New Auto Repair Regulations Could Hit California Drivers

SACRAMENTO, Calif., April 4 -- The Property Casualty Insurers Association of America issued the following news release:

California is part of a disturbing national trend of increasing auto accidents and mounting repair costs to fix more complicated cars. Unfortunately, California drivers face even more risk of escalating insurance costs because new California Department of Insurance (CDI) auto body repair regulations are propelling auto repair costs even higher, reports two California auto insurance trade associations, ACIC, the California Voice of the Property Casualty Insurers Association of America and the Personal Insurance Federation of California (PIFC).

"Improved technology has made cars safer for passengers, but these advances have not slowed auto accidents or auto repair costs. California and states across the nation are seeing an explosion of auto accidents, traffic fatalities and higher costs to repair more sophisticated cars, "said Mark Sektnan, ACIC president. "Things are about to get even worse for California drivers because the CDI approved regulations that are rapidly pushing auto repair costs even higher,"

Typically insurers negotiate rates with body shops in order to control costs. Insurance pays for 80 percent of all auto body repairs. The CDI approved new regulations in 2016 forcing insurers to pay "rack rates" which are randomly set by body shops and these costs could likely be passed on to consumers and businesses.

"As small business owners we operate on slim margins, any increase in costs will impact our bottom line and make it difficult to do business," said M.C. Townsend, president and CEO of the Regional Black Chamber of San Fernando Valley. "Insurance is a requirement, not a luxury. I cannot just go without insurance. With all the other cost increases small businesses face, we cannot afford the increases from these regulations."

Evidence of the impending labor rate increases is mounting quickly. These regulations took effect on March 1st and insurers are seeing labor rates jump significantly. For example, one large body shop in the Bay Area raised their labor rate for mechanical labor from $71.00 per hour to $116.00 per hour. Another shop increased rates from $77.87 to $108.00 per hour.

"These new CDI regulations are magnifying the crisis California is facing from more frequent accidents and higher repair costs. The price tag of these regulations could add an additional $280 to $300 million in higher auto repair costs, which could hit California drivers in their wallet," said Rex Frazier, PIFC president. "There is an epidemic on our roads with distracted or impaired drivers and pedestrians traveling on congested and poorly maintained roads. These conditions are already creating a deadly and costly environment. Now we are faced with additional repair costs from these new regulations that will simply compound the skyrocketing repair costs."

California already paid elevated auto body repair costs before these regulations even took effect. California auto insurers have seen lost costs go up 22.3 percent from 2013 to 2016. In one year alone, 2016, California auto insurers' costs for property damage liability and collision claims increased 28.9 percent.

"This is bad news for California drivers and small businesses who already struggle with high housing costs, long commutes and high labor costs," said Frazier. "Policymakers need to implement and enforce distracted driving laws and educate the public about the dangers of driving while impaired from not only alcohol but also recreational and prescription drugs. Policymakers also must put a stop to increasing auto repair costs by looking closely at proposed legislation or regulations that will push costs even higher."

A Closer Look at California's Increasing Accidents and Repair Costs:

1. California ranks number 6 in the top ten states with the biggest increase in auto accidents with a 6.9 percent increase. (2015 Fast Track Data)

2. California had a 13 percent increase in traffic fatalities in 2016 that is outpacing the national average of 6 percent increase. (National Safety Council 2016)

3. Over the last 10 years, the auto labor rate in California has increased by 15 percent and is the 9th highest labor rate in the country at $55.48 (Mitchell Data).

4. Since 2011, the average insurance premium jumped 16 percent to $926.00.

5. CDI's new labor rate regulations are estimated to add an additional $280 to $300 million in higher auto repair costs.

The Association of California Insurance Companies (ACIC) is part of the Property Casualty Insurers Association of America (PCI). ACIC is PCI's California Voice representing 363 property casualty insurance companies doing business in California. These members write $20.2 billion in premium in California insuring 36 percent of the property casualty insurance sold in the state. California members write 44 percent of personal auto insurance, 29 percent of homeowners insurance, 33 percent of commercial lines business insurance and 40 percent of private workers compensation insurance sold in California.