Insurance Group Testifies Against Setting Labor Rates at Final Massachusetts Hearing - BodyShop Business

Insurance Group Testifies Against Setting Labor Rates at Final Massachusetts Hearing

The special commission studying the logistics, benefits and cost of developing an auto body repair labor rate system in Massachusetts held its second and final public hearing Nov. 13. The American Insurance Association (AIA) testified at the hearing that setting labor rates would be “a major step backwards in the effort to reform the private passenger auto insurance system” in the state.

The labor rate commission was formed after the July passage of the auto body labor rate bill, H.B. 1085. The commission must report its findings by Dec. 31.

John Murphy, AIA Northeast Region vice president, said at the hearing that the AIA opposes regulating labor rates and equated such efforts with "government price-fixing."

“Auto insurers can and do negotiate favorable labor rates for repairs,” Murphy said. “Those efforts have a positive impact on repair costs which, in turn, have a positive impact on containing overall insurance costs.”

However, supporters of labor rate regulation, including the Massachusetts chapter of the Alliance of Automotive Service
Providers (AASP-MA/RI) and the Central Massachusetts Auto Rebuilders
Association (CMARA), say that Massachusetts repairers are paid the lowest labor rates in the United
States despite operating in one of the most costly areas in the country.

Murphy claimed a cost-estimate performed by the Automobile Insurance Bureau of Massachusetts (AIB) found that if insurers were no longer allowed to negotiate labor rates with repair shops and the state labor rate was comparable to the national average, repair costs would increase by $128 to $146 million annually, and those costs would be passed down to consumers.

The labor rate bill was introduced in January of 2007 by State Rep. Robert Spellane (D-Worcester). The labor rate commission was also tasked with looking into the number of existing shops in the state and the number that have closed since 2000, studying nationwide labor rate trends and Massachusetts trends through the U.S. Bureau of Labor Statistics, and developing a rate system that’s in line with the Massachusetts economy.

For more information, visit www.passthelaborratebill.org or www.aiadc.org. Click HERE to read a previous story about the bill.

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