Industry Group Opposes Massachusetts Proposal to Set Auto Labor Rates

June 21, 2013

The National Association of Mutual Insurance Companies is opposing bills currently under consideration in Massachusetts that would require the state to set a minimum hourly labor rate that insurers must pay for auto repairs.

In testimony submitted this week to the Massachusetts Joint Committee on Financial Services, NAMIC stated that the measure under consideration, “An Act reforming labor rates paid by insurance companies to auto repairers in the Commonwealth,”(H.969 and S.497) are unnecessary and ill-advised.

“We do not have a situation in Massachusetts where damaged cars are going unrepaired. There are plenty of repair shops ready, willing, and able to repair cars at prices insurers are willing to pay. There’s no need for the state to step in and set an arbitrary, minimum hourly rate,” said John Murphy, NAMIC’s state affairs manager for the Northeast.

“The system is working as it should. Cars are being repaired at competitive rates, thus helping to keep insurance costs as low as possible for Massachusetts policyholders,” Murphy continued. “While every service provider would like to make more money, the marketplace – not state government – should determine when that should happen.”

Under the proposal in Massachusetts House Bill 969 (‘An Act reforming labor rates paid by insurance companies to auto repairers in the Commonwealth”), the state’s insurance commissioner would be charged with setting the minimum hourly labor rate that insurers would pay on insured claims for repairs made by registered auto repair shops.

According to the bill, the rate shall be the minimum rate paid by insurers on all Massachusetts insured motor vehicle damage claims and shall be the average of the hourly rates paid by insurers for auto damage repairs in Connecticut, Maine, New Hampshire, Rhode Island and Vermont.

In determining the average of rates, the insurance commissioner would utilize data available from independent collision repair estimating services. Upon setting the rate, the commissioner shall have the discretion to adjust the hourly rate by not more than 3 per cent greater or 3 per cent less than said average.

Under the proposal, the insurance commissioner shall review the hourly labor rate once every 3 years to make readjustments as necessary; provided, however, that the commissioner shall provide a report of any proposed new rate to the joint committee on financial services 15 days before promulgation.

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