Lawmakers in multiple states have taken action in recent weeks on legislation impacting auto body shops, including new regulations related to labor rates, non-OEM parts and public disclosure of regulatory citations against shops.
California Gov. Gavin Newsom, for example, has signed into law a bill calling on that state’s Bureau of Automotive Repair (BAR) to create a system to give businesses receiving minor BAR citations not involving fraud a way to avoid having those made public.
The California Autobody Association and the Automotive Service Association were among 11 trade groups supporting the bill, which creates an independent panel to review BAR citations, and would allow “shops to attend compliance and remedial training for minor record keeping and documentation citation violations, similar to traffic school,” as a means to avoid having such citations made public.
The new law also calls for additional safety inspections in order for a salvage vehicle to be registered. The industry associations say that will help “protect consumers from unsafe, revived total loss salvage vehicles” that currently only require “a brake and lamp inspection, smog check and CHP inspection to make sure there are no stolen parts---nothing else.”
At the other end of the country, Massachusetts legislator comments during a committee hearing in Septmeber could indicate repairers there are finally getting their message across about the need to address collision repair labor rates in the state.
The state legislature’s Joint Committee on Financial Services held the hearing to collect testimony on a number of auto repair-related bills that propose setting a minimum reimbursement rate for labor by insurers to claimants.
“Massachusetts has the lowest labor rate reimbursement in the nation,” Evangelos “Lucky” Papageorg, executive director of the Alliance of Automotive Service Professionals (AASP) of Massachusetts, told the committee members. “The number of shops has dwindled by 1,000. But there’s also been an increasingly fewer number of individuals getting into the collision repair industry as [technicians] because they can make more money working as an unskilled laborer than they can [as a] skilled repairer in a collision repair facility. Working at labor rates that are 30 years old is absolutely ludicrous.”
Also testifying in favor of the bill was Brian Mountain, body shop director at Collision 24 in Brockton, MA.
“The hourly rate of reimbursement in 1988 was an average of $30,” Mountain said. “Today it is an average of $40. The rate has gone up approximately 33% in 33 years while my other business costs have skyrocketed. I’ve seen insurance premiums go up 261%, the minimum wage increased 270% and the consumer price index increased 124% during the same period of time.”
“You cannot repair today’s vehicles based on the rates that were being paid 30 years ago,” Papageorg told the committee.
Frank O'Brien, vice president of state government relations for the American Property Casualty Insurers Association of America (APCIA) represented the insurance industry at the hearing.
He followed up Papageorg’s testimony by telling the committee, “There is no free lunch…If you add cost to a system, it puts price pressure on the product…It’s common sense. If you add cost to the system it’s going to have an impact on price, and that impact is not going to be to lower prices.”
Before moving forward with passing new legislation, the joint committee is in the process of establishing a commission to study the issue, “whether that means more hearings or visits around the commonwealth,” said Rep. James M. Murphy, the House chairman on the committee. “Evidently there is an issue because the body shops are all saying the same thing.”
At the conclusion of the testimony, Murphy sounded skeptical about insurance industry arguments against the legislation.
“I’ve heard today, and I’ve heard in the past, that any increase to the cost of the labor rate is going to automatically increase premium costs,” Murphy said. “I don’t necessarily accept that. You’re going to have to show me why increasing a labor rate is going to increase premiums, because there are other ways that money can come out of the system to not increase premiums.
“The goal is not to raise premiums for consumers in the commonwealth,” Murphy concluded. “The goal is to make sure these body shops are still there to support all of the insurance companies that need these cars fixed…I think now is the time to really roll up our sleeves and get to the bottom of this issue before the industry itself, in regard to the repair facilities, actually collapses. Then you’ll have no one to fix the cars.”
In Illinois, Gov. J.B. Pritzker has signed House Bill 2435 into law, prohibiting an auto manufacturer from either requiring or prohibiting a dealer to sell any “secondary product," defined to include non-OEM parts.
The bill initially also prohibited an automaker from requiring dealers “to provide a customer with a disclosure not otherwise required by law,” but a later amendment removed that clause.
“It is important that consumers are properly informed about the parts to be used on their vehicle,” said Wade Newton of the Alliance for Automotive Innovation, which represents automakers. “This legislation with our amendment will continue to allow an automaker the ability to require such disclosure to help ensure transparency.”
Pritzker just three weeks earlier signed into law another measure, House Bill 3940, requiring automakers to pay a dealer for warranty repairs an amount no less than the amount a retail customer pays the dealer for the same services.
John Yoswick