Are DRPs Dying?

The concept of a direct repair program (DRP) seemed pretty great when insurers first introduced it: They’d refer claimants to a contracted shop in exchange for certain concessions, such as reduced labor rates or free storage. But as insurers sought to expand their control over the cost of claims, their practice of “recommending” direct repair facilities reduced the amount of work available for non-DRP shops, sounding the death knell for more than a few…as though the Grim Reaper himself had come calling for or independent auto body shops in the form of insurers, yielding a scythe molded from direct repair programs (DRPs).

“One shop rejected DRP contracts for years, but it got so bad – because insurers kept steering work away from him and to their contract shops – that he considered closing down the shop,” AASP/NJ Executive Director Charles Bryant recalled. “Two weeks later, an insurer offered to put him on their program, and despite how much he hated it, it was better than going bankrupt. A lot of guys hate being on the programs, but they sign on to prevent work from being steered away from them. How many times can a shop allow insurers to take jobs away?”

“Insurers direct their insureds to the DRP shop down the street and neglect to tell them they can go to any licensed body shop they want,” lamented an Essex County shop owner, who has never participated in any DRP because “I don’t want an insurer telling me how to fix the car. I don’t want them telling me what procedures should be completed or not. They’re not going to tell me how to run my business.”

Being a non-DRP shop also means “you’re not a priority,” he added. “An insurance claim can sit in my lot for three weeks, and though I see the appraiser drive by every day to go to the DRP shop down the street, he claims to be too busy to come see my customer’s car. It’s hard enough to get the job, and then they make it harder to do your job.”

To avoid that conundrum, a large number of shops opted to give DRPs a try, and many reaped the promised rewards.

Participating in over a dozen DRPs has provided one Bergen County shop owner with a “steady flow of clients” since signing onto his first program in the 1990s, but he acknowledged, “If you’re not on the lists, the work gets steered someplace else. You’re either on the inside…or the outside. As lousy as that sounds, it’s reality, and I chose the path of least resistance.”

That seemed to be the case for many shops, and the number of US shops contracted with insurers grew to over 90 percent in the 2010s. In the New Jersey Automotive 2014 Industry Survey, 92 percent of Garden State shops reported being a DRP facility (bit.ly/ NJA2014survey).

But over time, carriers grew more demanding, mandating which parts should be used and dictating aspects of the repair process. As a result, shops began withdrawing from programs…and many found life after death (of DRP relationships, that is).

Secaucus Autobody initially signed on with two insurers, but after one company got bought out and the other reduced the number of DRP shops in that market, owner Rick Symons saw no reason to pursue any new programs. “I didn’t really see any benefit to them, so it wasn’t a big deal,” he said. “I built my business on my reputation. All our work comes from client referrals and word of mouth. We’ve been here 32 years, and people come back because they know us. They’re typically not even aware of whether I’m a DRP or not.”

“You don’t need DRPs if you do good work and treat people well,” agreed Daniel Hawtin (Auto Body Craftsman; Island Heights), who dropped his last DRP contract a decade ago. “My philosophy is that I repair every vehicle like it’s my granddaughter’s car; I fix vehicles the way they should be repaired. With DRPs, you have to compromise too much, and that’s not something I’m willing to do. I’m not a good soldier; I don’t like to be bullied.”

In recent years, more shop owners seem to be deciding that DRPs just aren’t right for their business model. Recent responses to New Jersey Automotive’s Annual Industry Surveys have indicated a significant decline in the number of DRP shops in New Jersey, polling at 68 percent, 78 percent and 64 percent in 2019, 2020 and 2021, respectively.

“Insurers control the labor rate through various tactics, but where they used to add hours to compensate for certain program restrictions, they’re now cutting hours on certain tasks, like only paying five hours on a quarter panel that was billed at 8.5 hours,” Bryant pointed out. “Many insurance companies have become so restrictive that even DRP shops can’t survive, and that’s one factor driving shops away from direct repair programs.”

“It was kind of like, ‘This is what your labor has to be. This is what we’ll pay you,’” Symons recounted. “In my experience, it wasn’t profitable.” “They want to share your labor and parts profit, and they want too many free and discounted labor items. We just couldn’t possibly do all that for free,” Hawtin shared. “I don’t quite understand how anyone can make money that way, but I guess it must be profitable to some shops. If you repair enough vehicles each week – even if you’re giving a bunch away – you have to make money somewhere, right?

“I’m not willing to compromise my standards to save billionaires’ money. Insurers’ only concern is the money; that’s what matters most to them,” he continued.

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