Insurance Group Admits Control of Labor Rates - BodyShop Business

Insurance Group Admits Control of Labor Rates

The Massachusetts Auto Body Association (MABA) was recently "astonished" to find out that the Massachusetts Automobile Insurers Bureau (AIB) stated in a report that if House Bill 5056 were passed, they would no longer be able to effectively "control the labor rate and other aspects of the repair process."

"As a spokesman, I’m speechless," said MABA spokesman Stephen Regan. "Insurers have finally admitted they use the current system to steer policyholders and pay below market rates to repairers."

The report, entitled "Actuarial Analysis of House Bill 5056," further stated that if the bill were passed, insurers would have to pay an additional $100 million in labor costs to repairers because they would then be required to pay amounts equivalent to the national average.

"As a result of the direct payment and referral shop system, the hourly labor rates for collision repairs in Massachusetts are significantly less than the rates in other states," the report stated. "In the absence of willing referral shops and satisfied claimants, the systematic control on the hourly labor rate and other aspects of the repair process that have limited the cost in Massachusetts will vanish, allowing the labor rate to rise to the levels experienced elsewhere in the country."

"To state if the bill passes, insurers will have to pay in Massachusetts what they pay in other states could actually help convince the Senate to pass the bill," Regan said. "After all, why should their constituents be paid less than their counterparts in other states?"

House Bill 5056 unanimously passed the House of Representatives and is awaiting action in the Senate. It’s considered a comprehensive bill that addresses many of the problems plaguing the industry, including steering, market conduct, expedited appraisals, re-inspection requirements, minimum shop equipment requirements, disallowing insurer guarantees and eliminating the use of a so-called referral list, which showcases repairers who have agreements with insurers.

MABA feels that AIB addressing the labor rate issue as a result of the bill is ironic because the bill has no language that addresses that issue. Still, the insurance group believes that the net effect of the language in the bill would result in insurers paying a higher labor rate. They believe that the current statutes and regulations that MABA is seeking to change, which govern the Direct Payment and Referral System, would do away with the mechanism that insurers use to "control" the labor rate and other costs in Massachusetts.

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