The Iowa Insurance Division (IID) will conduct its own independent labor rate survey this week and compare the results to insurance company labor rate survey data as part of an investigation into whether certain insurers have been telling consumers that they’ll have to pay the difference for repairs at shops that don’t charge the prevailing rate.
The survey was prompted by Tom O’Mara, owner of O’Mara Auto Body in Martensdale, who filed a complaint with Angel Robinson, consumer advocate with the IID, in February. O’Mara told Robinson that last August, he raised his labor rate to $54 per hour and most insurers had no problem paying it. He claimed that State Farm, Progressive and Nationwide questioned the rate increase, and so he told them that it was the result of the increasing cost of petroleum-based products. He then claimed that those three insurers told their customers that if they chose a shop that charged over $50 per hour, they would have to pay the difference. He claims that Progressive determined its prevailing rate based on a single shop that was on its preferred list.
O’Mara contends that the insurance industry hasn’t conducted a labor rate survey in Iowa in five years in order to avoid paying shops higher prices.
“Some shops will recall that when surveys were conducted on an annual basis, we used to get a $2 per hour raise each year,” O’Mara says. “If the surveys would have continued to be conducted on an annual basis, shops would be receiving $60 per hour now.”
After O’Mara filed his complaint, Robinson requested labor rate information from insurers and, upon reviewing that information, determined that their labor rates were “very comparable” to O’Mara’s. However, she determined that conducting her own survey would be necessary to come to a definitive conclusion on the matter.
The survey will be mailed out during the week of April 6 to shops located in Des Moines, Indianola and Martensdale. Shops will then have roughly two weeks to send it back in.
Many repairers say that departments of insurance (DOIs) are largely unresponsive to their complaints and that they’re often told “we don’t get involved in business disputes between shops and insurers.” The reason is because DOIs’ typical stated purpose is to protect the interests of consumers and consumers alone.
Since O’Mara’s complaint involved alleged consumer abuse, Robinson determined that it merited investigation. She said she was also able to proactively respond to the complaint due to the nature of her unique position.
“Iowa is one of the few states that has an insurance ‘consumer advocate,’” she said. “Each one has a different area of jurisdiction when it comes to assisting consumers. Mine is fairly broad, so I can assist not just on an individual level but on public policy as a whole."
“There was an issue raised about consumers being charged unfairly, and that’s what I’m looking into,” Robinson added.
Robinson said she would never automatically dismiss a complaint just because it came from someone other than a consumer.
“Consumers tend to only know about an individual problem that affects them,” she said. “If I get a complaint from someone inside an industry like an insurance agent or a body shop owner, that might hint at a bigger problem and a possible trend.”
O’Mara says he isn’t too concerned about being branded a “troublemaker” and getting steered against even harder because he has a very loyal customer base and doesn’t have much competition in the surrounding area. He is encouraging all shops to participate in the survey and to use a labor rate that reflects their true cost of doing business and accounts for an acceptable profit.