A new Alliance of Automotive Service Providers of Massachusetts video encourages the state’s collision repairers to constantly talk about the nation’s lowest labor reimbursement rates.
In the video posted Friday, a Massachusetts shop owner says that 30 years ago, the labor rate was $30 per hour. Three decades later, it was $39, he said. (AASP-MA called the latter an average.)
2018 Mitchell data shared by AASP-MA reported a Massachusetts labor rate of $38.28, the lowest in the nation.
The Northeast Consumer Price Index rose about 120 percent over the 30 years while labor rates only rose 24 percent, the owner says. Put another way, that’s “a raise of 30 cents a year for the past 30 years,” he says.
The idea that a body shop could buy equipment, obtain OEM certification, fix high-tech vehicles, guarantee work and absorb the liability for less than $40 was “absolutely absurd,” according to the shop owner.
“The rate is completely unfair in terms of how customers are reimbursed and how we are compensated” as repair professionals, he states.
AASP-MA Executive Director Evangelos “Lucky” Papageorg said Friday the video came after the organization battling the issue for a “very long time.”
“At some point, enough is enough,” the video states.
AASP-MA also this month demanded a meeting with Massachusetts Insurance Commissioner Gary Anderson.
“Unlike every other state in the country, Massachusetts insurers have never conducted a survey to determine what the free market labor rate truly is,” Papageorg wrote in a Feb. 5 letter to Anderson. “Why not? As a follow up, please tell us how these absurdly low labor reimbursement rates are established and substantiated by insurers? We ask that you require the insurers to provide current written documentation. We also request that you provide a written explanation of your specific involvement in determining and allowing the intentionally suppressed rates to be held out as the ‘prevailing market reimbursement rate’ to policyholders.” (Emphasis Papageorg’s.)
The Massachusetts Division of Insurance has not yet responded to a Tuesday morning request for comment.
AASP-MA told Anderson that National AutoBody Research data from 334 Massachusetts auto body shops found posted body and paint labor rates averaging $56 per hour.
“Each retail business has the right to establish their own rates based on their individual costs,” Papageorg wrote. “AASP-MA and the collision repair industry are proponents of utilizing the results of an independent survey of the market to determine the reimbursement rate paid by insurers to the policyholders. Doing so would ultimately foster a free market, based on fair competition, and allow the consumer to choose who they will trust to repair their vehicle. We believe the ‘average’ rates from this survey is a reasonable starting point relative to the current economic conditions here in Massachusetts. By every economic measure available, the average rates from this survey are more realistic than the suppressed rates that the Insurance industry has been manipulating for the past thirty years.”
The issue boiled down to insurers artificially suppressing the reimbursement rate and while having “completely bamboozled” consumers into thinking it’s a fair and “market rate,” Papageorg said Friday. Carriers argue that this is all they can get in subrogation, and they’ll also cite data from their referral shops to compute a rate for unaffiliated shops, he said.
“It’s nothing more than a contracted fleet rate,” he said in a statement regarding the referral shops’ rates.
“Any one shop’s contracted fleet rate isn’t ‘inflicted’ upon another repairer in an area, let alone statewide,” Papageorg said in a statement.
The video calls upon shops to constantly raise the issue with insurers. According to the shop owner, insurers say no one talks about labor rates.
“I find that hard to believe,” the shop owner states. He calls on shops to express their “complete dissatisfaction.”
Papageorg said shops should raise the issue with licensed auto damage appraisers, who are bound by their licenses to negotiate all terms of the repair.
Anyone concerned about the viability of their business and the industry needed to talk about the rate issue, the shop owner states. Insurers needed to hear daily that “this is wrong,” he said.
Nothing forces an auto body shop to settle for what the insurer pays. You can agree to a price for repairs with your customer, and charge them. The customer has the right to pursue total reimbursement from the insurer under the consumer’s indemnity policy.
Papageorg said “there are numerous shops” which charge the consumer their facility’s posted labor rate and let the customer handle it with their insurer.
Papageorg pointed out that this wasn’t balance-billing. It’s just charging the customer your posted labor rate for the procedures you perform to assume the liability for the work, he said.
Massachusetts repairers have seen customers reimbursed those differences, and the proof is available on the National AutoBody Research website, according to Papageorg.
Carriers don’t want to set the precedent of agreeing to those rates with the repairer, but “they reimburse the customers” on the back end, Papageorg said.
The video calls on every repairer in the state to be part of the solution and “stop being part of the problem.” It encourages them to join the AASP-MA to try and rectify the situation.
“Until the collision repair industry takes it upon itself to step up and do something, the insurers will continue to suppress the rate,” the shop owner states.
Alliance of Automotive Service Providers of Massachusetts YouTube channel, Feb. 14, 2020
Featured image: The Alliance of Automotive Service Providers of Massachusetts logo is shown. (Provided by AASP-MA)