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The California Autobody Association (CAA) is advising repairers who are given insurance estimates based on software-generated paint materials charges to ask for printed reports that explain how the amounts were calculated.
According to the CAA, some software programs that calculate paint and materials charges generate charges that may be based on a shop’s average cost, not its selling price. The CAA believes that some insurers may use these programs to convince shops to accept less than their standard calculation method amount.
The CAA claims that insurers must give shops a copy of the printed reports that explain how paint charges were arrived at if they rely on software to calculate them. It says that an odd-numbered paint materials rate (e.g. $27.21) suggests the insurer used a paint materials calculator and then backed out the hourly rate from the total.
The CAA advises that if the report doesn’t say otherwise, shops should assume the paint charges are based on their average cost due to most paint products not carrying a suggested retail price.
The CAA also recommends looking at the report to see if it includes a percentage markup field, noting that at least one software program uses the word “adjustment” in the report instead of “markup.” The CAA says that if this field is blank, zero or unreasonably low, shops have the right to request a reasonable markup just as they do on used parts or other items that don’t carry suggested list prices.
When deciding on markup, the CAA advises shops to consider the volatile nature of automotive paint products and their investment in inventory and equipment necessary to sell the product.
If the insurer refuses to allow a reasonable markup on paint, the CAA recommends that shops in California and states where paint capping laws exist file a complaint with their departments of insurance. The paint capping law that passed in California last year reads:
Insurers shall not engage in capping. For the purposes of this section, “capping” means offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.
The CAA also advises shops to close the discussion with insurers by saying, “Automobile repair shops do not accept any methodology that determines a paint materials charge when it does not include a reasonable profit or markup.”
For more information on the CAA, visit www.calautobody.com.