Al Brodeur, who has owned a Marlborough body shop for 37 years, said the average rate insurance companies paid shops in the late 1980s was about $30 per hour to repair banged-up cars.
Currently the hourly wage is about $35 per hour. The $5 increase pales in comparison with the increased cost of doing business over 20 years, he said.
It is also less than the average rate of collision-specialist wages across the country, which Brodeur estimates to be about $45 per hour.
Since the late 1980s the Commonwealth Automobile Reinsurers – a quasi state entity that oversees how insurers operate in Massachusetts – has encouraged insurance providers to resist labor rate increases and lower rates whenever possible, said Tom Ricci, owner of the Hudson's Body and Paint Center.
Such a mind-set has stunted increases in rates insurers pay shop owners in the last two decades, prompting potential mechanics to pursue other trades, or skillful collision specialists to find work out of state, Ricci said.
Brodeur, who has had to cut his work force by 20 percent in recent years, also lamented the stagnant wages.
Brodeur recently indicated the going wage rate in Rhode Island - recently bumped by that state's Legislature - for collision work is more than $40 per hour.
In response, shop owners are supporting legislation that would revamp the way insurance companies pay shops for their services.
House Bill 1085 would establish a three-tiered classification system instead of the current flat, one-size-fits-all rate. The act is before the Joint Financial Services Committee.
In a letter sent to their Beacon Hill colleagues this year, bill sponsor state Rep. Robert Spellane, D-Worcester, and state Rep. Ronald Mariano, D-Quincy, railed against an archaic insurance industry, while bemoaning the limited insurance options in the state.
“I hope you appreciate that most of the companies and groups opposing reforms now are the same companies and groups that have financially benefited now that only 19 companies remain writing auto insurance in Massachusetts,” the letter reads. “Consumers in Massachusetts, our constituents ... have fewer automobile insurance companies to choose from than any other state in the country.”
Frank O’Brien, vice president of the Property Casualty Insurers Association of America, acknowledged recently that the insurance industry in the state was at a crossroads.
“It’s going to be an era of managed competition. The amount of state intervention is going to differ than where it was in the past,” he said.
The bill does not include a specific request for what the automotive repair industry deems to be a fair hourly rate. Instead it calls for the establishment of the Automobile Repairer Labor Rate Commission, which would organize repair shops in a triple-tiered hierarchy.
An “A” shop would have top-notch, experienced workers and state-of-the-art equipment, said Ricci.
Such an investment would be rewarded under the proposal with a business receiving 100 percent of the market rate. The rate would be established by the commission using federal statistics that index labor costs across all industries in the state. The average nationwide rate for collision repair work would also play a factor in establishing the rate, said Rick Starbard, who as a member of the state’s Alliance of Automotive Service Providers and a shop owner in Revere who lobbied for the proposal.
“Shops are at their breaking point,” he said.
A “B” shop would be paid 90 percent of the “A” shop rate, while a “C” shop – a business that met the minimum state requirements for collision repair business – would be paid “whatever the status quo” dictates, Ricci said.
Starbard said he thinks a fair market rate for a top-shelf shop would be $50 per hour.
The financial burden of such increased rates will eventually fall to the consumer in the form of higher insurance premiums, O’Brien said.
“Expenses for any businesses are a consideration when a business sets its price,” he said. “There’s a lot of truth in old cliches. In this case, there’s no free lunch.”
Dan McDonald can be reached at 508-490-7475 or at email@example.com.
Reprinted courtesy of The MetroWest Daily News