Allstate gets into body shops

Associated Press

CHICAGO – Allstate Corp.’s entry into the car repair business is an intriguing experiment that other insurance companies may emulate if it proves successful, industry experts said.

But others say a nation of insurer-run auto body shops isn’t likely soon.

In an industry first, Allstate last week purchased Sterling Collision Centers, a chain of 39 repair shops in seven states. By handling the automotive repair experience from start to finish, the Northbrook, Ill.-based insurer expects speedier processing and more efficient claims management that it said will help policyholders as well as the bottom line.

“We will all be working for the same customer,” said spokesman Mike Trevino of Allstate, the nation’s second biggest car and home insurer behind State Farm Mutual. “The process is more streamlined, eliminating redundancy in the process as it exists today.”

The move potentially could help contain auto insurance rates, according to analysts and other experts, although one said it theoretically could result in consumers having less say in how their cars are repaired.

After falling about 3 percent in 1998 and again in 1999, premiums rose an average 1.5 percent last year, largely as a result of escalating repair costs, according to the Insurance Information Institute.

Industry watchers point to a number of factors that make it unlikely the Allstate-Sterling deal will prompt a wave of takeovers of auto repair chains.

For one thing, the auto repair industry is fragmented and dominated by mom-and-pop shops or small chains; those with shops nationwide are rare.

Insurers also may not be interested in the huge commitment necessary to form a nationwide repair network under a known brand name. Trevino said Allstate plans to expand its newly acquired chain by building new Sterling stores rather than by purchasing others.

The Sterling deal is the next step in a trend of closer involvement with body shops that began in the early 1990s. Insurers set up alliances in which customers can be sent straight to a body shop in the insurer’s direct-repair network.

Allstate has such relationships with 5,000 repair shops nationwide; customers may still choose another shop, as will be the case with Sterling.

Another large insurer, Progressive Insurance, is launching a related initiative. The Mayfield Village, Ohio-based company told analysts in March that customers would soon be able to leave their cars with Progressive and pick up rental cars to use while awaiting repairs.

Chicago-based tort attorney Michael Hyman said the latest move poses a potential risk for consumers.

“Consolidation of the auto repair industry, particularly insurance companies’ purchases of repair chains, could have serious repercussions for the consumer since it eliminates another layer of protection – that of the body shop itself,” he said.