Industry groups, legislature clash over body shop labor rates bill

(The Center Square) – Two industries having opposing perspectives on a bill that would set the amount paid for body shop labor rates.

The current average labor rate paid by insurance companies is $40 an hour, which is one of the lowest in the country, according to members of the auto collision industry. H 1111 would set a minimum labor rate.

The rates are affecting automobile service providers who have a difficult time retaining skilled workers, Lucky Papageorg, executive director of The Alliance of Automotive Service Providers of Massachusetts, said at a joint hearing of the Massachusetts Joint Committee on Financial Services. Consumers also are impacted by current rates as many collision repair shops have closed over the past few years, Papageorg said.

“Because of the dwindling number of qualified collision repair shops, there is an increasing period of time that people are forced to be in their vehicles that are particularly unsafe to be on the roads in the first place,” Papageorg said. “And then once the vehicles end up in a collision repair shop facility, the repair times have been extended significantly.”

The issue also affects body shops at dealerships, according to Robert O’Koniewski, executive director and general counsel of the Massachusetts State Automobile Dealers Association. About 50% of body shops at auto dealerships have closed, he said.

“Right now, the insurance companies have had a stranglehold on the reimbursement process for decades and as you’ve heard eloquently from other individuals, it’s managed to tamp down the rate over the years so that the rate that’s being paid for the repairs does not reflect the true economics of the industry,” O’Koniewski said.

Christopher Stark, executive director of the Massachusetts Insurance Federation, countered their claims, calling the bill “government price-fixing on the auto insurance market.”

Legislators need to look at total claims costs for labor, Stark said. For example, New York has one of the highest costs at $1,572 per claim, about $400 higher than the cost in Massachusetts. But the take-home wages of a skilled worker were $971 per week in New York, compared to $995 in Massachusetts, Stark said.

“We can’t believe falsely that an increase in the labor rate is going to result in an increase in wages,” Stark told the committee.

The legislature is establishing a committee to study the issue, according to Chairman James F. Murphy, but he asked industry executives to come to legislators with solutions.

“You have the knowledge and expertise to tell us how to fix things,” Murphy said.

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