After reviewing insurers' methodology for establishing
the rates they pay for collision repair, the Iowa Insurance
Division (IID) has concluded that there has been no violation of the law by
insurers.
Collision repairers in Iowa asked the IID last
September to review the law regarding reimbursement rates for automobile
repairs after some insurers had refused to pay their rates, saying they were
higher than the "prevailing rate" in their particular market area.
The IID surveyed the top 10 insurers in Iowa: State Farm,
Progressive, Farm Bureau, American Family, Nationwide, Grinnell Mutual and
Auto-Owners. Questions were submitted in three general categories: prevailing
rates, use of direct repair facilities, and storage fees.
Iowa Administrative Code provides that repair estimates
prepared for or by a carrier must be "reasonable." The surveyed
carriers were asked to share how rates were established and evaluated in a
"reasonable" manner.
In summary, the insurers responded that they
"applied the prevailing rate method of setting rates." The IID said
that prevailing rates are set by the area market rates charged for the same
services. Most of the carriers told the IID that they continuously review the
prevailing rates of a market area and do not have a formal review period
(though two carriers noted reviewing rates annually). Finally, the insurers
surveyed told the IID that "rates will be changed in a market when the
majority of the area's repair facilities have increased their prices."
"While this is the most common method of increasing
rates," the IID's response read, "insurers use an assortment of ways
to obtain the data needed to make the determination. Some have a formal process
(such as a repair facility survey), while others simply rely on consistently
being unable to negotiate lower rates in a market area to determine an increase
in rates."
The carriers also reported that deviations from
prevailing rates would be determined on a case-by-case basis.
The IID said that the term "reasonable" does
not have a set definition under auto repair rules. Also, based upon previous
reviews of prevailing rates, the IID said no carrier has been cited for labor
rate violations in the past.
The IID also addressed steering, stating that
"steering is not explicitly prohibited under Iowa law." Insurers were
asked to provide the scripted language used to communicate with claimants.
According to the IID, all of the carriers with direct-repair facilities said
they inform their claimants of the right to choose a repair facility when a
claim is reported to the insurer (even though that is not required by law in
Iowa). The right to choose language is then followed by the "promotion"
of the carrier's direct repair facilities. The carrier usually explains the
benefits of using a direct repair facility as well as offering to find a direct
repair shop for the claimant.
Storage fees were also addressed by the IID, which stated
that "the expense of storage fees for vehicles needing repair has only
recently been raised by consumer complaint." Iowa law requires insurers to
"provide reasonable notice to an insured prior to the termination of
payment for automobile storage fees."
"Most carriers have a more formal process for
dealing with storage and storage fees," the IID stated. "These
carriers provide both verbal and written notice of the termination of payment
for storage fees."
The insurers told the IID that storage rates paid are
usually set by the facility or predetermined by market rates.
The repair rates (per hour) as reported by the Iowa auto
repair facilities in 2009 were:
Body & Refinish
Lowest Rate: $32
Highest Rate: $62
Most Frequent Rate: $52
Frame
Lowest Rate: $54
Highest Rate: $75
Most Frequent Rate: $65
Mechanical
Lowest Rate: $50
Highest Rate: $119
Most Frequent Rate: $65/$75
Paint & Materials
Lowest Rate: $28
Highest Rate: $38
Most Frequent Rate: $32
Insurer Repair Rates in Des Moines Metro Area
State Farm
Body & Refinish: $54
Frame: $58
Mechanical: Not Provided
Paint & Materials: $32
Progressive
Body & Refinish: $54
Frame: $56
Mechanical: $70
Paint & Materials: $34
Farm Bureau
Body & Refinish: $52-$54
Frame: $58
Mechanical: $75
Paint & Materials: $32-$35
American Family
Body & Refinish: $54
Frame: $65
Mechanical: $65
Paint & Materials: $34
Nationwide
Body & Refinish: $54
Frame: $58
Mechanical: $56-$68
Paint & Materials: $34
Grinnell
Body & Refinish: $50-$62
Frame: $50-$75
Mechanical: $50-$118
Paint & Materials: $30-$40
Auto-Owners
Body & Refinish: $48-$60
Frame: $50-$68
Mechanical: $55-$85
Paint & Materials: $28-$36
Insurer Repair Rates in Cedar Rapids
State Farm
Body & Refinish: $60
Frame: $65
Mechanical: Not Provided
Paint & Materials: $38
Progressive
Body & Refinish: $60
Frame: $65
Mechanical: $70
Paint & Materials: $38
Farm Bureau
Body & Refinish: $60
Frame: $65
Mechanical: $75
Paint & Materials: $38
American Family
Body & Refinish: $60
Frame: $65
Mechanical: $70
Paint & Materials: $38
Nationwide
Body & Refinish: $57-$58
Frame: $58-$60
Mechanical: $60
Paint & Materials: $36
Grinnell
Body & Refinish: $50-$62
Frame: $50-$75
Mechanical: $50-$118
Paint & Materials: $30-$40
Auto-Owners
Body & Refinish: $48-$65
Frame: $56-$95
Mechanical: $48-$110
Paint & Materials: $30-$48
More information:
Iowa Collision Repairer Gets Meeting with Governor to Discuss Labor Rates, Steering