ACIC Testifies on Auto Labor Rate and Steering Regulation
The California Department of Insurance (CDI) is proposing auto labor rate survey and steering regulations. The auto labor rate survey regulation is a prescriptive approach on how companies should conduct labor rate surveys and imposes a significant cost on insurers as CDI initially estimates that it would cost insurers about $1.15 million. The steering regulation is equally problematic because it attempts to regulate what insurers can say about non-direct or direct repair shops. Both regulations exceed CDI’s authority and are examples of regulatory overreach.
On April 21-22, 2016, ACIC testified on both regulation during CDI’s regulatory hearings. ACIC questioned CDI’s authority in proposing the auto labor rate survey regulation. In particular, ACIC pointed out that in 2007 the Office of Administrative Law (OAL) rejected a similar proposal to standardize insurer auto labor rate surveys, because it found that CDI had no authority under Insurance Code Sections 758, 790.10, 12921 and 12926. ACIC also argued that CDI’s efforts to pass on $1.15 million to auto body repair shops via the auto labor rate regulation is inconsistent and inappropriate with CDI’s core mission to protect consumers, and if giving the auto body shops more money is the primary goal of the regulation, then the legislature is the proper venue to make those changes.
ACIC also mentioned that AB 1200 made it clear that insurers can speak about the benefits of direct repair shops, and that CDI’s effort to restrict that by regulation violates AB 1200 statute. ACIC emphasized the need for the CDI to consider organizing a task force that would include policymakers, the Bureau of Automotive Repair, and other stakeholders to develop a comprehensive approach rather than moving forward with incomplete and one sided regulations on auto labor rate and steering.