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During a recent meeting of the Auto Body Association of Texas (ABAT), the association shared information about its discussions with the Texas Department of Insurance (TDI) regarding labor rates, as well as the progress made with ABAT’s Consumer Complaint Form drive.

The meeting was led by Jill Tuggle, ABAT’s executive director and president of Summit Marketing Solutions, and Burl Richards, president of ABAT’s board of directors and owner of Burl’s Collision Center in Henderson, TX.

Discussions With Texas Department of Insurance (TDI)

Since the formation of ABAT seven years ago, Richards said the association has met with TDI to try and understand who determines the prevailing market rate. “TDI made it clear that it’s up to the shops to decide their posted rates,” said Richards. “It’s up to a court of law to determine if it’s fair and reasonable.”

He shared a TDI Commissioner’s Bulletin dated August 2010:

“The Department is also concerned that setting reimbursement rates artificially low for specific motor vehicle repairs and parts that are used to make the repairs may lead to substandard repairs, which may also impact the warranty on a vehicle. The majority of personal automobile insurance policies require insurers to pay the amount necessary to repair or replace the property with other(s) of like kind and quality. “It is an unfair claim settlement practice for insurers to pay claimants an amount for the repair of the vehicle, including parts, that is not a reasonable amount for repairing or replacing the property with other of like kind and quality or is not sufficient enough to make the repairs necessary for the manufacturer to honor the vehicle warranty.” While ABAT is attempting to work with TDI to address the issues Texas auto body shops are dealing with, Richards said member shops dispute the process and data used to determine the market rate, and asserts it should exclude any contracted rates.

He recommends shops access www.laborratehero.com, which shows the retail door rate shops have reported by ZIP code.

Mike Anderson, president of Collision Advice and an ABAT member, said staffing is the top issue he observes from shops across the country. “Until our industry can pay a more competitive wage, we’re not

going to fix that staffing problem,” he said.

Anderson said at the end of the day, the industry is never going to hire the brightest and best and compete with other industries until we can pay people a better wage. “This can only be accomplished by capturing more not-included operations, seeing an increase in labor rates, or a combination of both,” he said.

Tim Ronak, senior services consultant for AkzoNobel, said part of the challenge is the compensation received on an hourly basis. “We’ve been watching individuals use parts margins to subsidize what they are paying their production staff,” he said. “A significant number of shops are making less than 50% gross margin on labor. When that happens, the technicians are making proportionately more money on labor sales than the shops are. The shop assumes all of the liability and business risk, yet the shop is getting an insufficient return on labor sales and the technicians don’t have any risk.”

The goal, according to Ronak, is to create a way to recognize there needs to be a retail pricing differential in the marketplace. “Rather than negotiating a $2 to $3 break, we should look at those as a percentage discount from the retail rate,” he said. “When we raise our retail rate, instantly, that should track back to any type of insurer agreement by maintaining a consistent ‘trade discount’ from the consumer retail price.” Ronak explained the differences in the retail, market, prevailing and contracted rates:

Retail rate: a shop’s individual posted rate

Market rate: the average rate of all shops’ retail door rates in the local area Prevailing rate: an asserted rate by a third-party using the survey method they decide

Contracted rate: the rate agreed to by a third-party contract and conditional on receiving work through a DRP

“Ideally, the prevailing rate should be the same as the market rate unless those determining the prevailing rate in a market use contracted or discounted pricing values,” explained Ronak. “When that occurs, it may understate the actual market rate.”

Richards stressed the importance of having a fair system in place. “We’re allowing an insurance company to dictate what those prevailing rates are and we aren’t doing anything about it; we’re not questioning them,” he said.

Consumer Complaint Forms

Richards then shared information about ABAT’s initiative to raise awareness through the use of Consumer Complaint Forms.

After years of talking to TDI, in January 2020, Richards came up with the idea to create a consumer complaint form customers could fill out to file with TDI and send to the state legislator, senator and representative. For the forms to be effective, Richards said shop owners and managers need to educate staff and customers about the process and benefits.

He advises the following: plaining the process with the forms. 2. Have a conversation with customers when they drop off their vehicles and let them know about the potential challenges with the insurance company. “We’re not trying to start a fight; you are just educating the consumer,” said Richards. 3. Make sure to communicate issues as they arise during the repair process. “Don’t be embarrassed or ashamed to tell a customer that you did something for them,” he said. “It’s not ‘the greedy body shop.’It’s the body shop that is trying to get you back in a safely repaired vehicle.” 4. Go over the form with customers when they pick up their vehicles and have them initial and sign it. 5. Send the form to jill@abat.us.

“We are at a critical time in our industrywherethingshavetochange,” said Anderson. “That change has to come from each and every one of us doing our part.” He said this isn’t about fighting insurance companies or being the bad guy. “It’s taking a few moments to fill out a document and start building a foundation case for discussion in the future,” he said. “Something has to change!”

Anderson shared an example of his nephew, who went to work at Amazon straight out of high school and now, at 22 years old, is making more than $100,000 and has stock options, fully-paid health insurance and tuition reimbursement. “This is what we are competing with,” he said.

Another example Anderson shared was a burger franchise in his local area giving people a starting pay of $20 per hour, 100% paid health insurance, three weeks of vacation and up to $10,000 per year in tuition or childcare reimbursement. “How do we compete with that unless we can offer a more competitive wage just for entry-level staffing?” he said. Tuggle said the efforts by Texas body shops having customers fill out the forms are making a difference. “It’s creating a movement across the nation with auto body as-