Molodanof said the insurance companies didn’t like this method because they thought the shops would get together, collude and raise rates.
“That’s against the law,” he said. “We adhere to the antitrust laws and we’re very careful about that.”
Bill AB-1679 would allow insurance companies to survey an entire county (encompassing thousand of square miles) instead of using geocoding.
“That’s not fair; look at Los Angeles County for example,” Molodanof said. “Rent and business rates are totally different in Marina Del Rey versus Inglewood, why would labor rates be the same?”
Commissioner Jones also stressed in the current regulations that 100 percent of shops in the geographical area that are BAR certified and provide workers comp and garage keepers liability insurance need the opportunity to participate.
“It’s okay if they don’t participate, as long as you provide the standardized survey questionnaire and give them the opportunity to respond,” explained Molodanof.
AB-1679 states that insurance companies only have to survey 20 percent of the shops in a county, and even though they still have to be recognized by the BAR, they do not need to have liability insurance and workers’ comp requirements.
“This means shops that pay under the table can be surveyed, which will skew the accuracy of the rates,” he added. “Also, it’s unspecified what the 20 percent pool is going to be. It’s ‘cherry picking’. Look at what happened in the 2016 election due to polling inaccuracies.”
The next standard Commissioner Jones set pertained to DRP rates being used on surveys.
“If you’re going to do a survey you cannot include the direct repair rate because it’s a volume discount; you have to include what you regularly charge,” the CAA lobbyist explained. “Volume discount rates are not market rates, even though the insurance companies think they are.”
Molodanof shared an example to better prove his point.
“If Walmart wants to buy a million bags of Lay’s potato chips, Lay’s is going to give Walmart a volume discount,” he said. “But if you or I went into Lay’s and demanded the same price for one bag of potato chips, they’re not going to give it to us. Everyone else gets charged the regular price; that’s the market rate.”
The Phoenix Club in Anaheim was packed with California industry members interested in hearing about a potential bill that “will negatively impact their business” if passed.
Molodanof believes including DRP rates in the surveys will artificially lower the labor rates, causing the consumer to pay more out of pocket.
“The passing of AB-1679 would allow insurance companies to use DRP rates in labor rate surveys,” he said.