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Charge Regulation Weighed, However Insurers Level To Advantages Beneath Managed Competitors
OCT. 3, 2023…..Two years in the past, lawmakers have been gearing as much as have a particular fee dive deep into the long-running debate over the labor charges paid by insurers to auto physique restore outlets in hopes of discovering an answer to a difficulty that has festered on Beacon Hill for years.
With that particular fee’s ultimate report within the can for greater than a yr, the Joint Committee on Monetary Companies on Tuesday heard a lot of the identical testimony from lots of the similar individuals in relation to auto physique labor charges that haven’t modified considerably since 2008: auto physique outlets say a rise or the facility to barter the labor charge with appraisers is important or else outlets will start to shut for lack of revenue and staff, and the insurance coverage trade asserts {that a} important change to the auto physique labor charge would imply a rise in insurance coverage premiums paid by Massachusetts residents.
The difficulty has lingered on Beacon Hill for practically 20 years regardless of particular commissions that explored the matter in 2008, and once more in 2021-22. However auto physique restore store homeowners have been again in entrance of legislators on Tuesday to remind lawmakers that outlets are reimbursed by insurers at a median charge of about $40 per hour — which they mentioned is the bottom within the nation — and pressed for laws regulating minimal labor charges.
“Our trade has gone from being physique males and banging out dents and portray automobiles to a bunch of highly-skilled technicians engaged on autos that carry computer systems processing extra code than rocket ships that traveled to the moon. The portray and refinishing course of has brought on our technicians to change into chemists and have to have the ability to measure components to realize shade matches, and on the similar time, the long-lasting finishes produced at car manufacturing factories by robots,” Evangelos “Fortunate” Papageorg, government director of the Alliance of Automotive Service Suppliers of Massachusetts, mentioned. “Sadly, the labor charge of reimbursement has not stored tempo with the adjustments in know-how, coaching and tools required to carry out correct repairs, in addition to with all the opposite escalating prices of operating a enterprise right here in Massachusetts.”
Papageorg and others supported a handful of payments coping with auto physique labor charges, together with H 1035 from Rep. James Hawkins of Attleboro. The invoice, considerably just like one Hawkins filed last session, would require that insurers reimburse auto physique outlets at a minimal charge equal to the speed on the time the Insurance coverage Reform Act handed in 1988, adjusted for inflation. Afterward, the speed could be adjusted based mostly on the Shopper Worth Index.
In line with the U.S. Bureau of Labor Statistics, $1 in October 1988 is the same as $2.55 of shopping for energy in August 2023 (the latest month with information accessible).
Christopher Stark, government director of the Massachusetts Insurance coverage Federation, mentioned the Hawkins invoice is a foul concept as a result of auto physique labor charges at present are between seven and 15 p.c increased than they have been at this level final yr.
“So the market is responding and it’s responding nicely, and we don’t wish to reintroduce some ranges of presidency management of {the marketplace},” Stark mentioned. “Because the 2008 reforms, which moved us from mounted and established to managed competitors, shoppers have gained within the state. We’ve gone from constantly one of many high 5 highest insurance coverage charges states to now and the 15-to-18 spots nationally, and that’s good for shoppers.”
He argued that a significant factor conserving labor charges comparatively decrease in Massachusetts is a “persevering with oversupply of restore outlets available in the market” because the variety of bodily harm claims in Massachusetts has trended downward. Citing the identical figures as he did at a 2021 listening to, Stark mentioned the variety of bodily harm claims in Massachusetts declined from about 606,000 in 2003 to about 472,000 in 2019, a drop of twenty-two p.c.
“Fewer automobiles want extra technologically superior repairs, but the variety of auto restore amenities stays comparatively constant over that point, with solely a decline of 5.5 p.c — once more, in comparison with the bodily harm decline of twenty-two p.c,” he mentioned. “The sort of protectionism would undermine the muse of managed competitors and runs counter to well-established financial ideas, and mandating a minimal labor charge will improve drivers’ premiums. It’s a tax with out a profit for drivers.”
Stark mentioned the Massachusetts Insurance coverage Federation as a substitute helps a invoice (H 1005) filed by Rep. Michael Finn of West Springfield. Stark mentioned the invoice “is a crucial piece of laws that we got here up with in response to each of the chairs urging us to give you be a part of the answer transferring ahead on labor charges.” It might abolish the the Car Injury Appraiser Licensing Board and shift its authority to the commissioner of insurance coverage, one thing restore trade representatives say could be a non-starter for them.
The Legislature established a particular fee to review auto physique charges within the fiscal yr 2022 price range, consisting of legislators from each main events, three individuals appointed by the Car Insurers Bureau, three individuals appointed by the Alliance of Automotive Service Suppliers of Massachusetts, a consultant of a vocational-technical college or program, and an auto seller.
A ultimate report launched in April 2022 said that the “Fee acknowledges that auto physique labor charges should be addressed and that the auto physique labor charge has not elevated considerably since 1988.” However the group, co-chaired by Monetary Companies Committee co-chairs Rep. James Murphy of Weymouth and Sen. Paul Feeney of Foxborough, didn’t make a simple suggestion and introduced the Legislature with six “suggestions and potential options.”
The primary chance the fee talked about was the established order, which it mentioned “will not be a viable suggestion and won’t present a long-term answer to the difficulty of auto physique labor charges.” There have been additionally suggestions made by the Alliance of Automotive Service Suppliers Massachusetts and Massachusetts State Car Sellers Affiliation.
Two forms of laws have been recognized: one set of payments into consideration final session that “would create a government-set labor charge that insurance coverage firms could be required to pay auto physique restore outlets based mostly on the typical labor charge of surrounding states” in New England, and one other (together with Hawkins’ invoice) that “would use the labor charge set in 1988 and alter it for at present’s use based mostly on inflation over the previous twenty years.”
After which there was the “legislative suggestion,” which was to create a Labor Charge Advisory Board made up of presidency officers, insurance coverage trade representatives, restore trade representatives, and others to “deal with any and all points associated to auto physique labor charges.”
The advisory board could be charged with conducting an annual survey of auto physique store labor charges and amassing different trade information to “be used as components to supply a foundation and suggestion for which the board can focus on a good and equitable labor charge.”
That “legislative suggestion” and a requirement for a minimal hourly labor charge of $55 was included within the Senate model of an financial growth invoice that collapsed within the ultimate days of formal work within the 2021-2022 legislative session when Home and Senate Democrats have been blindsided by legally-required tax rebates.
That very same language is earlier than the Monetary Companies Committee once more this session as S 688, filed by Sen. Michael Moore of Millbury.
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