Auto Focus

A Call to Action on Damage Recovery

Even if the vast majority of damage claims are handled properly, it doesn’t take many incidences of abuse to erode the auto rental industry’s trust with consumers. The industry needs to be consistently and actively engaged in reducing the number of damage claim disputes.

May 2, 2012

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For any car rental operator, the subject of damage claims is enough to get your blood boiling. You’ve suffered through the countless renters who have gotten away with the damage they’ve caused. In the name of customer service, you’ve backed down from the irate customer who swears “he didn’t knock that bumper off.” And you’ve processed scores of claims without incident, though dutifully accepting that you’ll rarely get a break on diminution-of-value or loss-of-use charges. And then you pick up this issue and read the piece by consumer advocate Chris Elliott, which claims that the car rental industry is treating damage recovery as a “profit center.” Thank you, Auto Rental News!

Yes, I did let Chris Elliott into this forum, but I agree with you. I do not think there is an industry-wide problem of car rental companies profiting from damage to their vehicles. Look at any car rental company’s P&L — damages are a major expense; the amount of damages never collected on likely far exceeds the amounts that are paid.

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From my informal queries, rental companies recover 60-85% of the damages to their vehicles. Jim Tennant of the Tennant Group reports that during one analyzed period when he was an operator, damage expense was about 6% of revenue and damage recovery was about 5% with a 1% loss in total revenue — and that’s on the high end of loss recovery. Jack Vercollone of VERC Rentals in Massachusetts once analyzed some 500 units on their way to resale, and found that this group averaged more than $500 per unit in uncollected “mystery” damage.

A profit center? Blasphemy!

But does refuting any of these assertions matter to the customer who feels he or she has been wronged on a damage claim? Of course not. The only thing you as a car rental operator can do is to stick to best practices and head off problems before they arise. In general, that means making sure your damage notation and recovery processes are uniform, timely and transparent, and are readily communicated to the customer.

Take a company like Texas-based Capps Truck and Van Rental, which went through a concerted effort to revamp its damage discovery and claims procedures. Capps always does a pre-trip inspection, and weather and busy days are no excuse for failing to inspect. Yes, damage may not always be found at check-in. However, “In fairness, maybe the person did do the damage,” says Mark Klafehn, claims manager at Capps. “But if your personnel are not trained well enough, and if you try to go back and accuse the renter whom you checked in 48 hours ago, you’re creating a firestorm of an issue.”

As soon as damage is found, the agent is instructed to immediately call the customer. “Don’t send the file to myself or my claim associate so we get it three days later,” Klafehn says. “It’s a whole lot more credible to address damage in a matter of hours than a matter of days.”

The result of Capps’ efforts? According to Randy Harris of Khoury Alternative Claims Management, Capps has one of the lowest claims disputes out of any of his clients.

Other companies are leading by example. When it comes to focusing your employees on an uncomfortable part of their jobs, San Antonio-based Dollar and Thrifty franchisee Monty Merrill has a good idea: He motivates his employees to get signed accident reports, not to find damage per se. This is a good way to get your staff to work with the customer through an uneasy situation instead of trying to find damage after the fact.

Hundreds of other rental locations follow the right procedures. Of course, they don’t get the press. And for those companies — however many or few — whose procedures fall short of those best practices, you need to take better care of the customer. Even if the vast majority of claims are handled properly, it doesn’t take many incidences of abuse to give the industry a black eye and erode trust with consumers.

This is not a rebuttal of Chris Elliot’s piece. It’s an opportunity. It’s a call to action to the car rental industry to be even more actively engaged in reducing the number of damage claim disputes.

Now the question is: What are you going to do about it?


For additional articles and news from the Auto Rental News May/June magazine issue, click here.

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Author Bio

Chris Brown

Executive Editor

Chris Brown is the executive editor of Business Fleet Magazine and Auto Rental News. Through these publications, online newsletters, trade events and associations, Chris covers all aspects of the fleet world, including fleet management, manufacturer fleet activities, the fleet leasing industry, vehicle remarketing, rental industry news, car rental taxation and legislation.

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