Friday, 10 April 2015 00:00

ABARI Responds to PCI's Claim that Legislation Results in Higher Premiums for Drivers

In March 2015, the Property Casualty Insurers Association of America (PCI) released a report claiming that insurance premiums in Rhode Island have increased drastically over the past decade. This is allegedly because of 17 pieces of legislation, sponsored by the Auto Body Association of Rhode Island (ABARI), that have been passed into law since 2003.

PCI claims that these laws have reduced insurance companies’ ability to provide “checks and balances,” resulting in RI drivers paying the third highest average vehicle damage insurance premiums in the nation and the sixth highest overall liability and physical damage premiums. According to PCI’s report, collision repair costs have risen as a result of increases in labor rates; they claim labor oppose these bills in favor of the collision repair industry. 

Autobody News reached out to ABARI’s Spokesperson, Jina Petrarca-Karampetsos who provided documentation and noted, “There is no statistical support for PCI’s claims that ABARI is the cause of all that is wrong with insurance premiums in Rhode Island. Their report uses incompatible comparisons and statistics that refer to cost per claim rather than repair costs as a veiled attempt to once again vilify an industry working hard to keep Rhode Island citizens employed and provide safe quality repairs for fair compensation.”

This documentation, organized in the spring of 2014 and again in 2015 and shared at the House Committee hearing on March 24, shows that insurance profits in RI are twice the national average and have been since 2002. It also demonstrates that auto insurers in Rhode Island enjoy the 10th highest profit margin in the nation over the last decade. ABARI questions if this is because legislators passed a “file and use” statute in 2004 which allows insurers to file for a rate increase of up to 5% without approval.

ABARI’s report also shows that both auto insurance premiums and collision repair premiums have declined significantly from 2006-2011, but over the same time period, the cost of bodily injury premiums has risen.

Petrarca-Karampetsos explained, “Consumer legislation supported by ABARI cannot be blamed for any increase in auto premiums.” In fact, the cost to repair a vehicle was the same in 2011 as it was in 2004.

Further charts indicate that RI’s unique demographics has made it a high-cost insurance state for decades; in 1998, they were ranked fourth in the nation and were ranked fifth for the years 1996, 2000, 2002, 2006, 2008, 2010 and 2011, coming in sixth in 2004 and eighth in 2012, according to the National Association of Insurance Commissioners’ (NAIC) Automotive Insurance Database Report 2014, the report indicates.

ABARI’s report indicates that RI is aligned with other demographically similar insurance markets and has witnessed a slow increase in auto insurance premiums since the beginning of the Great Recession in 2008. Contrary to the insurance industry’s claims, “RI is not and never has been an anomaly with regard to auto insurance premiums,” Petrarca-Karampetsos stated.

When questioned about RI ranking fifth most years in insurance premiums at the 2014 hearing on this issue, PCI representative Frank O’Brien answered: “what else goes into the cost? Well in that regard, let me be very clear. RI is never going to be a low-cost state. We are never going to be 50, or 49, or 48 like Maine, Vermont and New Hampshire. Never. We are not Maine, Vermont or New Hampshire. We are more like Massachusetts, New Jersey, New York. We are a highly urbanized state. We are a small state. We are highly concentrated in terms of population. Our roads are in bad shape. We tend to hit each other a lot. SO, with that, that isn’t going to change. We are always going to be in the top five, top ten, top fifteen.”

In accordance with O’Brien’s statement, ABARI developed a chart to compare insurance premiums and profits in RI to comparable states, including Connecticut, Massachusetts, New York and New Jersey. ABARI’s report indicates that a 2013 Automotive Insurance Database Report by the NAIC showed those states ranked as sixth, thirteenth, fourth and first, respectively, in 2011.

Between 2004 and 2010, auto body repair costs increased 2%, ABARI insists, despite PCI’s claims that consumer protection legislation has driven the cost of repairs up by 48% because of increased labor rates; in fact, RI’s hourly labor rate has been $45 per hour since 2009.

Petrarca-Karampetsos notes, “Though PCI alleges that RI’s labor costs have increased 24.3% since 2003, this is quite misleading when one notes that RI auto body shops have been receiving $44.45 per hour for labor costs since 2009. Publically available statistics demonstrate that RI has gone from the most expensive state to have a vehicle repaired in 2004 and 2005 to the fifth highest in 2010. As such, the consumer protection legislation ABAIR sponsored has improve RI costs compared to national averages, quite contrary to PCI’s claim that RI has moved from thirteenth to second highest in the nation. We have actually gone in the opposite direction.”

Updated reports presented in 2015 indicate that auto repair costs in Rhode Island have been on the decline since 2009 and in 2011 were lower than in 2007.

As such, ABARI supports the current legislation presented to the House Assembly in favor of S2834 which could establish two classifications of auto body facilities in RI. The legislation will not mandate insurers pay higher amounts for repairs, but it will simply require them to conduct two separate labor rate surveys, one for each designated classification. This bill will also serve to assure the motoring public that the collision repair facility they’ve chosen has the equipment and expertise to repair their vehicle properly.

As ABARI’s report concludes, Petrarca-Karampetsos states “ABARI has supported legislation over the last decade for the purpose of supporting small businesses and protecting consumers. Not one piece of legislation supported by ABARI requires an insurer pay a greater amount for auto body repairs. Instead ABARI’s activism has resulted in legislation which: allows the consumer the right to choose a repair shop and ensures that they are properly informed of their right; requires an appraisal inspection by a licensed auto damage appraiser for all vehicles with $2500 or more of damage; requires technicians working on vehicles in auto body shops be certified; requires insurers use one industry manual in its entirety to appraiser a vehicle; allows a consumer to choose a rental company which has led to several new small businesses in RI; requires insurers to conduct a labor rate survey and report their results to the department of business regulation; and requires insurers use automotive industry valuation sources when determining the value of a total loss vehicle.

“All of the foregoing does not mandate an insurer pay higher repair costs to an auto body repair facility. Instead, they are all intended to protect consumers and professionalize the auto body industry, and as demonstrated, have not resulted in higher insurance premiums for RI consumers.”

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