Sunday, November 30, 2008

Body Shop Labor Rates

As a consumer, what concern should body shop labor rates be to you? After all, collision repairs are very expensive and often the cost of the repair is paid for by an insurance company less any deductible that might be involved. Because of the importance of the safety involved in collision repair and the post repair value of the vehicle, it is an area that bears looking at.

If you have made a trip to the New Car Dealership recently you would find that the labor rates in the Service Department are $90 and up while a peak inside the Dealer’s Body Shop, if they even still have one, are below $50 an hour. How can a business under the same roof have such vastly different rates? Are the service rates unrealistically high? Are the real estate taxes less in one area than another? Are the costs of heating and electric less? Are the skill levels less? The answers to all of those questions is no. Then why is there such a large disparity in labor rates? The simple answer is insurance companies.

After an accident you may have taken or towed your car to a shop that you have experience with before you contact the insurance company. Then when you contact the company they may “suggest” using one of its repair shops. How strongly they make this suggestion varies from company to company. However, if you are persistent they will send an appraiser (read cost containment officer) to assess the damage. By this time a reputable repair shop will have already prepared a damage estimate for you. The repair shop’s estimate is actually required in the State of Illinois as a consumer protection under the Collision Repair Act.

Although your chosen repair shop has prepared a detailed repair estimate it is extremely rare that the insurance company representative would accept that or write one of its own that mirrors your professional’s opinion. But for today’s exercise we will only consider the labor rate. The insurance appraiser uses the labor rate approved by the insurance company.

When questioned by a claimant, every insurance company will parrot the same excuse, “we pay the prevailing labor rate in the area.” Who establishes this prevailing labor rate? Each individual insurance company does, that’s who. They do this by writing its own estimate and refusing to pay any rate above its chosen “prevailing rate.” If it is a true prevailing rate, then every company would pay the same rate. But they don’t. One company might pay $48, another $46 and others $44 or $42. Some sub standard insurers are still writing $22 to $24 and as recent as 2007 I saw one company write an estimate at $18 an hour. Clearly there is no such thing as a prevailing rate.

You may ask doesn't quality stand for something? Not to an insurance company. While they will say they want quality repairs what they really want are company profits and it doesn't matter who pays. And ultimately it is the vehicle owner who will pay. Controlled labor rates control the quality of repairs and ultimately the safety and value of the vehicle.

1 comment:

  1. Nice work Slicky Boy, here on the left coast Geico is a sub standard payer, they come into a bodyshop with an attitude, you can be their friend if you accept six dollars an hour under what other insurance companies pay at your shop.

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