Calif. auto body regulations would increase rates

November 6, 2006

California policyholders would see their automobile insurance premiums increase, under proposed Department of Insurance regulations that mandate payments to auto body shops for insured repair work, according to three property/casualty trade associations.

The regulations were the subject of DOI hearings in October. Testimony was provided on behalf of the Personal Insurance Federation of California, Association of California Insurance Companies and the American Insurance Association.

“These regulations exceed the authority granted to the department,” said Ken Gibson, vice president of the western region of AIA. “State law enacted in 2000, which is the basis for the regulation, requires insurers to report labor rate survey results to the department. The law does not give the department any authority to dictate how the surveys are to be conducted.”

“The proposed regulations far exceed existing law by attempting to establish a method for conducting the surveys. They also mandate a badly flawed scheme for calculating the prevailing rate by inflating prices in the survey,” said Sam Sorich, ACIC president.

“The proposed regulations would force insurers to pay body shops their ‘posted rates,’ which are higher than actual rates insurers regularly pay for work,” according to PIFC President Rex Frazier.

According to the associations, the regulations “will force insurers to make calculations based on inflated rates, which would translate into higher repair costs. That may be good for the repair shops, but not for California policyholders,” they said in a statement.

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Insurance Journal West November 6, 2006
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