10-10-06
PRESS RELEASE:
The New York State Auto Collision Technicians Association, (NYSACTA)
issued a statement today in the wake of completion of an
Independent Economic Study for the Auto Body Industry in the
State of NY. NYSACTA is challenging all insurance companies to
increase the allowance paid to auto body repair shops in NY
State. NYSACTA explained that they want insurers to conduct
business in the spirit of the NY State Insurance Regulation 64
by "negotiating all elements of a claim, including labor rates
fairly and completely," instead of using the current "price
suppression tactics," alleged by NYSACTA being used by some
insurance companies.
NYSACTA Executive Director, Ed Kizenberger said, " we have met
with the State Insurance Department and NY State Attorney
General [Democratic front runner for NY State Governor] Elliott
Spitzer's office regarding concerns that Insurers are price
fixing labor rates at the lowest possible rate. We also feel
other violations are being committed creating an unfair claims
practice environment." Kizenberger continued, "for instance by
using Direct Repair Shops (DRP) as a back-up source they
[insurers] may indeed be in collusion creating an unfair trade
and claims practice by coercing other non-DRP shops to accept
low rates." NYSACTA President, Mike Orso said, "Some insurers
hang their hat on supposed surveys, where results are secret.
The questions include, "will you accept the rates we pay?" That
question is not in the spirit of a survey, it’s a take it or
leave it question."
The study’s results and recent insurance industry statistics
indicate the lowest auto claims frequency in history while most
insurers are enjoying record high profits. NYSACTA is requesting
that insurers implement an immediate increase in labor allowance
of $20.00 per hour by October 1, 2006 across the board to any
body shops that post their hourly labor rate. The recent spike
in fuel and expected increases in energy cost for heating the
cold Northeast shops this winter require this action now. The
requested increase would bring the average body shop labor rate
allowance to $64.00/hr, within $20.00 of the study’s base
conclusion. That study concluded that auto body labor rates in
NY should be in the $80-$95 per hour range for typical auto body
labor depending on where the shop is located. "Not
unreasonable," says Orso, "considering typical mechanical labor
rates."
NYSACTA also requests that insurers prepare to add an additional
allowance of $10.00 per hour by January 1, 2007 and thereafter
adjust for annual increases of 3-5% to keep in line with the CPI
or state index. Orso reflected that, "insurance profits are up.
Claims frequency is down. Since premiums rise on average 5-7%
annually the cost of an increase in labor rate is offset. The
cost savings effect of safer cars, stronger laws regarding DWI,
Cell Phones, seat belt use, safety systems and higher
deductibles has resulted in lower accident severity and fewer
claims, with injuries. Simply stated, lower property and
personal injury costs along with other considerations mean
insurer profits are exponentially up. The shops are paying a
hefty price as insurers get fat."
Kizenberger claims that, "while insurers continue to tighten the
financial noose on most Direct Repair Shops in their programs
across the country, extreme pressure is being put on shops to
reduce rates, allow deeper discounts and increase cycle time on
an already strained industry infrastructure." Mike Orso said,
"Desperate times create desperate people. I get calls from shops
that are scrambling. They are DRP'd out. Techs are evaporating,
costs have risen dramatically and mysteriously shop rates remain
low. It doesn’t take much to see that tainted surveys,
unreasonable demands and coercion suppress the rates. Shops are
sadly scrambling to stay afloat." Orso went on to say,
"ultimately the consumers is suffering with unsafe, shoddy
repairs."
Mike Orso feels, "there is and irony to these suppression
tactics being used against consumers and shops. " Orso stated,
"that testimony quoted from the *Texas HB-1131 hearings exposed
some ugly facts." In that testimony, according to Orso, Allstate
admitted that in an internal survey that Allstate "found (among
other things), that quality at Sterling was below PRO standards
in 60% of its stores." Sterling Auto Body Centers are a wholly
owned subsidiary of Allstate. PRO is Allstate’s nickname for
Priority Repair Option, Allstate’s direct repair program. Other
testimony was recorded that, "despite these findings Allstate
continued to refer its customers to Sterling." Orso said, "The
only logical conclusion is that Allstate was not looking out for
its claimants and only cared about Allstate’s goal of funneling
work to its Sterling shops. That puts real people, vulnerable
consumers, at the center of our issue. Claimants are falsely
lead to believe Allstate cares." The Allstate testimony further
indicated how brownfield vs greenfield shops differed. New
ground up shops (greenfield) vs acquired "mom and pop stores" (brownfield)
as nicknamed by Allstate. Orso said, "In the 1960’s I can
remember my father arguing with Allstate appraisers as they
suppressed rates then. Allstate would refuse to pay $8.00 per
hour as shops were held at $6.00 per hour. That’s one reason the
**1963 Consent Decree was developed and ordered. Fast forward to
today and the same scenarios are here only now Allstate owns the
shops. Orso feels, "The reason for "brownfields" is that some
shops can’t afford to invest because of the profit squeeze from
labor rate suppression. Insurers created this situation
themselves and now use it against the industry. It’s time to
correct it. I call on all insurers to do the right thing before
eventually it costs $250 per hour to repair a car."
Orso said, "insurers have a right to go out and make deals and
it’s the shops right to give away anything they want to make a
deal for a DRP. However, if tomorrow the shop down the street
makes a deal to give away right front fenders. I should not have
to. Recent NY State Appellate Court’s have found that, "insurers
owe for fair market value in repairs." Key word is fair. I think
its time for fair."
*Texas Court Case 3:03-cv-02187 Doc 191 Filed 03/09/2000
** HYPERLINK "http://www.concentdecree.com/"www.consentdecree.com
*** NYS
Appellate Court Case #2000-379 SC January 23, 2001
