Some New York and New Jersey collision repair facilities could stand to lose $15 to $16 per hour in labor rate based on a new method of calculating the prevailing competitive price by State Farm.
In July 2015, State Farm announced it would be making “market refinements” to its repair facility survey, affecting both DRP and non-DRP shops. Back when the adjustments were made, State Farm spokesman Justin Tomczak said, “We are refining market boundaries used to determine prevailing competitive prices (PCP) to serve our customers and to better align with government-defined market areas.”
State Farm had said that updates may result in prevailing competitive price (PCP) adjustments in some areas in addition to the periodic changes in PCP relating to updated repairer pricing and capacity information.
Now, reports are that New York- and New Jersey-area body shops are seeing a decrease of $15 to $16 per hour.
“State Farm’s attempt to turn back the hands of time and refuse to honor the long-awaited labor rate increase announced by State Farm over a year ago and that has been paid by State Farm for over a year is a slap in the face to the collision industry,” said Charles Bryant, executive director of the Alliance of Automotive Service Providers/New Jersey (AASP/NJ). “By paying claims at the rate established and based on the State Farm Repair Facility Survey Program for over a year, State Farm has established what they commonly refer to as usual and customary. It is a common practice for insurers to state that the rates they pay are based on what has been established as usual and customary. For State Farm to now reverse their position all of a sudden and refuse to pay what they themselves have established as usual and customary would violate the requirement that negotiations be conducted in good faith found in the regulation governing fair claim settlement practices in the state of New Jersey. The AASP/NJ will not sit back and allow this type of beaten abuse to be inflicted on our members. We are working diligently to determine the best avenue to address this issue.”
Collision repairers are encouraged to voluntarily update their repair capacity and pricing information at any time on State Farm’s b2b website.