After being presented with in-depth analysis by both the California Collision Repair Association (CRA) and the California Autobody Association (CAA) regarding the negative consequences of proposed labor rate survey rules, DOI Commissioner Steve Poizner dropped the regulations for insurer-conducted labor rate surveys, at least for the time being.
As reported in the September issue of Autobody News, the CRA had asked the commissioner to kill the rules, stating that they would allow insurers to cap payments for repairs which, in turn, would hurt consumers.
CRA executive director Allen Wood said, “We applaud the commissioner for listening to our arguments and for taking action to stop a flawed plan. The CRA stands ready to work with all stakeholders to establish a repair marketplace free of unfair business practices such as steering and capping.”
Wood noted that faulty labor rate surveys have been used by insurers to justify the underpayment of claims, stating, “Steering is fueled by insurer statements indicating the policyholder will have to pay the difference between the survey labor rate and the rate charged by the shop that he or she has selected. This is an unfair business practice that would have been perpetuated by sanctioned labor rate survey.”
He added that government regulated labor rates would produce a marketplace with repairs compensated by “averages” and not the true cost of the repair work.
The issue of labor rate surveys has been a problem for the collision industry for many years. Not everyone agrees that the withdrawal of the regs by Poizner is favorable in the fight for shops to be compensated a fair price for the work that they do.
The California Autobody Association (CAA) expressed disappointment that a solution was not put in regulation, despite the fact that the current revised regulations were not addressing the main issue of implementing a fair and accurate process of doing labor rate surveys.
“The CAA’s position has always been that an unbiased third party should perform the labor rate survey,” stated CAA Executive Director David McClune. “There is an inherent conflict of interest when insurance companies control the process, creating an unfair business practice that harms shops and consumers.”
Bill Gausewitz, counsel to the commissioner, stated: “In making this decision, the commissioner asked me to tell the interested parties that he has serious concerns about the relationship between insurers and body shops in connection with insurance claims. The department will take further regulatory action on this subject.
“We will ask representatives from both insurers and body shops to assist the department in developing ways to address these concerns. If a cooperative approach cannot be developed, the Commissioner will address the issue unilaterally in the way that the department deems best. We will distribute a letter to interested parties shortly elaborating upon how we intend to proceed on the issue.”