Auto Body Shops Fight Insurer Labor Rates
When a little business feels big guys are taking advantage of it, is it time for the government to step in? Or is deregulation and opening the markets a better solution?
That fundamental economic question is at the heart of a recent state report about the way insurance companies pay for work done by auto body shops. The report was issued by The Special Commission on Auto Body Labor Rates, a group that the Massachusetts Legislature created in 2008 after hearing complaints about the rates from many body shop owners.
Steady State
Mike Pace, co-owner of Advanced Auto Body Inc. in Worcester, said that in 1984 he got $24 to $30 an hour repairing cars damaged in crashes. Today, the rate is $34 to $36.
“It’s been pretty low for years,” Pace said. “It’s controlled by the insurance companies.”
The state report offers some evidence to back that assertion up. It notes testimony from auto body shop representatives at commission hearings in Worcester and Boston indicating that hourly rates for body repairs in other states, and for mechanical repairs in Massachusetts, have risen far faster.
According to Stephen Regan, a spokesman for the Hanover-based Massachusetts Auto Body Association, rates for mechanical repairs, which are typically paid for by individual customers, rose from around $30 per hour in the 1990s to around $90 per hour today.
Regan argues the ultimate effect of the low rates is that shops can’t invest in new equipment and new workers aren’t coming into the industry.
Another proposal came in the form of a bill introduced in the last legislative session that would have had the state intervene, setting hourly rates based on national averages. The bill would have created a tier system, paying more to shops that receive higher grades for quality.
But, according to the report, insurance industry representatives testified that such increased regulation would fly in the face of the state’s recent shift to managed competition for the auto insurance industry.
The Automobile Insurers Bureau, a Boston-based industry organization, hasn’t taken a stand on the reimbursement issue. Michael Sloman, an officer with the group, said ultimately insurers have less of a stake in the question than their customers.
“Whatever rates are to be paid will be passed on to policy holders,” he said. “Whatever the cost is, it will be absorbed.”
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