Massachusetts has launched its second attempt in a little over two years to resolve the auto body labor rate dispute, establishing a new advisory board with just 13 months to recommend comprehensive pricing reforms. The initiative, part of Governor Healey’s recently signed Mass Leads Act, marks the state’s third official examination of repair rates since 2008.
Previous Reform Attempts
The state’s first examination of labor rates occurred in 2008 when managed competition began, followed by a 2022 Special Commission investigation. The 2022 commission highlighted several critical findings, including that Massachusetts collision repair technicians earned an average of $47,400 annually, compared to $72,940 for comparable skilled trades. A legislative proposal discussed in that report had sought to mandate rates of approximately $78 per hour by adjusting 1988’s $30 rate for inflation, though this measure did not advance.
For a summary of the 2022 Special Commission report see the May 10, 2022, article, “17 Bullet Points on The New Insurance Labor Rate Report” by Owen Gallagher in Agency Checklists.
Background of Labor Rate Disputes
According to the 2022 Special Commission report, Massachusetts auto body shops have operated at labor rates unchanged since 2008, hovering around $40 per hour. This average labor rate contrasts with neighboring Rhode Island, where the 2022 report found labor rates ranging from $46 to $53 per hour. That same report documented that Massachusetts had lost 119 registered repair facilities between 2008 and 2020, leaving 1,686 shops operating statewide.
New Board Structure and Timeline
The newly created Auto Body Labor Rate Advisory Board brings together key stakeholders under a tight deadline, with recommendations due by December 31, 2025. The 14-member board includes:
- Co-chairs appointed by the Insurance Commissioner and Attorney General
- One representative appointed by the Director of Standards
- Three representatives from the auto insurance industry selected by the Automobile Insurers Bureau
- Three representatives from different geographic regions chosen by the Alliance of Automotive Service Providers
- One representative from the State Automobile Dealers Association
- One representative from the Association of Insurance Agents
- Three additional members appointed by the co-chairs representing consumer advocacy, the business community, and an insurance industry economist
Mandated Areas of Investigation
Under its enabling legislation, the board must examine:
- Labor rates in neighboring states
- Auto body shop operating costs
- Total labor costs
- Inflation data
- Workforce trends
- Vocational-technical school enrollment and graduation patterns
- Insurance premium impacts
- Additional relevant industry metrics as determined by the board
Required Deliverables
The legislative mandate to the board is to, by December 31, 2025:
- Design and implement a comprehensive auto body shop survey
- Collect and analyze industry data across all mandated areas
- Develop specific recommendations for fair and equitable labor rates
- Submit detailed findings to the Division of Insurance
- File a comprehensive report with legislative committees including Financial Services and Ways and Means
Industry Implications
For insurers, the stakes remain significant. The 2022 commission noted industry analyses suggesting that aligning Massachusetts rates with national averages could increase average auto insurance premiums by $22.50. However, insurers maintained in that report that Massachusetts shops’ longer repair times resulted in total repair costs roughly comparable to national averages despite lower hourly rates.
Looking Ahead
The compressed timeline seemingly presents opportunities and challenges for each of the stakeholders. Unlike its predecessor boards, the board’s enabling legislation charges the board with recommending “fair and equitable” labor rates to the Division of Insurance – a directive that could theoretically resolve the longstanding dispute between the auto insurance and body shop repair industries. Depending on what action the commissioner of insurance or the Legislature takes based on the board’s recommendations, the board’s work could materially change auto insurance rates in the Commonwealth.
Michael D. Powers, a newly appointed co-chair and counsel to the insurance commissioner, emphasized the board’s broad mandate: “The advisory board has a short window to complete the substantial mission assigned to it: collecting the relevant industry data, reviewing it, and conducting whatever activities are necessary to complete its mission.”
