EARL COOPER: California’s Escalating Auto Insurance Costs are Worsened by New CDI Auto Repair Regulations

Earl “Skip” Cooper, II
President & CEO of the Black Business Association Editor & Publisher of the Black Business News Group

OPINION – The Black Business Association (BBA) is the oldest ethnic business organization, and headquartered in the State of California. Along with others, the BBA is concerned about the increasing severity and frequency of auto accidents, and the growing trend that will most likely result in an increase in insurance costs for the Golden State.

The BBA supports AB 1679 because it’s the right thing to do in support of the small business community in California, which contributes significantly to the economy, and the communities it serves. We cannot afford to make doing business in California unaffordable to small business owners, whose contribution to the local economies throughout the State of California is very significant, and represents jobs for many of the residents of the state.

California has seen an alarming increase in auto accidents, fatalities and injuries recently. California ranks as #6 in the top 10 states with the biggest increase in auto accidents, with a whopping 6.9 percent increase! In 2016, Californians paid the ultimate price with a 13 percent increase in traffic fatalities, which outpaced the national average of a 6 percent increase.

But that is not the end of bad news for California’s drivers. New auto repair regulations that were approved by the California Department of Insurance (CDI) are propelling auto repair costs even higher. Consumers and small businesses that rely on cars to run their businesses may be in for more gray skies when they open their auto insurance bills.

Typically insurers negotiate rates with body shops in order to control costs. The new CDI approved regulations are forcing insurers to pay “rack rates” which are arbitrarily set by body shops and these costs will eventually be passed onto consumers and businesses. Auto insurance pays for 80 percent of all auto body repairs. So when insurers see higher costs, it could hit policyholders in the wallet next.

The new regulations took effect on March 1, 2017, and body shops have wasted no time implementing new higher labor rates. Insurers are seeing labor rates jump significantly and quickly. 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 in Southern California increased rates from $77.87 to $108.00 per hour; and yet another shop increased labor rates from $85.00 per hour to
$125.00 per hour!

The new regulations are magnifying the cost crisis California was already struggling with. These new rules are expected to add another $300.00 million in higher auto repair costs. These increases will hurt average Californians trying to get to work, and small businesses trying to keep their doors open.

Small business owners operate on slim margins and any increases in costs impacts the bottom line. Insurance is mandatory; a business can’t just go without it.
These new regulations will just add to the burdens small businesses are facing.

Assemblymember Autumn Burke (D-Ingelwood) is introducing legislation to curb the cost increases created by these new CDI regulations. She has introduced AB 1679 to protect consumers and small businesses from the rising cost of auto repair in California. This bill creates an alternative, and less costly, approach
than CDI’s sole way of doing auto labor rate surveys.

AB 1679 is a common sense solution that will accomplish the same goal of establishing the right labor rate but without driving all rates upward. California drivers and small businesses face a lot of rising expenses, long commutes and high labor costs. It is vital that steps be taken to curb the escalating costs in the auto insurance system. Tell your legislator to say YES to AB 1679 and help Assemblymember Burke protect small business and California drivers.
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By Earl “Skip” Cooper, II
President & CEO of the Black Business Association Editor & Publisher of the Black Business News Group