Some collision repair shop owners enthusiastically greet the concept of waiving deductibles in an effort to attract customers.

As a brouhaha brewing in Florida suggests, reducing or eliminating the upfront amount policyholders are supposed to pay out-of-pocket is generating criticism from insurance carriers, industry leaders and – especially – fellow business owners struggling to compete in the same market.

The decision over whether to waive is largely moot for shops belonging to direct repair programs (DRPs), as the terms of the contract will likely spell out what can or cannot be done with the deductible. Some insurers may insist it be collected in full while others may opt to waive it as a marketing strategy: We’ll drop the deductible if you pick our DRP.

Shop owners get angry when a repair center down the street is soliciting customers into their facility with a bargain price that can’t be beat. Another source of anger is a widespread belief that waiving deductibles is illegal. That is not necessarily true, although all 50 states enact their own laws on insurance matters.

Part of the confusion stems from how a deductible-waiving shop handles the transaction. Let’s say a customer has a $500 deductible and the wreck has caused $1,000 in damage. If the shop knocks $200 off the deductible to bring that client in the door, then the shop earns $800 for the repair. This could be a decent price under some circumstances. If, for example, the business owner is able to control overhead and other costs, perhaps the building is owned free and clear and there is no rent or mortgage to pay, or the facility thrives on referrals and a high volume of work with efficient throughput.

The trouble starts if a shop owner charges the insurance company $1,200 for the $1,000 job in an attempt to recover the $200 discount. This is insurance fraud – definitely a crime.

The latest dustup is taking place in Crestview, Fla., where Ed Lowe, owner of Crestview Paint and Body, will waive $200 of a customer’s deductible or $250 for members of the U.S. military forces. “It’s not against the law to waive a deductible,” he says. “It’s the customer’s money.”

A complaint to ABRN alleging suspected illegality was lodged by a competing shop owner who requested anonymity and was tired of losing clients to Lowe. It is particularly galling when a potential customer already on your lot decides to have the vehicle towed over to Crestview, he said. The result was a puzzling series of queries about the practice.

“This is a very important subject,” says George Mantzaris, vice president of the Florida Autobody Collision Alliance (FACA), a statewide organization that is a recent Society of Collision Repair Specialists (SCRS) affiliate member.

“Yes, it is illegal to wave a customer’s deductible in the state of Florida,” Mantzaris says. “We talk about this frequently among the shops and insurance companies. And yes, there are shops that do use this tactic to sway customers, especially during these difficult economic times.”

“It is illegal,” agrees Mark Schlein, deputy director of insurance fraud investigations for the Florida Department of Financial Services. The senior state law enforcement official went on to deride any shop owner who is “stupid enough to waive your deductible.”

ABRN requested a copy of the precise language contained in the measure, so everyone involved would be on the same page. Surprisingly, it turned out to be quite a different story during a subsequent conversation with Schlein a few days later: “I did a very diligent search and I can’t find anything in the statute that prohibits that conduct,” he says. “Merely reducing one’s price to compensate for the deductible is not illegal.”

“I can’t break a law that doesn’t exist,” Lowe says.

Established in 1988, Crestview has been offering this deductible deal for two years, and Lowe said business is up 90 percent since it began. The shop has no DRPs and Lowe is an outspoken critic of insurance companies.

Crestview has found a forum to broadcast Lowe’s views. On Wednesdays for the past two years, a sports radio call-in show specializing in college football has been broadcasting live from his shop during the 4-7 p.m. drive-time slot. As a sponsor of the program, Lowe joins the host on-air to discuss football and ruminate about the state of the insurance industry.

In college football-crazed Florida, “Southern Sports Tonight” on 98.1-FM The Ticket is a hard-hitting show with bruising commentary. And we’re not even talking about the gridiron rivalries; we’re talking about what’s said regarding insurance company executives and how they operate their businesses.

“I’ve been calling them awful things on the radio,” Lowe cheerfully admits. “I’m anti-insurance. I tell the general public what the hurdle is.” He’ll rail against steering and its impact on the collision repair industry or address a problem that a listener has settling a claim. “The insurance companies are dominating these rural areas, and I’m trying to do something about it.”

Even the pigskin pro who anchors the program is getting in on the act. “I’ve educated the host, and he almost knows as much about the business as I do,” Lowe says.

“I have a pretty big audience here. I go for a base of loyal customer; I’m advertising to people who are loyal to their college.” Regarding DRPs and the pressures policyholders face to choose a particular shop endorsed by the insurance carrier, he says, “You’re more loyal to your school than your insurance company.”

The smash-mouth show seems like it’s a hit with the public. The signal is strong enough to attract customers from other states, and the remote aspect of the broadcast encourages listeners to come on down to the shop and meet the cast.

Couple this high-decibel sponsorship over the airwaves with his bold stance of waiving deductibles and “it’s the best thing I’ve ever done,” Lowe says. “I took in five jobs today – that will tell you how powerful the radio show is. I’ve got 50 cars right here on my back porch waiting to be fixed.” The porch is a covered parking area. “I’ve been heard all the way to Tallahassee; that’s a two-and-a-half hour drive where I’m going to pick up cars.”

Shop owners in far-away markets also are tuning in to the buzz and seeking marketing advice. “I’ve got people calling me from Nebraska, California and all over asking me how to stay in business,” he says.

While Lowe is a scrappy fighter – he previously was embroiled in a trademark legal dispute with Progressive Insurance over use of the word “concierge” that was settled out of court under a confidentiality agreement – he definitely has fun with his rants and notoriety. Click on trademark dispute to see that article.

Lowe will even venture into hostile territory in the form of insurer drive-through estimating stations. “I’ll drive the car to the appointment, and they’ll say, ‘What are you doing here?’ And I say, ‘I’m getting customers.’”

Although the SCRS does not have an official position on waiving deductibles, the organization’s president, Gary Wano, cites “multiple reasons why repairers should discontinue” the practice. For starters, there’s a possibility that a shop is losing money on the job if its knocking a $200 deductible off the cost.

“What message does this give the insurer?” Wano says. “Somehow, the repairer argues that the repair requires certain operations or rates to repair the car properly; then gives that away in a deductible reduction, causing the insurer to question if too many repair dollars were allowed. More often then not, this knowledge leads to hostility between a repairer and the informed insurer.”

Another issue is that the application of “universal contract law” between the insurer and the policyholder may hold sway in dictating what’s done with the deductible, Wano said.

“The insurance companies are having a fit about that,” says Erica Eversman, chief counsel for Vehicle Information Services, which lobbies and litigates collision repair industry legal matters. “They’re not seeing it as a business-development tool.”

DRP repairers are bound by the terms they agree to, she said, stressing also that it is illegal for any shop owner to increase the insurer’s repair bill to recover a discounted deductible.

“Some insurance companies will waive the deductible if you take it to one of their DRP shops,” says Eversman, who says this discussion about deductibles is yet another drawback to an increasingly intrusive role that the insurance industry is taking throughout the repair process, such as initially writing a low estimate and then raising the amount through supplements if the driver actually goes ahead with the repair.

“Charging a deductible is a tool of the insurance companies,” Lowe says. “The insurance companies made the deductible to avoid having to pay a claim.”

Waiving this charge is the right thing, he asserts. “We don’t have steering laws in Florida, so I have to do what I have to do to protect my business.” “This is America. It’s all about what deal you can make. If they take that away from us we’re all in trouble.”