Don't Call It "Flat", Call it "Base": Revenue Neutral Seems to be the Trend

Insurance companies, third party administrators and billing services have begun to announce the changes in their pricing structure in response to the NAGS rebalanced pricing scheduled to become effective February 28, 2005. Most, with some exceptions, are opting for a structure that includes a NAGS list price with a small discount off (or, increase above in some markets) the new part price, a separate fee for adhesives and separate hourly rate for labor.

The adhesive prices for most of these offers is between $20-$22 flat. The hourly labor rate being offered has ranged between $35-$40 with an interesting phenomena occurring. A number of providers have chosen a labor structure that offers a $40 base fee (mistakenly being called a flat fee), plus $30 per hour for labor. So for an installation that requires two hours, the labor fee paid would be $100 ($40 + (2x$30)). A 3-hour installation would provide $130 in labor ($40+(3x$30)).

"We are concerned a bit that when people see the pricing structure, they will see $40 flat and think that's it," said one insurance representative who preferred not to be identified. "It's a double-tiered structure, it's a $40 flat fee plus $30 per hour for all hours of labor."

Editor's note: to help avoid confusion in the industry, AGRR/ will refer to this $40 fee as a base fee, rather than a flat fee.

The net effect under most new plans being announced has been value-neutral. That is, the net result of what's being paid for an installation under the old NAGS benchmark price vs. the new NAGS rebalanced price is minimal. There are some exceptions to this, which AGRR/GlassBYTES will cover in a separate post.

The industry has held its collective breath for weeks with hopes of avoiding a repeat of the 1999 revaluation in which an hourly labor rate was to be added. Instead, most providers offered a true flat rate labor, hampering the ability of auto glass shops to negotiate their own rates. Thus far, this does not appear to be the case with most rebalancing offers being made.

"People should not be lulled into a false sense of complacency by the pricing announced thus far," said one auto glass shop owner, "you need to study and analyze your own situation to know what pricing will and will not work for you. Shops that have taken a proactive look at this will be in much better shape than those that are simply reacting."

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