Measuring auto physical damage estimating performance by benchmarking key performance indicators (KPI) has been in place since the advent of electronic estimating. Unfortunately, so too have misunderstood metrics and efforts by appraisers to 'game' the numbers. This seems especially true when it comes to measuring auto parts performance.
The 'industry standard' metric of measuring the percentage of parts dollars spent by part type has been used by many insurers as the sole way of judging this performance for years, despite having an inherent flaw. Anytime you measure the percentage of something, you have to watch not only the numerator of your equation, but also the denominator.
A simple example of this is taking a $1,000 parts spend. If you have a recycled part that is $200, then the percentage of parts dollars for recycled parts would be 20 percent. However, if we find a less expensive part—let's use $100—then we would change the numerator to 100. Then the denominator also changes to 900, meaning our percentage of parts dollars for recycled parts is now 11 percent.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
