Larry Montanez Plays Devil’s Advocate for State Farm Labor Rate Decreases

Wednesday, 28 December 2016 00:07

Featured in AUTOBODYNEWS

Many collision repair industry professionals have taken up arms in reaction to State Farm’s decision to lower labor rates in parts of NJ and NY, but amidst the outrage, a very recognizable voice is strangely absent. Industry advocate Larry Montanez of P & L Consultantshas taken a different stance on this situation as he appeals to the industry to consider a logical approach.

Montanez notes, “State Farm is lowering labor rates to what they consider to be a reasonable amount based on what they say is their market research. Conversely, they did originally claim that their extensive market rate survey is what placed their labor rate at $65, and now a bunch of shops are crying foul play as State Farm decreased their labor rate from $65 per hour to $50 per hour because that’s what other insurance companies pay shops for the same work, but the shop’s contract is with the consumer, not the insurer; State Farm is a third party that has no control over what the body shop charges as a rate.”

“It’s a nothing story,” Montanez insists, reminding shops, “You are supposed to charge your posted rate, and if you’re doing that, you are probably already suing all the other insurance companies for their suppressed labor rates and unwillingness to pay anyway so there’s no difference in what State Farm is doing.” One big question Montanez asks is “How can you (any shop) complain about State Farm reducing their labor rate if you aren’t upset enough to sue other insurers for the same thing? It makes no sense, and a jury is not going to find in your favor – unless you’ve been suing for suppressed labor rates, you’ve got no leg to stand on!”

Many of the shops that Montanez consults with charge their customers their posted rates which can range from $75 to $175 per hour for labor rates, depending on the type of operation, so this has no impact on how they do business. “State Farm has decided they belong at the same rate as everyone else is accepting. Basically, they gave many shops a gift by paying $65 an hour, but according to some financial experts from repair professionals, it was still short, and now almost everyone is whining that they took the gift away. We as an industry need to condemn them all for doing the same things, not just complain about one, or it is smarter to keep our mouths shut so we don’t sound foolish!”

Although Montanez may be the most forceful voice explaining this logic, he is not the only industry professional who noticed that State Farm’s decision can be at least partially blamed on the shops themselves. When one industry publication printed this story online, there were a handful of people who pointed out the invalidity of their peers’ outrage.

Ernie wrote, “I don’t pay attention to the pigeonholes insurance companies try to force us into. I’ll use estimating platforms to estimate but not to invoice. My bill is an accurate invoice for what is owed. I don’t care how the insurance company has to reinterpret my invoice – I just focus on the bottom line… More often than not, State Farm will pay as long as you are doing what you are invoicing for.”

Matertech noted, “I see the problem as the shops themselves unfortunately. I don’t think they should complain about a decrease when they had already been accepting less ($16 per hour less) from other insurers. You have to know that State Farm would figure that out through subjugation and data mining the shop’s own estimating data.”

Pete Suszczynski agreed, “Not playing devil’s advocate, but the same shops are repairing vehicles happily at Geico and other insurance companies’ labor rates which is what State Farm dropped to. Maybe it’s the repairers’ fault as well.”

Montanez believes, “They’re arguing the wrong thing! Why weren’t these shops suing other insurance companies for paying less than State Farm? Now, they’re crying because they lost a more reasonable rate from one company that they didn’t hold others to. Now, they have to work hard to obtain what is needed to operate their businesses instead of working smart by holding everyone accountable. They need to handle this the right way, but they don’t actually want to make a difference. If you will accept what the other insurance companies will give you, how can you complain about State Farm paying the same? This industry needs to step up and fight against all insurance companies who aren’t paying fair labor rates, or just suck it up and do what the insurance companies want! The problem is that most shops do not know what their hourly operating costs are or what a technician costs them per hour to work at their shop.”