Setting state-regulated prices for auto repairs in Massachusetts would undo the progress made on auto insurance reform in the state, the American Insurance Association said today.
Testifying at a public hearing of the Special Commission on Labor Rates in Boston, AIA Vice President for the Northeastern Region John Murphy said the group does not want the state to backtrack from its commitment to allowing competition in the market, and that such competition would ensure greater efficiency and quality in auto body repairs.
"Auto insurers can and do negotiate favorable labor rates for repairs," he said. "Those efforts have a positive impact on repair costs which, in turn, have a positive impact on containing overall insurance costs."
In seeking to control prices for repairs, Mr. Murphy argued that the state would only increase costs to insurers, which would be passed on to policyholders, and that such costs could prove especially harmful given the state of the economy.
Mr. Murphy cited a cost estimate performed by the Automobile Insurance Bureau of Massachusetts which found that barring insurance companies from negotiating for lower rates would lead to an increase of approximately $128-to-$146 million in repair costs annually.
"Imposing additional costs on the auto body repair system in Massachusetts is bad public policy that would be another financial blow to consumers who are struggling to manage the current downturn of the nation's economy," he argued.
The special commission was formed to study how auto repair labor rates are formulated, and to investigate the costs and benefits of establishing a rate-setting mechanism. The hearing was open to the public to receive testimony from any interested parties.
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