Vermont insurance regulators are offering preliminary recommendations related to collision shop and insurer interactions, focusing on such key industry issues as labor rates, claims adjusting, direct repair programs (DRPs) and the use of non-OEM parts.
Virtual adjusting tied to supplement delays
A 61-page report, prepared based on a 2023 statute calling for the Department of Financial Regulation to determine if shop and insurer practices were “fair and reasonable,” notes that the uptick in photo-based estimating and virtual adjusting, for example, has contributed to shops filing supplement requests on about 95 percent of repairs. Vermont shops surveyed for the report indicated that, on average, supplement review creates more than a 7-day delay in repairs.
State regulators say they will continue to work with shops and insurers toward more defined recommendations in 2027 on this issue (and the others identified in the report), and recommends that future regulations “provide timeframes for responding to and paying supplements.” But the Department also touched on the issue earlier this year when it issued a revised bulletin requiring the use of an in-person inspection when requested by a claimant.
“While virtual claims adjustment systems may in some situations help settle claims more quickly and reduce costs for the insurer, there is compelling evidence that photographs, videos, and other virtual representations do not always reveal the true extent of the damages that have been sustained,” that bulletin states. “For this reason, insurers must provide an in-person inspection of damages by a licensed adjuster within a reasonable period of time if requested by a claimant or if the use of virtual adjusting is inappropriate.”
Insurers pay below average shop labor rates
The report said the Department’s survey of shop hourly labor rates around the state found a range between $60 and $84 (though all but one shop had rates of $74 or less, and the average was $67), but found in a survey of 20 insurers that carriers were paying an average of $60.50 per hour. The report notes that labor rate increases haven’t kept pace with the cost of living, given that the $34 average labor rate in 1995, if adjusted for inflation, would be $71.68 today.
No state has resolved shop-insurer disagreements related to labor rates by setting mandatory rates, the report points out. But the Department “has seen an increasing number of consumer complaints relating to insurer-paid labor rates that differ from the rates charged by the shops.”
While insurers pointed to similar sources they use to determine prevailing rates, when the Department “pressed them for details about how they use these sources or their method for determining a final labor rate, insurers had difficulty articulating a clear process or were not able to provide written procedures or source materials,” the report states.
The study found that “sometimes insurers will add a ‘concession line’ to estimates…to reimburse shops for a higher labor rate.” Although it isn’t clear how often this is used, “by including the amount in this manner on the estimate, the payment of the higher rate is masked…another example of a practice used by insurers that may have the effect, whether intended or not, of keeping average labor rates artificially low,” the report states.
Report seeks stronger consumer protections
The report also calls for tighter DRP guidelines to ensure consumers continue to maintain the right to use the shop of their choice, and to prohibit costs being passed on to consumers when DRP labor rates are lower than non-DRP rates.
Other items of note in the report: The report suggests that a consumer bill of rights could clarify consumers’ expectations regarding claim handling, including what shop and parts are to be used for repairs. And it notes that the Department would disapprove any auto policy submitted by an insurer that removes the right-to-appraisal clause.
John Yoswick