Insurance spokesman: Legislation benefits auto body shops at customers' expense

Insurance spokesman: Legislation benefits auto body shops at customers' expense

Chuck Lombardi, owner of Cumberland Collision, stands in his shop while one of his repairmen works on the door panel of a Ford pickup. (Valley Breeze photo by David Wuerth)
But backers say proposed bills are good for consumers

Rhode Island has one of the highest auto insurance rates in the country, says a representative for insurance companies who do business here, and state lawmakers' ongoing efforts to help auto body shops is a big reason for it.

Frank O'Brien, vice president of state government relations with the Property Casualty Insurers Association of America, said the 2014 General Assembly session is again littered with bills that would benefit body shops and force insurance companies to pass on resulting costs to customers.

Since 2003, 17 bills supported by the Auto Body Association of Rhode Island have been passed by the General Assembly, said O'Brien, and while none on its own has been devastating, lump them together and the picture isn't pretty.

"What we're talking about is a cumulative effect, where Rhode Island policyholders are dying a death of a thousand cuts," said O'Brien, whose Property Casualty Insurers represents companies like Amica and Progressive.

Jina Petrarca-Karampetsos, spokeswoman for the Auto Body Association of Rhode Island, is the sister of former state Rep. Peter Petrarca and daughter of John Petrarca, owner of Providence Auto Body. She said the continued claims of O'Brien and others linking bills that help auto body shops to higher insurance rates are wrong.

The bills ABARI pushes are "good consumer" bills, she said. Rhode Island had some of the highest rates "long before ABARI did anything," she said, and every year for the past eight years she's proven that insurance rates have actually gone down.

There are many reasons for the high insurance rates in Rhode Island, according to Petrarca-Karampetsos, including dense population, high claim rates, and high severity rates.

Familiar names in the General Assembly are once again leading the charge on auto body bills in 2014.

Rep. Arthur Corvese, of House District 55 in North Providence, has again put in a bill that would create two difference classifications for auto body shops. It would require separate and distinct labor rate surveys and a different reimbursement rate for each type of shop.

A second Corvese bill would eliminate the process that allows filings by casualty insurers seeking rate increases or decreases of not more than 5 percent to become effective when filed.

Rep. Stephen Ucci, of House District 42 in Johnston and Cranston, is the sponsor of bills that would prohibit insurance companies from requiring the use of used or remanufactured airbags and/or suspension parts when vehicle repairs are made by an auto body shop, and would amend the definition of the term "aftermarket part" to refer to all motor vehicle replacement parts. Corvese has also signed onto the Ucci bills.

The classifications bill would recognize that there is a difference between auto body shops, she said, ensuring that the shop a customer goes to has the proper equipment and experience to get a job done and the business gets properly paid for doing the work.

She said the second bill would take away the ability of insurers to increase rates without a hearing.

But according to O'Brien, the legislation would essentially charge more for the Class A shop with all the "fancy" gear even though the Class B shop could do the job just as well for less money. It would be like requiring people to pay $10 more for a sirloin at one butcher shop based on how the shop looks, he said.

Chuck Lombardi, owner of Cumberland Collision and a member of ABARI, told The Breeze that the key underlying issue in the ongoing debate about body shops vs. insurers is the continued inequity between the pay rates for auto body technicians and mechanics. Auto body shops get only $45 to $50 an hour for labor rates, while mechanic shops get double that, he said, even though auto body technicians today not only need the knowledge about the intricate workings of the car but the increasingly complicated skills to make the car look good again.

"You're more of an artist and you get paid half the money," said Lombardi. "It's just ridiculous."

Body shops are experiencing an "employment pool deficit" where young laborers are heading to a mechanic shop where they can earn much more, said Lombardi. Shops are having an difficult time offering a wage good enough to attract more people into the industry, said Lombardi, and as a result the workforce is aging.

O'Brien said he can see where Lombardi is coming from on the pay rates, but said that "every craftsman thinks his trade is more complicated than the next guy."

There has long been a disparity between the pay rates because mechanic work has been seen as more technically challenging, said O'Brien. The gap in the skill levels has lessened over time, and it should be, said O'Brien, but from Lombardi's perspective, it hasn't narrowed quickly enough.

Lombardi's statements show a fundamental motivation behind the auto body legislation, said O'Brien, to use "state intervention into the marketplace to raise the rates faster than the free market" dictates.

David Soucy, of the Soucy Insurance Agency in Woonsocket and a member of the Independent Insurance Agents of Rhode Island, said he believes the continued campaign to help auto body shops is being made on the part of a small fraction of "disgruntled" shop owners. He thinks "99 percent" of owners are "very satisfied" with the way things are, but others continue to bring up "pretty ominous" legislation like the previously proposed "right-to-sue bill," which would require insurers to negotiate rates with body shop owners and would give the owners the right to sue if they can't agree on a price.

Like earlier bills to limit insurers' "one-stop shopping" facilities and ban auto painting as part of mobile repairs, this year's bills would add to Rhode Island's reputation of being unfriendly to business, said O'Brien. Eventually that reputation will become so bad, he said, that companies may decide it's not worth it to do business here.

Adding costs, rules and complexity ultimately means a losing combination and "drags the state down," said O'Brien.