Potential Economic Impact of State Farm Parts Bidding on Collision Repair

Statement from the SCRS

Prosser, Washington, April 2, 2012 – From 2007 to 2009 State Farm Insurance, the nation’s largest auto insurer, tested a parts ordering program with repair facilities who participated in their DRP program in California and Indiana. That program revolved around a parts discount to State Farm from the auto manufacturers, which was facilitated through an electronic parts ordering program. In April of 2011, nearly two years after the conclusion of the previous test program, State Farm released an online video discussing future parts ordering initiatives. That same month, Insurance & Technology published an article referencing a report released by Stephen Applebaum and the Aite group, which clearly stated that “State Farm is leading the way to greater control of the auto repair procurement process with its announcement of a new electronic parts-ordering initiative.”

While the article was brief, Applebaum’s post on the Aite site elaborated that “the U.S. collision industry repairs about 10 million vehicles annually, at an average cost of about US$3,000 each, for a total of approximately US$30 billion. Of that, parts represent 33%, or about US$10 billion. Given the level of influence carriers exert and that much being spent on parts, it is inevitable that carriers will seek to gain greater visibility into, and control over, the parts procurement process. After all, each percentage point is worth US$100 million to someone.” Less than a year later, in the early months of 2012, the carrier began testing the program – an online parts-ordering/bidding software program developed by a New Zealand firm called PartsTrader – in areas of the United States such as Tucson, AZ and Birmingham, AL.

Read the full statement from the SCRS – Click here.

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