A longstanding dispute between insurers and auto-body shops has taken an ugly turn this year, with each side accusing the other of putting profits over consumers’ needs, and legislators pitted against the R.I. Department of Business Regulation and Gov. Donald L. Carcieri.
The fight involves two basic issues: how much body shops get paid for labor, and who should appraise the damage on each car – often an entree to fixing the car.
Leaders of the Auto Body Association of Rhode Island, which represents independent shops, say labor rates are far too low, and while each insurer is supposed to set its own rate, somehow almost all pay the same: $38 an hour, unchanged for several years.
As for appraisals, body shop owners say insurers get around Rhode Island’s ban on steering consumers to specific shops by making the appraisal process substantially quicker and easier if a car is taken to a cheaper “direct” shop (one on contract with the insurer).
The recriminations aren’t new, but this year, new DBR Director A. Michael Marques tried to negotiate some kind of settlement between the body shops and the insurers, who say they pay what the market will bear, and they try to keep costs low for consumers’ sake.
What exactly happened between the insurers, the DBR and the body shops is subject to debate, but the end result is this: Last month, the General Assembly passed a bill that resolved the hourly rate dispute as the shops wanted – by making each insurer conduct a market survey to set hourly rates, and making the DBR oversee the whole process.
And on Wednesday, the House Finance Committee heard testimony on a second measure that would require, among other things, that any car with more than $1,000 in estimated damage get a second “independent” appraisal.
Marques is fuming. At his request, Carcieri has already vetoed the first bill, H-7167, but the body shops are trying to get legislators to override the veto. If the second bill, H-6996, is approved, Marques said, he’d urge Carcieri to veto it as well.
“They have no credibility with me because of what they’ve done,” Marques said of the body shops. “I thought that I could do something [to help them], but I must’ve been naive.”
Stephen D. Zubiago, a lawyer with Nixon Peabody in Providence and lobbyist for the Property Casualty Insurers Association of America, said insurers obviously want to save money, and keeping labor rates low and supporting direct shops – without violating the law – helps them accomplish that goal. The key, he said, is that consumers also benefit.
“If legislation passes which regulates the amount that insurers have to pay body shops, that would likely increase the costs of insurers to repair vehicles, which would likely result in higher premiums for consumers,” he said.
But Dave Reynolds, owner of New Century Auto Body in Johnston, said consumers should side with the shops.
The low labor rate affects body shops “dramatically,” he said, “because under the constraints we are under, we cannot expand the business, and we cannot send people for training.”
Reynolds also questioned the notion that insurers pay what the market will bear. It’s more like they’re colluding to keep rates low, he said. “Outside from extra-sensory perception, how do they all come up with the same rate?”
The bill the governor has vetoed would require the DBR to create a standard market survey form to distribute to insurers, get the insurers to conduct the surveys, and verify that the surveys were conducted as required.
As Marques sees it, however, the DBR shouldn’t regulate labor rates at all. “This is not a socialist country,” he said.
The second bill, the “Unfair Claims Settlement Practice Act,” would also pull the DBR into what should be a market-driven system, Marques said.
“We’re not appraisers here. We’re not adjusters,” Marques said. “But anytime you had a disagreement over the value of the repair of your car, we’d end up in the middle of it.”
