Mitchell Industry Trends Report Asks “Do Lower Labor Rates Lead to More Repairs?”
The feature article in this month’s Industry Trends Report from Mitchell International examines the relationship between labor rates and the number of operations on an estimate. The report details Mitchell’s data from the states with the lowest labor rates as well as the highest rates.
Greg Horn, vice president of industry relations, examined first-party collision estimates written in 2013 for all 50 states. The data included estimates written by independent appraisers, body shops and insurance company staff appraisers.
Horn’s analysis comes to three basic conclusions surrounding the issue:
- Lower rates do not result in more operations on estimates
- Lower rates do result in more panel repairs
- Lower rates do not result in additional refinish hours
Florida collision repairers, suppliers and vendors came together in Lakeland, Fla. on November 20 to discuss State Farm’s controversial PartsTrader program and identify solutions to combat “short-pay” trends in the industry.
Ray Gunder, of Gunder’s Auto Center in Lakeland, John Mosley, of Clinton Body Shop, Inc. of Clinton, Miss., along with several other Florida and Mississippi shop owners, joined attorneys John Eaves and Brent Geohagan to share their national efforts to stop State Farm’s attempts to impose a mandatory parts procurement program on an unwilling collision repair industry.
Mosley shared information regarding the recent CIC meeting at SEMA as well as discussions with State Farm’s George Avery. “The simple and clear message was, if you choose not to participate in PartsTrader, State Farm will immediately find you irrelevant,” said Mosley. “The message was clear that State Farm doesn’t care if the collision repair industry likes PartsTrader or not–they will continue to implement the program.”
“We’re in Florida with the purpose of filing an injunction to stop PartsTrader,” Eaves declared to the meeting attendees. “Our ultimate goal is to defeat this mandated parts procurement program and stop State Farm’s intrusion into the collision repair industry in Florida and across the country. We feel PartsTrader is a virus–it infiltrates and destroys long-term relationships between repairers and their suppliers–but we have the cure.”
Eaves added, “This issue isn’t just about you as individual repairers. This issue is about your responsibility to consumers around the nation who are relying upon you, the repair professionals, to look out for and to safeguard their best interests regarding their personal safety and economic wellbeing.”
Additionally, Eaves and Mosley spoke about repairers coming together and filing litigation for “Short Pays” on performed repairs. Mosley stated that their research has shown, on average, that insurance companies have shorted shops $625 to $700 on a $3,500 repair for necessary procedures. These processes included color-sand and polish, fill-block and prime, test drive, clean car for delivery, and others. The attorneys have developed a list of more than 60 necessary procedures that are commonly omitted by insurers.
“This is about taking back the monies insurers have taken from you for procedures and materials that the repair required, that you the repairers have provided, that the consumer received, and that the insurer has failed to pay for,” said Eaves. “That is considered “Unjust Enrichment” for the insurers, and our legal team is going to help participating shops get back the monies they were deprived of.”
Cathy Mills, Executive Director of the Florida Autobody Collision Alliance (FACA) announced during the meeting that FACA was in full support of efforts to stop PartsTrader.
Barrett Smith of Auto Damage Experts (ADE), who was on hand to start the meeting, stated: “There has never been a better time for repairers to step up and collectively be represented and to stop the abuses that they face every day throughout the collision repair industry. Repairers must ask themselves: If not now, when?”
From Hammer & Dolly, FEB 2013 Issue
Lakeland, FL-based shop owner Ray Gunder (Gunder’s Auto Center) placed a notice in his reception area last year and provided handouts to all auto appraisers and insurer claim representatives who visited his shop that new Labor Rates and allowances were in effect. The increases included labor, refinishing labor, frame labor, mechanical labor rates and the invoicing of PMCLogic for all body and refinishing related materials.
“It all comes down to the books … gross profit and net profit.” says Gunder of his decision to raise rates. “It’s been seven years since the rates have been moved in this area. I’ve looked at my net profits dwindling down into the danger zone. It was either change the rates to be able to make a profit, or close my doors. It was that simple. When (insurance people asked me, “Why do you need a rate increase?” I always asked them, “How many raises have you had in seven years?”
As of November 29, 27 insurers had elected to provide full compensation to Gunder’s Auto Center for the shop’s Labor Rates and material invoicing. (read the full article to see the list)
“For the last couple of months, they have been paying the rates for all procedures,” he says. There are no more issues now.”