Rhode Island collision shops should benefit from new labor rate surveys, the results of which could nearly double existing hourly rates by next year. Under a new law, insurers are required to annually survey all licensed shops in the state, except those that have a DRP relationship with the insurer. The new rules are part of legislation passed by the Rhode Island General Assembly in June over the objections of the governor and the insurance industry.

"The surveys will be over by the end of the year, and we should know the numbers by next February," says John Petrarca, owner of Providence Auto Body and president of the Auto Body Shop Association of Rhode Island (ABARI). The association lobbied for several years to get the legislation passed. "The response from the industry has been very positive. The insurance industry is not happy about it, but this is long overdue."

Petrarca said he expects labor rates to increase up to 75 percent or even 100 percent. "It could come close to doubling," he says.

The Rhode Island legislation is based on similar regulations in California. Insurers must provide a description of the manner in which they determined the prevailing labor rate to the state's Department of Business Regulation. Insurers had requested that this requirement be removed from the final regulation, and for the law to allow for surveying techniques outside of submitting questionnaires to collision shops. Both requests were turned down.

Governor Donald Carcieri initially vetoed the legislation, but he was overridden by the legislature. Carcieri, a Republican, has had a number of his vetoes overridden by the largely Democratic assembly, and has also wrangled with the legislature on several other insurance-related issues.

In California, the Bureau of Automotive Repair (BAR) instituted new regulations that relegated labor rate surveys to resource documents, preventing insurers from using them to set rates. The new rules also prohibit insurers from using discounted rates negotiated with DRP shops as part of the survey. A number of state and national insurance industry associations came out against the regulations, warning that they would cause an increase in auto insurance premiums.

Rhode Island also passed laws requiring notification of the consumer's right to choose a repairer at body shops and on appraisal notices. Every repairer and drive-in claim center must now display a sign explaining this right to choose.

ABARI also supported another recently-passed bill requiring minimum requirements for the certification of collision technicians.

According to Petrarca, the $38-per-hour labor rate paid by insurers for his work has remained stagnant for the past 15 years, and is only half of his posted labor rate.

Next year, ABARI will push for a bill that requires all vehicles to be examined by a licensed appraiser. "Right now in Rhode Island, an insurance company can send a car to a direct repair shop without an appraiser," Petrarca says. "We want every car to be looked at by an appraiser to protect the consumer."

For more information, visit ABARI’s Web site at www.abari.net. To see a copy of the labor rate survey rules, click here.