Many state legislatures have convened for the 2009–2010 legislative session. Top issues for body shop owners and managers are the same as they have been in past years: labor rates, insurer steering of claimants and paint capping.
Several states have passed laws in recent legislative sessions to address issues such as steering and labor rates. Steve Regan with the Massachusetts Auto Body Association (MABA) stated, “There has been an enormous amount of success in the last three or four years on the state level with respect to collision repair legislation.”
However, enforcement of existing laws and recently passed laws has been another matter.
The issue of paint capping has been on the table for at least twelve years in California. In 1995 the California Department of Insurance issued a letter that stated the practice of paint capping was illegal. But here we are in 2009 and paint capping is still a hot topic in California as it is across the nation.
The issue of paint capping was back in the California Assembly last year, when they unanimously passed California Senate Bill 1371 prohibiting insurance companies from placing caps on payouts for collision repairs. The problem has been that legislators can’t agree on a definition of capping. The bill never passed the state senate.
Some states have clear paint capping regulations, but many states do not. They either have very vague language in the paint cap laws or do not address the issue at all.
Both North Carolina and South Carolina have problems with paint capping by insurers and plan to introduce paint capping legislation this session. Virginia was the latest state to pass a paint cap law, which seems to be helping in the Old Dominion.
Anti-Steering Bill in Massachusetts
A Massachusetts bill that would have prohibited auto glass insurance claims third-party billers from participating as vendors of auto glass replacement and/or repair services for the same insurer failed to past last session. The same bill is expected to be re-filed for legislative action this session, according to the office of Rep. Robert P. Spellane (D), the sponsor of House Bill 1102 last session.
Public Hearing in California on Proposed Anti-Steering Regulations
According to the California Department of Insurance (CDI), a public hearing is set for February 25, 2009, “to provide all interested parties the opportunity to present comments with respect to a new regulation on Insurer Recommendations of Automotive Repair Dealers.
The public hearing will be held in Sacramento at the Capitol Mall in the Employment Development Department Auditorium. If unable to attend, all interested parties are invited to submit written comments to:
State of California Department of Insurance, 45 Fremont Street, 21st Floor, San Francisco, CA, 94105 Consumer Help line: 800-927-4357
CDI says: The purpose of the new regulation will be to provide guidance and specificity to insurers with respect to the nature and degree of involvement they may have in a consumer’s choice of an automotive repair dealer.
The proposed regulation states, “Except when a referral is expressly requested by the claimant, after a claimant has chosen an automotive repair dealer, the insurer shall not suggest or recommend that the claimant select a different automotive repair dealer.”
The proposal continues to define the consumer-insurer relationship, “a claimant has chosen an automotive repair dealer when the claimant has specified to the insurer a specific automotive repair dealer ...” The regulation, if approved, also defines what it determines “suggest or recommend” includes as far as insurer actions.
Vince Bertolucci, co-owner of Bertolucci’s Body & Fender Shop in Sacramento, California, says he plans to attend this public hearing.
When asked if he sees steering as a major problem in California, Bertolucci says, “Absolutely! They’re [insurers] steering the hell out of customers around here.”
According to Bertolucci, a law that would make it illegal for insurers to recommend a body shop unless the claimant asks for a referral is exactly what is needed.
Getting body shop labor rates more in line with mechanical labor rates
In some states, body shop owners and body shop associations have decided to fight back, through legislation, to regain control of labor rates.
In Massachusetts, anti-steering legislation that passed the House and is now in a Senate committee, is opposed by insurers because it “takes away labor rate control.”
The Massachusetts Auto Body Association (MABA) was the driving force behind House Bill 5056 last session. MABA believes that HB 5056 would “establish accountability for insurers and repairers and allow a competitive, free-market system allowing shops to compete fairly and freely against one another for customers.” They hope to see this legislation passed this year.
Massachusetts insurers are opposed to HB 5056. The insurers say, “the net effect of the language in the bill would result in insurers paying a higher labor rate.” They further say that the “current statutes and regulations that MABA is seeking to change, which govern the Direct Payment and Referral System, would eliminate the mechanism that insurers use to ‘control’ the labor rate and other cost in Massachusetts.”
The labor rate issue for body shops is a problem all over the United States, not just in Massachusetts. In South Carolina, body shop manager Thomas Melvin of Aussie’s Autobody (Ridgeland, SC) says their body shop labor rate is forty-four dollars per hour ($44/hr) while their mechanical labor rate is seventy-five dollars per hour ($75/hr).
Melvin says that he has a problem getting some insurers to pay his posted labor rate. “They only want to pay forty dollars per hour ($40/hr) saying that ($40/hr) is the ‘prevailing rate’ for this area.”
To make matters worse, Melvin claims some insurers refuse to pay for repair procedures called for in the procedural pages or P-pages. “It sure is frustrating,” he says.
According to Melvin, the body shop owners and managers can make a difference this year if they will work together in the legislative arena and with various state associations to “push back” against unreasonable insurer demands.