works—
Society of Collision Repair Specialist—
Society of Collusion Specialist—
Nowdy, it doesn’t work that way. Your primary customers for the networks are the larger carriers. In most cases those carriers are not major Commercial Lines carriers so they are not in the game glass companies’ insurance. Also, the difference in the cost of insurance for a glass companies and the millions spent on glass does not even come close to quid pro quo.
As for one business running their business to their benefit, I do not disagree. Every business has the right to maximize profits. At the same time every business has the responsibility not to enter into arrangents that are detrimental to them. If a business does not make good business decisions it is their own fault for lack of success.
Sup, what’s a good business decision – cutting back until you can’t cut any more to retain your insurance company customers or loosing your insurance customers and being forced to cut back or even close?
The p&c segment of the industry is getting more like the health segment every day.(that’s not a compliment). The “preferred provider” concept is “the reason for the season” of health care reform.
Every trust, cartel, or monopoly in the history of the world claimed it was saving its customers money by dictating special “discounts” for itself. That is not how private markets should work and it is not efficient. With secret strongarm arrangements, it almost guaranteed that the deals eventually will be based on corruption than on quality or efficiency. There is a long economic history showing the inevitability of massive fraud when anticompetitive practices are encouraged.
Man some of these guys are crooked. I would have never thought a glass business owner or its employees would actually damage windshields themselves just for the chance to be able to make a buck off of repairing them. Then again, I suppose stranger things have happened, and the bit about the insurance agents steering clients doesn’t surprise me at all.
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