American Insurance Association Testifies At Massachusetts Labor Rate Hearing

BOSTON (November 13, 2008) – The American Insurance Association (AIA) testified today that the setting of auto repair labor rates would be a major step backwards in the effort to reform the private passenger auto insurance system in Massachusetts. The testimony was presented at a hearing before the Special Commission on Labor Rates. John Murphy, AIA Northeast Region Vice President, told the Commission that AIA strongly opposes the effort to re-introduce government price fixing to the automobile insurance system and hopes that Massachusetts will not reverse course from its commitment to managed competition. According to Murphy, allowing competitive forces to operate would ensure that quality repairs are made in the most efficient and cost-effective manner. “Auto insurers can and do negotiate favorable labor rates for repairs,” said Murphy. “Those efforts have a positive impact on repair costs which, in turn, have a positive impact on containing overall insurance costs.” According to Murphy, mandating an artificial rate-setting process would add significant costs to policyholders’ auto insurance premiums throughout the Commonwealth. “Imposing additional costs to 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.” Murphy cited a cost-estimate performed by the Automobile Insurance Bureau of Massachusetts (AIB) which found that if insurers were no longer allowed to negotiate labor rates with repair shops and the labor rate were set at a level comparable to the national average, auto repair costs would increase by approximately $128-146 million annually. Those additional costs, according to Murphy, would ultimately be borne by consumers. “No other state in the country has opted to set a labor rate for automobile repairs and AIA strongly urges this Commission to reject any such proposal for Massachusetts,” concluded Murphy. AIA member companies have a 19% market share and in 2007 collectively wrote more than $923 million in auto insurance premiums. The American Insurance Association represents approximately 350 major insurance companies that provide all lines of property and casualty insurance and write more than $123 billion annually in premiums. The association is headquartered in Washington, D.C. and has representatives in every state. All AIA press releases are available at <a href="http://www.aiadc.org/">www.aiadc.org</a>. Brianne Mallaghan Director of Public Affairs, Northeast Region American Insurance Association One Walnut Street Boston, MA 02108 617.305.4155 <a href="mailto:[email protected]">[email protected]</a> <a href="http://www.aiadc.org/">www.aiadc.org</a>