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The new regulation sets forth voluntary standards for insurers to accurately and reliably survey auto body repair labor rates to ensure they are paying the reasonable and proper amount.
California Insurance Commissioner Dave Jones has issued new Auto Collision Repair Labor Rate Survey Regulations that he says will increase consumer protections when a damaged vehicle is repaired.
The Department of Insurance viewed insurer-created labor rate surveys as an unfair way of establishing labor rates which limited payments for auto collision repairs. Consumers were then left having to pay the difference between the actual labor cost of the repair and what the insurer was willing to pay based on its labor rate survey. The new regulation sets forth voluntary standards for insurers to accurately and reliably survey auto body repair labor rates to ensure they are paying the reasonable and proper amount.
“Accurate and reliable labor rate surveys ensure that consumers are not left paying out-of-pocket for collision repairs – which should be covered by insurance – or worse, forced to leave the vehicle in disrepair creating a potential safety concern,” said Commissioner Jones.
The regulations outlined an example of how the prevailing auto body rate should be calculated. The example was as follows:
Assume that in a specific Geographic Area, the applicable surveyed labor rates charged by the six (6) Responding Qualified Auto Body Repair Shops (as defined in Subdivision (d)(8)(A)3 of this section) that are included in the geographic area are $64, $65, $66, $66, $71 and $73. The rate at or below which a simple majority of surveyed shops charge is $66, since four of the six shops (the simple majority) charge a rate of $66 or less. Therefore, the prevailing rate in this example is $66.
Over the past several years, the Department of Insurance has worked on regulations protecting consumers who have filed automobile collision repair claims with insurance companies. The regulations went through a formal public review process required by state law, which included taking and responding to public input on the regulations at public workshops, public hearings and through written public comments. The regulations were drafted and revised with input from consumers, insurers and repair shops.
The Office of Administrative Law (OAL), which independently reviews all new regulations, approved the Commissioner’s regulation on Nov. 30th. The regulation goes into effect by operation of law on Jan. 1st, 2017. However, these newly adopted regulations are part of the Fair Claims Settlement Practices Regulations, which contain a delayed compliance date in order to give insurers who choose to use these voluntary regulations additional time to comply. The earliest compliance date is February 28th, 2017.
To read the text of the regulations, click here.