The vehicle service contract industry has been serviced by the independent inspection industry for many years, but issues still plague inspection agencies, service contract administrators, their clients and contract holders. A call for greater accountability is in order.

Vehicle service contract administrators require independent inspections prior to making decisions about the validity of claims for a variety of reasons and circumstances. Some of these reasons include

• verifying the vehicle’s odometer reading

• verifying that an actual covered “failure” occurred

• determining the extent and the cause of damage

• confirming there are no vehicle modifications, commercial use or physical damage

Troubling Trends

• An inspector who was placed on a “do not use” list by a particular client said he was told by an inspection agency to simply use a different name when calling in his verbal report to that client.

• An inspector called in a verbal report and forgot to test the thermostat in an overheat situation. When he was informed by the agency that he needed to do so, he hung up and called back with the results in less than two minutes. It was doubtful that he could have actually tested the mechanical thermostat in that short period of time, especially since it hadn't even been removed prior to being advised that it needed to be tested. This agency is no longer using this inspector, but several very large service contract administrators still use his services.

• An inspector was not able to determine the cause of a failure that a subsequent inspector confirmed in short order. As it turns out, the initial inspector had little or no automotive mechanical experience and was in fact a physical education instructor who was doing inspections to supplement his income.

While these are all legitimate grounds for interrupting the flow of the claim process, the assignment of an inspection has historically been viewed as a cause of considerable disruption, expense and loss of productivity for the customer, the dealership/repair facility and the administrator.

There is no questioning the validity of the occasional call for a second set of eyes and ears to verify reported findings, substantiate that the vehicle hasn’t been abused or confirm that some other non-covered condition exists. However, many in the industry have been questioning whether something can be done to further enhance the process to make it more dependable and efficient.

The matter of turnaround time is only one frustration related to independent inspections. Another issue is the credibility and qualifications of the independent inspectors of today. The reality is that not all inspectors are created equal.

As mentioned in previous articles and presented at various trade gatherings, the automotive industry has experienced tremendous technological changes and growth in the last 10 years. These changes have made the world of automotive mechanical repair a much more challenging environment than it ever has been. Service contract administrators often depend on a third party to help them evaluate reported conditions and the reported cause(s) of failures to determine whether a covered breakdown has occurred.

This process can be derailed when an under-qualified inspector is assigned to assess the situation. Sometimes the culprit is a lack of technical knowledge and other times it may be an indifference or inability to produce a quality report of their findings. Either way, the administrator, the repair facility and the consumer are usually caught in an untenable situation when the inspector fails to perform effectively.

Many factors can cause an inspection to go awry and some have nothing to do with the inspection assignment process, the inspection company or the inspectors themselves. In some instances, poor preparation or insufficient processes within the administrator can be blamed. In other cases, it can be the result of poor communication with or from the repair facility.

This occurrence is most prevalent in the area of diagnosis when component disassembly is required and information relating to the level of diagnosis or the stage of disassembly is miscommunicated by the repair facility or the administrator.

In other words, a number of factors can make the inspection process a positive or negative experience.

However, when the snafu is the result of an under-qualified inspector, administrators typically feel they have little recourse. They depend on the inspection agency that assigned the job to instigate corrective measures. In many cases, the agency has little or no leverage over the independent inspector.

When inspection agencies try to hold an inspector accountable (sometimes monetarily), they sometimes hear the following: "I just won't do any inspections for that (service contract) company anymore" or "I don't need to work for you anymore, because no one else beats me up like you do".

Ineffective or sub-standard results in any other trade would certainly result in remedial action and/or loss of work. Apparently this does not necessarily hold true in the inspection industry.

Inferior Inspectors Give All a Bad Name

We certainly have indications that not all inspectors are created equal. However, it should be made clear that there are many very qualified inspectors working in the industry. The point is that the industry lacks standards or criterion to gauge the credibility and qualifications of an inspector.

Inspection agencies can inquire about whether the inspector applying to do business with them is “ASE Certified;” however, that measure alone is not sufficient to identify undesirable candidates.

While the agency is responsible for producing a quality final product (i.e., a written inspection report) that reads and translates correctly and represents the facts by painting an accurate picture, the theory of “garbage in-garbage out” does come into play.

In addition, standards relating to the manner in which inspectors conduct themselves and communicate with the administrator’s dealers and repair facilities must be spelled out and considered as well. Industry experts and inspection agencies largely agree that little can be done and little is done to regulate and control independent inspectors.

As a matter of fact, almost anyone can decide to perform inspections for a living. They can “hang a shingle” and start their business as an independent mechanical inspector. It is likely that hundreds of inspections are being performed every day by less-than-qualified individuals.

Until some sort of certification process is put in place, the overall quality of inspections will continue to decline. This industry needs a sanctioning body similar to the Association of Finance and Insurance Professionals (AFIP), which serves this function for the F&I industry.

Certification will instill the ethical guidelines, training and ongoing support that is necessary. This foundation is tremendously important to the service contract administrator’s bottom line because this is truly where the claim disbursement process starts in many cases.

As in other trades, a certification program would include requirements the candidate would have to meet to become an inspector. This would eliminate someone with limited or no automotive mechanical experience from becoming an independent inspector. Depending on the criterion, applicants may have to apprentice under an existing certified inspector for a period of time.

Short of creating a national inspector certification program, which would require cooperation from a number of service contract administrators and inspection agencies, a recognized industrywide "do not use list" could be developed. An independent group would need to be formed that would establish the benchmarks, review and monitor who and why an individual would be placed on this list.

In addition to independent inspectors, not all inspection agencies are created equal either. About seven to nine major inspection agencies serve the automotive industry, as well as a number of smaller entities that are typically start-ups by former independent inspectors.

As one would expect, some of these start-ups may lack the capital and infrastructure that a larger agency has in place and they often operate under informal processes and procedures. Considering almost all of the inspection agencies use the same pool of inspectors, the real differences from one agency to the other are in the controls, expectations and accountability each agency implements and enforces within their business model.

Technology Supports Value-added Services

While technological advances have certainly improved and sped up the inspection process, the next step is to create more timely and consistent methods to communicate credible inspection findings and other information to the administrator.

We are on the threshold of having the ability to communicate with inspectors while they are still on-site at the repair facility and review the photographic evidence in real time rather than waiting for the pictures to be uploaded to the inspection agency’s website the next day.

The technology is available and only waiting for the infrastructure to be implemented and embraced. In addition to a number of procedural benefits and the reduction of substitute transportation expenses, advances in this area could eliminate the need for certain re-inspections that will result in the savings of thousands of dollars.

Additionally, first-class technology and advanced processes are the initiatives that really allow inspection agencies to rise above the others and enable them to provide more accurate information in a timely manner. This is where agencies can seize opportunities to develop and provide value-added services that reduce the disruption factor, downtime and additional claim expenses that are part of the current inspection process.