[COVER] STORY Want to watch a shop owner or estimator’s blood pressure rise? Merely utter the phrase “insurance appraiser!” Many shops engage in contentious dialogue with appraisers during the appraisal process. As the expert in the repair, it can be quite frustrating to have your Labor Rate be challenged, to have OEM required and recommended procedures be rejected or to be told you’re “the only one.” On the other hand, appraisers argue that they can’t pay more because the Labor Rate is set by the insurance company, they uphold viewpoints that seem contradictory to conducting a safe repair, or sometimes they merely seem uninformed about the repair process in its entirety. Are they even aware of the complexity of modern vehicles? Do they know how heavily shops invest their time, energy and funds into training, tools and equipment? Are they capable of “getting it,” or are they truly clueless? Do they even care? Inspired by our recent feature, “Does the Consumer Know What You’re Worth?” (available at bit.ly/NEARconsumer), New England Automotive Report reached out to several insurance staff and independent appraisers who anonymously shared their thoughts on Labor Rates, OEM procedures and the best ways for shops to negotiate an estimate. Not surprisingly, most appraisers think that insurance companies set the Labor Rate. “Labor Rate is set by the insurance industry or by the
to adhere to the prevailing rate for the area because they don’t want to pay much,” admitted an independent appraiser based in West Virginia. “Shops try to raise their prices, and insurers try to keep costs down.” An independent appraiser from New Jersey clarified: “If the insurance company rejects the shop’s posted rate, the insurer has no problem telling the vehicle owner they’ll be responsible for the additional $25 hourly charge unless they move it somewhere else. The shop then has to make a business decision: Do it for $40, charge the balance to the customer, or have them seek services elsewhere. Unfortunately, a lot of shops aren’t in the position to tell customers to pay the balance or take their car to another shop, so effectively, the insurance company sets the Labor Rate. They claim that prevailing rates are developed based on an audit of all the shops within a market, yet if they only survey all the DRP shops contracted to work for $40 an hour, what do you think that survey is going to reflect as the set ‘prevailing’ rate?” “Insurers collect enormous amounts of data to determine those rates, but it’s usually older data, and it definitely includes DRP rates,” agreed an insurance staff appraiser from Pennsylvania. “Right now, everybody is facing the impact of the workforce shortage, which is pushing wages up, but unfortunately, insurers’ operations do not take that into account. That’s a major frustration point for the folks trying to get the job done.”
IS EVERY APPRAISER
Want to watch a shop owner or estimator’s blood pressure rise?
individual insurance company,” expressed a Massachusetts-based former staff appraiser who now works in a shop. “They all go by the ‘prevailing rate’ which is currently in the $38-42 range in Massachusetts.” “It varies by state to some extent. New England has a lot of exceptions, which is why it's notoriously difficult to get appraisers up there, and in Massachusetts specifically, there are strict laws about Labor Rates; I believe they’re set by the insurance commissioner,” proposed an independent appraiser from Virginia. “Often, the shop has a posted Labor Rate, but the insurer provides us with a rate that we cannot exceed. ‘Prevailing rate’ is the key phrase insurance companies use.” At that point, the appraiser’s job is to negotiate the price between the shop and the insurer, and if no agreement can be reached, “we inform the vehicle owner that they’ll be responsible for paying the difference, or they can choose to take their car to another shop – but it’s 100 percent the vehicle owner’s decision where their car is repaired,” he explained. Some appraisers recognize that shops set their own Labor Rates, though they acknowledge the challenges that simultaneously inhibit shops’ ability to do so. “Shops set their own rates, but the insurance companies want 28 June 2022
New England Automotive Report
A retired staff-turned-independent appraiser residing in Missouri offered a historic outlook. He recalled that shops determined and raised their Labor Rates yearly when he began in the 1960s, but as insurers began establishing preferred networks, they were able to negotiate preferred rates, providing leverage to dictate the rates they’re willing to pay. “The collision industry walked into their own trap,” he indicated in reference to shops eagerness to join DRPs in the early 1990s. “Shops got what they wanted, but a company sending a significant volume of work tends to insist they deserve this or that. These days, insurance companies set the rate 85-90 percent of the time, but some shops are holding the line and setting their own Labor Rates.” Shops should get paid for everything they do to repair a customer’s vehicle, yet often, insurers object to paying for OEM procedures. Do appraisers recognize how important it is for shops to adhere to the OEMs’ guidelines in order to ensure a safe and proper repair? “Any procedure that ensures the vehicle is being properly repaired to its safe, pre-accident condition should definitely be done, but the point of contention comes when certain recommended items could be argued as unnecessary,” the Virginia
