Why it's time to do away with rates based on your location.
If the state of the industry is to adapt for the better we must challenge suppositions and practices that have been long held, and long held us down. A common method for rate suppression in this industry by insurance is "rates in your area". Most shop administrators will take this phrase at face value, and will let it discourage their labor rate claims. However it is based on a completely false narrative. Not all labor is equal. Shop A may use state of the art equipment, have all manufacturer certifications, use manufacturer approved repair methods and materials, while Shop B next door may use a 30 year old MIG to plug weld quarters, and cave and pave dents with cheap filler against manufacturer recommendations. Should these shops share the same labor rate because they are in the same zip code? Absolutely not! Furthermore, this zip code average neglects to account for shops in the area under contract by insurance as a direct repair facility where the rate is a matter of contractual agreement, why should shops not under contract match it?
Rates should be dictated by quality, and by the ability of the shop to get the closest to factory repair possible. Additionally the rates have been stagnant for years. A common average of $52-55 in most states has been standing since the early 2000’s, has not even adjusted for inflation. If it had the labor rate of $52 in 2002 would be $82.88 today in 2022. Nowhere are these changes reflected or even entertained by today’s adjusters. This is of course during a time when technicians are at an all-time difficult to find. How can the industry attract techs needed to produce volume when the shop makes as much per hour as the tech could make 3-5 years into any other heavy industry such as plumbing, electrical, welding, etc.? It is time to ask these questions seeing as average industry growth national average 1.3% per year, vs auto insurance’s 5.6% per year. Why are two industries so dependent on another growing at such shockingly disproportionate rates?
The same goes for material costs and rates. Supply rates around $30 in the early 2000’s would, adjusted for inflation, be 44.50 today and yet very few shops have achieved this rate concession from insurers. Additionally to state that the rate should be a function of zip code is even less understandable in regards to materials. Shop A may use all name brand manufacturer approved materials, Shop B may use value line nonsense that fails after a few months out in the sun. Why should they be subject to the same rates? While the solution for labor rates is more nuanced, the solution for materials is very simple, bill for what you use, quantity and cost included, every item, on every job.
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