DRP agreements: what to check before you sign

Insurers don't publish their direct repair program agreements, and State Farm's form bars the shop from disclosing it. Two have become public, and between them they cover the clauses most agreements carry:

• State Farm's Select Service Agreement, a 2015 version a Wisconsin shop signed, later filed as an exhibit in a lawsuit.
• Progressive's Network Repair Shop Operations Guide, an exhibit to its repair shop agreement from 2008, still on its website, with similar terms on its current service and repair standards page.

Both are old, and today's terms will differ: State Farm's estimating and calibration rules have changed since 2015, for a start. Use them as a map of what to look for, and read your own agreement in full, including every exhibit and anything it says can change by notice.

The pricing clauses decide what most of your work for that insurer will pay:

Newer programs set prices for specific work too. State Farm caps calibration bills at its own price table and charges its shops $3 a VIN, which they can't pass on, to check ADAS requirements. GEICO set standard pricing for scans and calibrations at its Auto Repair Xpress shops in 2024.

• Prices. State Farm's 2015 agreement priced OEM parts at the lowest of list price, the local market price or the price given another insurer, with similar terms for recycled parts.
• Part types. It required certified non-OEM crash parts, such as bumper parts, lights, radiator supports and outer panels, unless the owner asked otherwise, and the use of parts-locating services State Farm named, at no cost to State Farm.
• Changes. Progressive's guide barred swapping OEM parts for non-OEM, or repairing a part the estimate said to replace, without its written consent.

Check how parts clauses fit your state's disclosure rules and the automakers' position statements on non-OEM parts. Our guide to pricing parts and paint and materials covers both.

Rental days are an insurer's cost, so the agreements watch the calendar. State Farm's 2015 agreement gave State Farm work preferential status and had the shop record five dates on every bill: drop-off, promised, start, completion and pickup. The shop gave a guaranteed completion date and paid the extra rental when it caused a delay. Progressive's guide asked for service at least equal to what the shop gave any other insurer, in scheduling, cycle time and quality.

Neither document sets a number of days. The targets arrive later, in the scorecard, so ask what they are and how they're measured before you sign.

Expect to give a lifetime warranty on workmanship. State Farm's 2015 agreement asked for a limited lifetime written warranty, including paint, with fixes at no cost, rental and towing included. If the owner wouldn't bring the car back, the shop repaid State Farm for a repair done elsewhere. Progressive's guide guaranteed repairs while the car was owned or leased, with returned work as top priority and a quality check before delivery.

• Reporting at your cost. State Farm's 2015 agreement could require third-party performance reports, paid for by the shop and not to be shared with other insurers.
• Your data, their rankings. It let State Farm use any available data for internal measures and publish rankings in its advertising.
• Confidentiality. The shop couldn't disclose the agreement or discuss labor rates or pricing with other repairers.
• Audits and payment holds. Invoices had to be available, photos taken before teardown and parts kept as directed, and payment could be held if the bill's accuracy or quality was in question. Progressive could inspect before, during and after a repair, and didn't pay for anything not on an approved estimate or supplement.

For data clauses, the Collision Industry Conference's 2020 rules on data make a useful yardstick: data used only for its stated purpose, openness about where it goes, a way to opt out, and a way to ask who has handled it.

The Collision Industry Conference's guidance treats a DRP as an at-will relationship, and asks insurers to set clear expectations, define the performance measures in advance, warn a shop and give it time to improve before removing it, explain why, and offer a neutral way to settle disputes. Ask whether your agreement promises any of that.

A few state laws reach into these contracts:

• Texas: a DRP-type contract can't reduce the policyholder's coverage, an insurer can't stop a shop telling the customer where their parts came from and what the insurer was charged for them, and insurers can't solicit or take referral fees.
• California and Oregon: network pricing can't be used to cut what the insurer pays at a shop the customer chose.
• Connecticut: an insurer can't tell customers a shop outside its program will cause delays or lose them the guarantee.
• Many states follow the NAIC's model act, which makes it an unfair practice for an insurer to have no reasonable standards for workmanlike repairs at a shop it requires the customer to use.

Before you sign, make sure you can answer each of these from the agreement itself:

• Which labor rates apply, how they're set, and whether you must match the best rate you give any other insurer.
• What the parts rules are, and whether they fit your state's disclosure law and the automakers' procedures.
• Which scans, calibrations and other operations have set prices.
• What the warranty covers, for how long, and whether you could pay for a repair done elsewhere.
• Which performance measures are tracked, the targets, who pays for the reporting and how your data can be used.
• When the insurer can hold payment, reinspect or audit.
• The indemnity, the liability cap and the insurance you must carry.
• How either side can end it, what happens to cars in progress, and whether it survives a sale of the shop.
• What the insurer can change by notice, and how much notice it gives.

Then cost the work. Take a month of that insurer's repair orders, or a sample at its rates, and compare the gross profit with your other work before you commit your capacity to it.