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Amaradio---Labor Rate Surveys are Flawed and Misleading E-mail
Written by Lee Amaradio, Jr.   
Tuesday, 02 September 2008
Labor rate surveys were established as a starting point for negotiations. They are intended to create a floor to build upon, not a ceiling to keep prices artificially controlled. Today they are not serving any purpose other than keeping the cost down for the insurers. Insurers have even been bold enough to force the consumers to pay the rate difference when negotiations break down. It’s ironic because the code states that the burden of proof lies with the insurer, not the consumer.

    With the present survey system, the insurers have been able to create results that benefit them without regard to the needs of the repairers and the unique individuality of the collision industry. I haven’t  been able to find anything in the law or the insurance code that refers to any absolutes. As I read the laws, quite the opposite is intended. The laws and codes that are in place all point to only a starting point.
    For example, the survey system could be compared to examining a $1 bill and a $20 bill, saying that because they are both green, both are United States currency, and both have the picture of a president, they are worth the same. This is how inappropriate it is to say that all body shops should be paid the same labor rate.
    Going a step further, using a geographical area to determine the value of labor is equally ridiculous. How could it be reasonable for Northern California’s labor rates to be twice as high as those in Southern California? We are in the same state under the same regulations, governed by the same Department of Insurance laws.
    If you invested the most money and had the nicest, best equipped facility in your area, you would be penalized by the others that invested nothing in training or equipment. They would be paid the same for investing little. This could be compared to putting a nice restaurant next to a McDonalds and being forced to regulate your cost based on what they charge.
    If labor rate surveys are intended as a starting point for negotiations, why do we allow the insurers to use them to end negotiations? That the surveys have been skewed to favor the insurers should be no surprise since they are conducting them.
    Surveys were never intended to be used for price control nor were they ever intended to be used to lump all repair shops together. Labor surveys have even been used as the foundation for what we hear as “usual and customary” to control the repair process itself. There is nothing “usual and customary” in an industry that has no absolutes except cost.
    Imagine if the insurance industry allowed the collision industry to conduct the labor rate surveys and forced the insurers to honor them. This would be as fair as what The Department of Insurance has allowed to happen to repairers. Or at least allow the collision industry to conduct its own survey with as much weight as one submitted by the insurers.
    My research on labor rate surveys shows:
    1 .Surveys aren’t to be trusted; they must be approached with a critical eye.
    2. Surveys can be skewed to create  the desired results of the surveying party.
    3. Surveys can be damaging because they are deemed to be factual.
    4. Surveys are too subjective to be valid.
    5. Surveys in the collision industry should be abolished because the collision repair industry is too diversified for any survey to ever be accurate.
    When “cost control, without standards” is the driving force that dictates the repair process, it is the consumers who may be forced to choose between safety and cost.

 


 
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