Why Must We Fight for Every Dollar: Paying the Prevailing Labor Rate - BodyShop Business

Why Must We Fight for Every Dollar: Paying the Prevailing Labor Rate

It's happened again! Some insurance companies still think they don't need collision repair shops to fix vehicles. After years of progress toward common ground, Allstate Insurance has taken a reverse tactic: not paying the prevailing labor rate as they see fit. Sounds like selective p-page operations, doesn't it?

It appears we collision clods in hokey little Tucson are going to be the test cases for a certain insurance company’s suppression tactics.

Two years ago, Tucson had its first rate increase in four years (you do the math on shrinking profits). As usual, there was resistance, but experience told me it would be short lived. How wrong I was! Farmers Insurance of Tucson apparently didn’t like the results of State Farm’s flawed – but industry-accepted – annual survey, so they decided to conduct their own survey, faxed to some shops five weeks after the rate change took place. Farmers finally changed their rates only after calls to a since-retired claims supervisor who said, “his hands were tied.” Strange that after I went two levels over his head they became untied. The non-payment of this prevailing labor rate saved Farmers Insurance of Tucson hundreds of thousands of dollars during their time of denial. But at whose expense?

At the first meeting of the ACCA of Tucson, after Farmers backed off, I warned everyone to be very alert to the possible consequences of the precedent that had been set: If we (the insurance company) don’t like what’s charged by shops, let’s set up smoke and mirrors and stall as long as possible.

History lesson over.

Now to the immediate and latest outrageous behavior by an insurance company. Once again, a rate change has occurred in Tucson (my employees can’t wait four years for a raise), and we were greeted with this response: denial, resistance and, finally, acceptance. I said to myself, “Progress has finally been made, and I’m proud to be part of the industry. The insurance companies believe/know we’re partners in this business – no repairers to fix cars means no policies to sell.”

But wait … how wrong I was … again.

Our friendly good hands people in Tucson have stalled the rate change for three weeks after all other insurance companies have moved forward. Not so bad, you say, it’s only three weeks. Think again. Precedent = Pattern.

Yesterday, after another request for the new rate was denied, I had the good fortune to receive an estimate written by one of their PRO shops. Can you imagine my surprise to see the rates charged were the new (prevailing) rates I was just denied? Talk about reverse osmosis – a DRP being paid more than the outsiders!

I’m no attorney, but if we arbitrarily decided to charge a higher rate to any one insurance company, can you imagine the litigation that could be involved? If I’m not mistaken, this looks like reverse anti-trust. Isn’t one segment trying to fix prices of goods and services sold and profits achieved?

After a call to the local claims supervisor, I was told in a very professional manner that I’d be paid the prevailing rate on that estimate only – and that he’d let me know when they’d pay the correct rates on other estimates.

What will happen now? The rates will change soon. Allstate Claims of Tucson will back out of the controversy, and all will be well. I could have kept my mouth shut and waited for the big boys to toss us a bone, but not this time. Enough is enough! This pattern can’t be allowed to continue.

They can punish me and my employees, but as you all know, they can’t punish us all. Their arrogance in these attempts to fragment our industry is unnerving. They don’t care about anything we’ve tried to accomplish with dialogue over the last 10 years. The pattern set by Farmers Claims of Tucson two years ago and now followed by Allstate Claims of Tucson isn’t frightening in the long term – it’s deadly in the long term if allowed to continue.

But it appears that our local claims supervisors think in the short term – only of profits and bonuses this quarter. There’s no consideration given to the long-term damage caused by making these shortsighted decisions. It’s hard to believe that legal counsel at the corporate level would allow such idiotic decisions at the local (regional?) level to be implemented for such short-term gain.

Make no mistake. I’m no militant and I have no ax to grind with DRPs or what a shop wants to charge. However, when a prevailing rate is established in an area, we can’t tolerate an insurance company dictating to us what they’ll pay. Both sides accepted how the rates were established 30 years ago. We must stand together on this issue and pay particular attention to how this is handled in the future.

This article isn’t about litigation – that’s not normally my style or intent. This article is written in the belief that we (repairers and insurance companies) can all make this a better industry to be a part of.

Dan Hunsaker
Owner, Dan’s Paint and Body
Tucson, Ariz.

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