ACIC Testifies Against Proposed Changing Labor Rate Survey Regulation

September 28, 2005

The Association of California Insurance Companies (ACIC) was scheduled to testify Wednesday against changes to an existing regulation that governs labor rate surveys of auto repair shops by insurance companies.

The regulatory amendments are proposed by the Department of Insurance, which is having the second hearing in as many days in Los Angeles. The first hearing was in San Francisco.

“These amendments are troubling for several reasons. For one, we believe the Department of Insurance does not have the authority to amend state law by regulation,” said ACIC President Sam Sorich.

He explained that insurers strive to adjust their auto repair claims in a fair and reasonable manner. To achieve this goal, some insurers conduct labor rate surveys of area repair shops. Other insurers use different methods, but the goal is the same.

“The proposed amendments could be interpreted to mean that the only way an insurer could support the reasonableness of its adjustment of auto repair claims is by conducting a labor rate survey.

“Legislators have not imposed this requirement. All the Legislature has done is to simply say if an insurer chooses to conduct a labor rate survey, some of the survey information has to be submitted to the Department of Insurance,” Sorich said.

Moreover, for those insurers that choose to conduct the surveys, the proposed amendments would reportedly impose a number of new requirements mandating the content of the survey and the methodology used.

“Again, these requirements are not in state statutes,” said Sorich.

“Insurers are committed to adjusting claims in a fair and reasonable manner. We want to make sound decisions about repair claims and the labor rate survey is one way to do that. But, there are other ways. Efforts to make sure repair costs are reasonable inure to the benefit of all consumers because they help contain the cost of auto insurance,” Sorich added.

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