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"We’re losing our collective asses at the front door because we’ve quietly accepted our current situation as being beyond our control,” says a Mississippi shop owner, summing up perfectly the state of the industry and the mentality of many in it.

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His point? Doing something is always better than doing nothing.

Take the recent change in Rhode Island for example — where auto insurers are no longer going to be able to arbitrarily pick a number out of the air and claim it’s the “prevailing” local labor rate. And it all happened because of some very persistent, “do something”-minded shop owners.
The prevailing rates hit the fan, so to speak, late last year, when the Rhode Island Department of Business Regulation (DBR) adopted a new regulation that sets precise guidelines for how insurers are to annually survey all licensed collision repair facilities to determine the prevailing labor rate, excluding only those they have a DRP relationship with. The regulation also includes the exact survey form insurers must use and requires insurers to provide in their report to the DBR, “a description of the formula or manner in which the insurer has calculated or determined the prevailing labor rate.”

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All insurers with greater than 1% market share must comply. To do so, insurers had to send questionnaires to all licensed facilities as determined by the state prior to Feb. 1; by June 1, they must file a report on their findings with the DBR; and beginning in 2008, they must survey and file their reports annually by Sept. 1.

“We had to educate everyone to get this passed,” says John Petrarca, president of Providence Auto Body and of the Auto Body Association of Rhode Island (ABARI) — the persistent group of shop owners who were instrumental in making this regulation happen.

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“In Rhode Island, many insurance companies send letters to insureds and claimants, stating that the ‘prevailing labor rate in Rhode Island is $38 per hour,’ ” says Petrarca. “The letter goes on to say that the company won’t be responsible for any charges over that amount. When asked how they arrive at the ‘prevailing’ labor rate, insurers consistently refuse to produce any evidence, survey, study, etc. Instead, they say it’s the market rate. When legislators heard that the labor rate was $32/hour in 1987 and is only $6 more almost 20 years later, they hesitated to believe that it was ‘market’ rate.”

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Once they had their legislators’ ear, ABARI looked to other states, California in particular (which already had a law requiring insurers to survey) and incorporated what “we believe would lead to a fair, workable survey process.”

According to Petrarca, ABARI has been “relentlessly” lobbying the governor, the attorney general and the legislators for more than 10 years about the problems facing collision repairers and consumers. In 1999, they convinced the legislature to begin a commission to study the Rhode Island auto body industry. Says Petrarca: “As a result of the findings of the commission, many legislators were shocked at the state of the industry and the amount of insurance industry control.”

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Governor Donald Carcieri, however, initially vetoed the legislation that required the creation of the new regulation, and the “insurance lobby did everything they possibly could to prevent the bill’s passage and to prevent an override of the governor’s veto,” says Petrarca.
But because ABARI had so effectively educated their state house, the legislature overrode the governor’s veto — proving that the determination of collision repairers can trump the money of the insurance lobby.

As with everything in government, there are some gray areas regarding the new law, such as, it doesn’t actually require insurers to use the information once it’s gathered, but it does define the prevailing labor rate as “the rate determined and set by an insurer as the result of conducting an auto body labor rate survey.”

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How it will all play out is anybody’s guess, but one thing is for certain: Labor rates aren’t going to go down because of the new law.

To prepare the industry for the changes, ABARI held a meeting with more than 100 shops in attendance to explain the law and how to properly fill out the surveys. In addition, “the association will regularly request insurers’ reports sent to the DBR under the Freedom of Information Act,” Petrarca says. “If the reporting is inaccurate, we’ll decide the appropriate course of action.”

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The operative words here being, “course of action.”

Have you decided on one? What are you doing to alter the course of this industry? Or have you, as the Mississippi shop owner said, quietly accepted your current situation as being beyond your control?

If you have, then you’ve given up — on yourself and this industry.

Georgina K. Carson, Editor

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