Comment by panzagl
IF you go to a body shop to get a dent pulled, you will receive one quote. If you tell them insurance is paying you will receive a second, much higher, quote.
The dealer will say it's because the insurance company is such a hassle to deal with that they have to dedicate employee time to jumping through hoops to get paid. The insurance company will say the quote is higher because the dealer sees the insurance company as a big bag of money and if the insurance company doesn't ride them then prices of insurance will go up.
Dealing with government is this times a thousand.
Your analogy is somewhat backwards. Insurance companies squeeze body shops pretty well. If you go in there and ask for the same work you will pay more.
The real difference is that often times a person will just say make it look okay and I'll be fine. Whereas insurance work is basically making a car good as new because that is legally required. If you try to get the same level of service at retail you will pay more.