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Massachusetts labor rate panel to present ‘all possible solutions,’ no recommendation

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Insurance | Legal
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The special commission created to study auto body labor rates in Massachusetts will not be issuing specific recommendations to the Legislature, the commission’s co-chair said during the panel’s fourth and final meeting on Monday.

Instead, state Rep. James M. Murphy (D-4th Norfolk) said the commission’s report will include a variety of possible solutions to the state’s stagnant labor rate, as suggested by auto body shops, insurers, and other stakeholders.

The report “will include all possible solutions to the issue before us,” he said.

Asked by commission member Bill DeLuca “if there will be any recommendation at the end of the day,” Murphy replied, “It depends. The way I envisioned it would be it’ll be a document containing possible solutions. As I said earlier, I don’t know if there’s one solution here.” The report will be written by the House Committee on Financial Services, he said.

With no further meetings planned, it’s unclear how the commission would be able to adopt specific recommendations.

Murphy called on all stakeholders to submit their proposals by the end of Friday. “It does not have to be a hundred-page treatise. It can be a one-pager … even a paragraph. Less can be more,” he said.

Although the commission has been given until July 1 to issue its report, Murphy suggested that it might be issued much sooner. “Don’t be surprised if it comes out anytime after Friday. I don’t know how to be more clear and specific than that,” he said.

Among the possible solutions, Murphy said, is House Bill 1111, currently before the House Committee on Financial Services. That bill would require insurers to use a minimum rate equal to the rate at the time the Insurance Reform Act passed in 1988, adjusted for inflation. The rate would then be adjusted each year based on the Bureau of Labor Statistics’ Northeast Consumer Price Index, which is the inflation rate for the region that includes Massachusetts.

Proponents of the bill argue that its passage is needed to correct 40 years of rate stagnation in Massachusetts and allow shops to respond to decades of rising costs. At $40 per hour, the allowed labor rate is the lowest among the 50 states.

Murphy noted that H. 1111 could be amended or rewritten in committee, to include some of the solutions put forward.

Monday’s meeting was held at Assabet Valley Regional Technical High School, to give commission members an opportunity to visit an auto body repair program. Educators and body shop professionals alike had warned that existing low labor rates are discouraging students from pursuing a career in collision repair.

“The site visit today, I think only emphasizes how important it is that we have to do something for this trade,” said state Rep. Bruce Ayers (D-1st Norfolk), a member of the commission. “It seems to be a dying trade, compared to 15, 20 years ago … when [students] realize the amount of money they need to spend on tools, realize the amount of time and effort you put in, when they graduate they can go into another field and make much more money.”

“I think it says a lot when the average age of an auto body technician today is well into their 50s and 60 years old. The writing’s on the wall there,” Ayers said.

As required, the special commission held two public hearings on labor rates, on Jan. 25 and March 22, both of which were remote and livestreamed. It also has been accepting written testimony, and will continue doing so until 5 p.m. EDT Wednesday.

The written testimony and links to the recorded testimony will be part of the commission’s report, Murphy said.

During the public hearings, speaker after speaker told the commission that auto insurers’ refusal to pay a labor rate of more than $40 over the past 30 years has caused real pain in the collision repair industry, threatened its survival and put members of the public at risk.

That sense of urgency and frustration came through in some of the few comments made during Monday’s meeting.

Commission member Jack Lamborghini of Total Care Accident Repair in Raynham voiced doubt about the adequacy of solutions he expects the insurance industry to offer.

“I this goes back to 2008. And nothing has gotten done,” Lamborghini said, referring to a similar commission whose recommendations were ignored.

“I’m very fearful, honestly, that once again, nothing gets done, with a solution that’s offered up by the insurance companies that’s so inadequate, that we’re going to have a real problem going forward,” he said.

During the Jan. 25 public hearing, the executive director of the Massachusetts Insurance Federation said that “market forces,” rather than rate suppression by insurers, was responsible for 30 years of stagnant rates.

Christopher Stark said increased competition has led some body shops to enter into contracts with insurance companies, and that the lower labor rates that are part of those contracts figure into the industry’s determination of the prevailing labor rate.

Stark presented figures showing that since 2000, the number of accidents in the state have decreased by 22%, while there has been a 5% decrease in the number of auto body shops in operation. That difference, he said, shows that the market has become more competitive.

In deciding not to issue any recommendations, the commission seems to be taking some latitude on instructions from the Legislature to include “an assessment of whether current labor rates are reasonable and, if not, an evaluation of potential methods for calculating a reasonable labor rate” in its report.

The commission includes representatives of the auto body repair and insurance industries, as well as legislators, a licensed auto dealer, and representatives of the insurance commissioner, the attorney general’s office, and a vocational-technical school.

The following were the recommendations of the previous commission, spelled out in its Dec. 30, 2008 report:

“1. The Commission recommends that as soon as the data for auto body labor rates through June 30, 2009 becomes available, the General Court should review it to determine what effect, if any, the implementation of managed competition has had on the auto body labor rate paid by insurance companies to auto body shops located in Massachusetts. The representatives of the auto insurance and auto body industries agree that the CCC Information Service’s ‘Crash Course’ and Mitchell International’s ‘Industry Trends’ reports will be utilized as the primary national source for labor rate statistics. The Commission also recommends that other sources of information such as Collision Repair Industry Insight as well as appraisals generated by insurers to consumers and or repairers to track movement in labor rates paid be utilized. These reports are produced quarterly and annually. They detail the average labor rate paid nationally and by state. Also included in these reports is the average number of labor hours per repair both nationally and by state.

“2. The Commission recommends that the General Court then consider whether or not alternate methods, including legislation, are necessary to ensure that the labor rate insurers pay to auto body shops for repair of damaged motor vehicles is fair and reasonable as a result of the transition to managed competition in Massachusetts motor vehicle insurance.

“3. The Commission recommends that representatives of the auto body repair shop industry meet bi-monthly with representatives from the motor vehicle insurance industry to discuss and identify best practices and any other actions that will improve the accountability and quality of services that both industries provide to consumers whose motor vehicles are damaged.”

More information:

Mass. special commission on labor rates to hold first public hearing Tuesday

Mass. special commission holds 4-hour hearing on body shop labor rates

Insurers’ auto body labor rates well below ‘market rates,’ expert tells Mass. commission

House bill H1111:

Senate bill S709:

Recording of the committee’s Sept. 15, 2021 hearing on H. 1111:

National AutoBody Research survey data


Featured image: the Massachusetts state flag. (bkindler/iStock)

During a Jan. 24 public hearing, AASP/MA Legislative Director at-Large Tom Ricci of the Body and Paint Center holds a copy of the report of the 2008 Special Commission on Auto Body Labor Rates, whose recommendations were not followed. (Screen capture via the Massachusetts Legislature’s website)

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