Such has been the case for Robert DelGallo, a member
of theCCRE, immediate past-president of the Massachu- setts Auto Body
Association and owner of Factory Collision of Weymouth, Massachusetts
(
www.factorycollision.com) . As he explained in a recent phone
interview, "Insurers have a problem with the words 'expensive' and
'thorough' . . . they refuse to acknowledge it is more 'expensive' to
do a 'thorough' repair."
Squeaky tight insurers are no new phenomenon. All across the country
shops and stockholders have been paying the price for insurers' poor
investments in the tight economy of the past decade. It doesn't seem to
faze insurers that shops have also been hamstrung by the poor economy,
and shops in Massachusetts are no exception.
According to DelGallo, "Some insurers have successfully held shop labor rates down to $32/hour…since 1988 or 1989!" DelGallo is quick to note that a few of the better insurers are paying somewhat more realistic rates, "We have several insurers who are paying our $36/hour rate, which we've been at since we notified all insurers in 1/1/01. When we notified them, several companies had no problem with the $36 rate."
Others, like Arbella Mutual Insurance Co., though, have stubbornly refused to budge from the going door rate of 14 years ago. Of interest, DelGallo points out that just across the border, in Rhode Island, these same tight insurers are paying between $42 and $48/hour.
Consumer fights back
And that's where the friction started for Diane Rice, a very determined postal worker, who knew from past great experiences with Factory Collision's workmanship that no one else was going to touch her collision damaged vehicle, even though her insurer, Arbella, refused to pay any more than $32/hour. According to DelGallo, "We've had hundreds of cases where insurers refused to pay any more than the $32/hour, and yet, for the most part, these other customers have just paid us the difference between our hourly rate and that which the insurer paid, and dropped the matter. Insurers are preying on the fact that people live very busy lives, and won't make the effort to haggle with insurers, even at additional out-of-pocket expenses of hundreds of dollars each."
But with DelGallo's encouragement, and the financial and legal assistance of the MABA, Rice took this 'matter of principle' to court, suing the insurer, who lost through betting on the odds that no person would be likely to take the time, and be willing to pay a lawyer $2200, to collect the $602.80 that this insurer was taking from her.
Referral system replaces DRPs
I wasn't surprised to find that in the Commonwealth of Massachusetts, in which DRPs are supposedly illegal, insurers still steer work through a "Referral System" in which certain shops make certain concessions with insurer reps (no storage, low labor rate, etc) in exchange for having work referred to them. And it is these Referral Shops that have (in exchange for volumes of insurer-referred work) kept the labor rate in DelGallo's market area artificially low for so many years.
"It's the same old story everywhere; some of these referral shops, in making up for the low labor rate they've fostered, fraudulently cut corners, repair when they wrote to replace, and the like. Insurer reps on the local level know what's going on, but their boss says, 'Keep the labor rate down at any cost.' And so a lot of under-the-table games are going on. It's when these games they play cut into my paycheck, when consumers think I must be a crook because my door rate is higher than the referral shops, that I take offense. I've been telling customers, where it applies, 'Insurers are auctioning off vehicle repairs to the lowest bidder, and yours is on the block.
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