2023-10-03 00:00:00 - Joint Committee on Financial Services

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CHRISTOPHER STARK - MASSACHUSETTS INSURANCE FEDERATION - HB 1095 - HB 1118 - HB 1005 - Good morning, Chair Murphy, Chair Feeney, members of the committee. My name is Christopher Stark and I represent the Massachusetts Insurance Federation. The federation and our member companies represent about 80% of the391 auto insurance mark, and that'll be the focus of my testimony today, focusing on the auto labor rate Bills before the committee, as well as two Bills support by the federation relative to the ADALB. Starting with auto labor, I'm pleased to report that over, the last year since we met as the special committee on auto labor rates. Auto labor rates have moved upwards, rates today are between 7 and 15% higher than they were at this point, last year. So the market is responding, and it's responding well, and we do425 not want to reintroduce some levels of government control of the marketplace. Since the 2008 reforms, which moved from fixed and established to manage competition, consumers have won in the state. We've gone from consistently one of the top five highest insurance states to now in the 15 to 18 spots nationally, and that's good for consumers. If we look back to last year in some of the testimony that was presented, one was by doctor Sharon Tennyson. She presented to the committee her report on this and one of the key things that has remained the case, it's remained the case since the 2008 special commission on auto labor rates as well as the report last year, but her finding that another major factor keeping labor rates relatively lower in Massachusetts is the continuing oversupply of repair shops in the market, and oversupply repair shops will lead to downward pressure on prices in the repair industry.

484 The484 data through 2020 illustrated that486 the number of physical damage claims in Massachusetts has continued heading downward, reflecting what was happening492 nationally. At the time. In 2003, here in Massachusetts, there were 606,000 physical damage claims. In 2019, there were only 472,000. Now we know in the post pandemic era, that number has been rising but when we look at the data in those years, we can see that even though that reduced by 22%, fewer cars need more technologically advanced repairs, yet the number of auto repair facilities remains relatively consistent over that time with only a decline of 5.5%, again, compared to the physical damage decline of 22%. This type of protectionism would undermine the foundation of managed competition and runs counter to well established economic principles and mandating a minimum labor rate will increase driver's premiums, it's a tax without a benefit for drivers. Looking at analysis by the AIB, the estimates for these bills which they range from roughly552 $55 an hour to nearly $80 an hour, is estimated556 to be 4.6 to 9.2% increase for individuals' total premium. That total impact for the Commonwealth would then be between $210,500,000 and $421,000,000. One of the other things that's always important to understand in this is that the increase in a higher labor rate will also result in more total losses. This is not to the of the consumer, it's not to the benefit of the repair shops, and it's not to the benefit of the environment.

It's important, I think, that we take a holistic approach at dealing with this and that's why if you'll indulge me for just a moment, I'd like to turn to the ADALB legislation that we are supporting. House Bill 1005 is an important piece of legislation that we came up with in response to both of the Chairs urging us to be part of the solution moving forward on labor rate. What this legislation does is it abolishes the ADALB, the auto damage appraiser licensing board and it returns that authority613 to the commissioner of Insurance where it was prior to Section 8G in the 1980s.619 To do that, a couple of things will happen. One, it will decrease tensions dramatically. The ADALB has been used sort of like the sword of Damocles hanging over the head of every appraiser in our state that if they do one thing, minimal thing wrong, that there's a chance that they're going to have to come in, to the ADALB, go before them, have a hearing. Just one company over the last year submitted 100 frivolous claims to the ADALB. Now, luckily, the board created a process that648 did not require them to come in until an initial review of that but just think of the independent appraiser, it's not for the most part, employees of insurance companies, these are independent contractors that are out there having take a day off of work to come in to defend themselves against frivolous and often ridiculous claims.

But the other thing that we put into House Bill 1005 is language that replaces the current language relative to what happens if you can't negotiate the fair price and replaced it with language of a notice to consumers on how to handle that. One of things that the advocates for labor rate have moved in a direction of in terms of their public facing magazines and other things is697 urging their members to start balance billing the consumer, if they disagree, with the labor rate that is charged. What this Bill does, it creates that framework based on New York and New Hampshire where it's worked well. These things at the end of the day do actually create upward pressure on the labor rate, and it's worked well in those states as a way for the market718 to control these situations. I know that there's some angst on the other side of this issue regarding the language that noticed because it says that it any repair shop license by the state, which may be too broad, we would be happy to work through that language, it was just the only statutory citation that we had available to us to tie to what the responsibility of insurers would be. But if the legislature does not748 want to move forward on H 1005, then we would ask for the continued support for H 1075, which is a smaller tweak to the system for ADALB, which would address emergency licensures. We've been763 working with the ADALB for years765 to try to change the reg, I think that if we change the legislation, the statute will move them forward in a quicker fashion. So, with that, the other Bills on the agenda, Chairman and members of the committee, we will submit written testimony on.

SEN FEENEY - Just for clarification, you talked about those frivolous claims. What are the nature of those? What do you see and how do you define those?794

794 STARK794 -794 A lot of them are very small amounts, I mean, we're talking about maybe $30 of a disagreement about what the price of a part or803 a procedure would be. Some, and I think that we briefed this committee or the auto labor commission last year, is about manufacture procedures, and what defines that procedure, whether or not it's absolutely necessary for the repair of the car to821 return821 it to. So there will be disagreements on some of those things, but that is the course of negotiations between the appraise and the repair facilities, instead the repair shops try to use the ADALB as a crowd tool838 that838 they don't get one repair or procedure on the estimate, then they're filing these complaints where the ADALB, again, forcing these appraisers to come in and waste a day of their work trying to defend their license over $35. That was the point actually of the Chairman, last year of the board when he kind of chastised some of those of bringing these complaints forward by saying, you know, the point is for it to rise to a level that it should at least have up to a year suspension of the license to just bring them in to berate them and to use that880 for future negotiation purposes is unfair to the appraisers.

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NICK FYNTRILAKIS - MASSACHUSETTS ASSOCIATION OF INSURANCE AGENTS - HB 1077 - Morning, Chairman Feeney and Chairman Murphy, members of the committee.903 Thank you very much for the opportunity to come before you today. My name is Nick Fyntrilakis, I'm the President and CEO of909 the Mass Association of insurance agents. We're going to focus just on one915 Bill today, we will be submitting written testimony on some other Bills, but, I want to be respectful of your time frame, so I just want to focus on one particular Bill today, and that is House Bill 1077, an act relative to929 insurance company rebates. Purchasing insurance for your car, home, or business,935 are the most important decisions that a consumer will have to make. The state's current rebating prohibition exists because this decision be based on the merits of the policy, the right coverage for the right price, and to meet the needs of the consumer as opposed to what are the most expensive953 giveaways that a company can provide and gadgets, etcetera, that are not focused on the business of insurance. House Bill 1077 would change this fundamental principle of the insurance marketplace in Massachusetts967 and allow companies to offer products and service relative to971 loss mitigation or loss control as an inducement of purchase, and that's a very broad category and can get quite quite broad. This could include things like home security systems, smart home devices, which can be quite expensive, cost hundreds, if not thousands of dollars. Incentives grow when you look at commercial risks and the magnitude of those and what those might look like to policy holders.

These inducements would certainly change the calculus of consumers, and they might feel positive about that in the short term as getting some type of upfront benefit or upfront value. However, we would argue that the focus should be on what is the value of the insurance in ensuring that that is the proper coverage and the proper price for that particular risk as opposed to what they can be induced with. Once that1018 is open, as I mentioned, with regard to loss mitigation, you1022 can imagine that anything could really get put into that category and could very, very difficult to define what that means, what loss prevention means. Competitively, this would be extremely negative for local independent agents. Here, we represent nearly 1000 independent agencies across the Commonwealth, that range in size from one person operations to 500 person operations, but you can imagine that those smaller shops who provide a high quality of service to their customers and their communities would be extremely negatively impacted by having to try to compete with very large national entities and others that could provide some of these upfront inducements as opposed to focusing on the business of insurance. I know we want to have a healthy, competitive marketplace in Massachusetts and this Bill would harm that, and so we'd ask that you simply reject this particular1073 proposal and adhere to the current prohibition on rebating in the Commonwealth that would feel very sound in law. So on behalf of our members, I thank you for the opportunity to be before you today. As I mentioned, we do have some other Bills that we'll be submitting testimony on, and we'd be happy to answer any questions.

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JON HURST - RETAILERS ASSOCIATION OF MASSACHUSETTS - SB 695 - Mr. Chairman, members of the committee, good morning. My name is Jon Hurst, President of the Retailers Association of Massachusetts, 4000 members across the Commonwealth, all different types and sizes, retail sector employers. We're here this morning to support Senate Bill 695 by Senator Moran. This Bill is really a clarification of some change, as it affects small business workers' compensation cooperatives which are regulated by the division of insurance. These small self insured groups were authorized by the legislature in the mid 80s as a way for small businesses to have a level playing with larger employers and have better services, save some money, and hopefully be more competitive. Times have changed, there's still a lot of of these groups out there, regulated by the DOI, but there's a lot of competition out there, and mostly small businesses, we have about 4000 of our members. We have a partnership with the Massachusetts Package Store Association, that also has a couple 100 more of their members in the same group. One of the things that we're finding is that out in the marketplace, whether they're big payroll companies, a1191 professional employment organization's PEOs,1193 they're going out after a lot of small businesses, and they're trying to have one stop shopping. We're going to give you essentially free payroll processing in exchange that we're going to bring you in, we want you to buy our health insurance, our workers' compensation, our 401K, our demo insurance, really virtually everything.

Particularly under the PEO type of environment, really it takes away choices and flexibility for both the small business and the large business. What we need to do is get rid of barriers1227 that exist under the laws that help these small businesses to really compete with these, with both their direct larger businesses and don't put them into a pathway that may be as a mistake, you know, going with a one size fits all PEO type of arrangements which is a problem. Simply, what this legislation would do would be to allow for these groups, if they've been in place for at least five years and if they get the prior authorization of the commissioner of insurance to spread out premium payments equally over 12 months. Right now, under the law, which again, was established in the 1980s, you had to do at least 25% of the premium upfront, the intent of that was to make sure that they reserved and had sufficient reserves at the beginning. Times have changed, the reality is if you've been in business for at least five years, you do have those reserves, and, of course, the commissioner is not allow you to set up a payment structure that would hurt your reserves if they didn't agree to equal payments. But this is really what small businesses want, cash flow, as we all know, is very important for small businesses, and this will give them the flexibility. The commissioner of insurance allowed for this under the pandemic, under the emergency rules, but feels like a statutory change is necessary that he doesn't have the ability to do this simply by regulation. So it's a minor change, but it's an important change for competitiveness and equal opportunities for businesses across the Commonwealth. With that, I'd be happy to take any questions. Thank you for your time.

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JENNY ERICKSON - LIFE INSURANCE ASSOCIATION OF MASSACHUSETTS - HB 1077 - HB 977 - SB 719 - SB 640 - SB 686 - HB 1088 - Thanks very much, Chairman Murphy and Chairman Feeney. I'm just going to, in the interest of time, record our support for certain Bills and are in opposition to other ones. I'm Jenny Erickson, I'm the Senior Vice President and General Counsel of the Life Insurance Association of Massachusetts. Somewhere virtually is, Alex Crowley, our legislative assistant who would be sitting at the table, that empty table that I see. But I just want to show our support for House 1077, House 977, and its Senate counterpar, Senate 719. Also, our support for Senate 640 and our opposition to Senate 686 and House 1088. So I won't take up any more of your time this morning, but we will submit written comments on many of those Bills. Thank you very much.

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TRAVIS ALLEN - ENTERPRISE RENT A CAR - HB 1018 - Thank you, Chairman Feeney, Chairman Murphy, and committee members. My name is Travis Allen, and I work for enterprise Rent a Car Company of Boston, the entity that operates enterprise nation wide in vehicle, rental brands, as well as a full complement of mobility service models that include enterprise car share and commute by enterprise ride sharing, just the into. In Massachusetts, Enterprise employees over 1400 employees through our network, 130 locations operates a fleet of 25,000 rental cars, trucks, and vans. In my role for enterprise, I've engaged in policy discussions pertaining to future mobility models including technology enabled mobility services, such as the rental of private vehicles to the public, commonly called peer to peer car sharing, which is the subject H 1018. For clarity, peer to peer car sharing is the branding that has been adopted by several companies that facilitate the of vehicles to the public via digital applications, vehicles that the company1545 does not necessarily own themselves. But there are many different business models within the group of companies using the peer to peer branding. These include what you may call the original peer to peer model where individuals earn extra money from renting their personal cars when they aren't using them but there are also models that allow owners of small flee of vehicles, usually five to 40 cars to be offered for rent on their platforms.

Some that allow major rental car companies to list excess inventory on their platforms, some platforms that serve major markets, the insurance replacement market, and small businesses that need trucks, even some platforms that offer vehicles that they themselves own. From our perspective, this commercial activity is simply a new business model using smartphone applications that make vehicles available for rent to the public, the same thing the incumbent rental car company does. I hope to provide answers to any questions you and the committee have today to establish a regulatory framework that will enable the rental of privately owned vehicles to the public to thrive while at the same time ensuring appropriate protections are in place for consumers of this service. We believe this legislation removes all barriers for technology enabled service models while still ensuring four aspects of existing rental laws in Massachusetts. Insurance,1627 this Bill includes the model language from the National Council of Insurance Legislators, ensures that all parties involved in these transaction are protected by appropriate insurance provisions. Consumer protections, this model also addresses some level of consumer protections, such as safety issues associated with vehicle recalls. Traditional1648 car rental companies have to follow the federal regulation, which we all should, the safe car rental act that makes it illegal to rent a car with an active manufacturer recall for the safety of the consumer and general public. Also, taxation and operation at commercial airports. By creating definitions in this model, existing statutes and airport regulations would be followed for the peer to peer sharing services. This would ensure that consumers pay the same taxes and fees regardless of who they rent from.

The peer to peer host would be protected from obligation to collect and remit the taxes on the platform, not on the owner themselves, and this would also clarify that commercial airports have the right to regulate this commercial activity. We see this as very important as Mass port had to sue one peer to peer company, over recent years in order to get them to negotiate table after that company had already been operating at Logan Airport. We believe that Representative Garballey's Bill represents a significant progress that has been made on this issue over last few sessions. To summarize, enterprise supports modernizing Massachusetts existing laws to ensure that there are no barriers to the rental of privately owned vehicles through platform, while also ensuring Massachusetts residents get the same consumer protections, regardless of what company they use to rent the car, commercial airport have the express authority to regulate this rental activity at their airports, and they already enacted taxes and fees owed on a car rental activity, don't go and collect it. Many states have already successfully addressed these policy issues on peer to peer car rental, and in previous sessions, there has been strong leadership from the legislature and this committee to drive a compromise from both sides. Enterprise is more than willing to engage in a constructive process to achieve such a compromise. There are several good examples, and we'd be happy to share that information with the committee and other stakeholders. Thank you for your time today, we look forward to working with you on this important topic.

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FEENEY - Thank you, Travis for your testimony, it's a pretty comprehensive legislation. So as we try and go through and try it. One of the things you mentioned was that if there's1787 a factor recall on a vehicle and, obviously, that vehicle off the road until you get to it. Currently, peer to peer, you're saying there's no regulations on that at all. So I could be taking a car, it's going to be a rental, and it could be a safety recall on the area, something, and there's no1809 regulations at all. Is this correct?

ALLEN - That's correct. Massachusetts has not regulated the peer peer industry similarly to traditional car rental.

FEENEY - Alright. And absent legislation, there's been no introduction of any sort of regulatory scheme from agencies within the Commonwealth on that?

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REP HAWKINS - HB 1035 - Chair Murphy and Chair Feeney, we've worked on this for a long time, and I'm grateful for your participation in the auto body rates Bill issue, and appreciate everything that you've done. I don't need to repeat everything that we've talked about over the last couple of years about this, but I just hired a landscape contractor to put a retaining wall in my backyard, and I figured out what he's charging, he's charging me $400 an hour and his overhead is a couple dump trucks in a backdrop, Bobcat. The electrician came to do something in my house, we had to put in a new wire across the basement, he was there for an hour and a half, he charged me $500. My bicycle is at the bicycle shop right now, they charge me $105, and we're paying auto body shops $40 an hour, and that's the biggest overhead business you could imagine between frame machines, down drafts, free boots, high volume, low pressure guns, hazardous weight, the technology with electric cars, with accident avoidance systems, high strength alloys, the things that they have to do are high-tech, sophisticated environmentally sensitive, and that we were only paying them $40 an hour, which doesn't make any sense to me, where to last or last in the nation for reimbursement rates for auto body shops. We're trying to be aware of the fact that jobs in the trades are a better choice for a lot of high school students, but heck, they could make more money working at Target than they could at an auto body shop, if $40 is paid to the business, they've got1956 to cover all the overhead, what does that1958 leave to pay new hires or experienced help? There's an urgency to this and I know that I'm preaching to the choir, I know that you have been working on this for a while, and I appreciate your efforts, and I'm hoping that we can move it this time.

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MATTHEW BERARD - MASSACHUSETTS NATIONAL ASSOCIATION OF INSURANCE AND FINANCIAL ADVISORS - SB 650 - HB 977 - So thank you very much for allowing me to testify. My name's Matthew Berard, I'm part of the Massachusetts National Association of Insurance and financial advisors, we have over 430 licensed advisors of which I am one, I'm a volunteer for MNAIFA. I have a practice2063 in Needham, Massachusetts, my specialty has been insuring income in the event of an accident or sickness or disability insurance for 26 years and I've insured well over 10,000 individuals, as well as I serve as an expert for over 350 insurance and financial planners, nationwide as their expert on disability insurance, life insurance and fully insured pension plans. So we have two Bills, that we have filed, S 650, which is an act relative to notifying broker prior to termination of coverage. What this would require is if a policy owner of a life or disability insurer or long term care insurance policy has an agent of record, the insured must notify the agent of impending lapse in coverage or mail or send electronically a copy of the notification of the impending lapse in coverage to the agent at least 21 days before the effective date of such lapse. This is consumer based legislation intended to protect residents of the Commonwealth of Massachusetts.

The Bill protect owners of life insurance, disability insurance, and long term care insurance from the unintentional lapse of coverage, and, actually, I was in Senator Feeney's office in March, and they were dealing with one of these very issues of unintended lapse of one of their constituents. Some of the examples of those intentional lapse often involve changes in bank account information, change in address, as well as older policy owners who become forgetful and miss paying a bill or no longer remember the original intention of the coverage they purchased to protect themselves and their family. This Bill is right for the Commonwealth of Massachusetts insurance consumers, we urge you to report this Bill favorably to ensure policy holders maintain coverage, oftentimes, when they need to protect their families and businesses. So that's the first, and then the other is, HB 977, an act relative to2182 continuing education of insurance producers. This was Joshua's testimony that he wrote up. So Joshua is President of the Massachusetts Chapter of National Association of Insurance and Financial Advisors, and we have 430 members statewide in every congressional district. In addition, he's a partner in Prism benefits, an insurance and employee benefits practice in Woburn and Needham, Massachusetts. MNAIFA is here today to support House Bill 977, an act relative to continuing education for insurance producers. HB 977 would grant producers with active annual membership in MNAIFA up to three hours of continuing2220 education credits per year with no more than nine continuing education credits being awarded towards their three year requirement of 45 credits.

MNAIFA's mission is based upon three main principles; advocacy, education, and ethics. Our members provide your constituents with access to better trained, more educated, and more ethical advisors that advisors were not members of this organization. If adopted, HB 977, when incentivize advisors in the state to join our organization, we believe this would ultimately improve the quality of financial advice our constituent receive, advisors who join MNAIFA are required to adhere to a strict code of ethics, and we provide additional educational seminars throughout the year to make sure that members remain up to date with industry changes. Our footsteps regularly act down the hall of the building, that we're currently in as we work with our legislatures to inform them on how different bills will impact the industry and consumers within the Commonwealth. This Bill has been filed in seven previous legislative sessions, in each of those sessions, the joint financial services committee voted favorably in support of this Bill. In the last four sessions under the leadership of Representative Mariano and in the previous 2020, 2021, the Bill was represented by Representative Carpenter. In that session, we were able to successfully advance the Bill to a 3rd reading of the House, and it's actually passed the House three times. We would like to thank Representative Carpenter for filing this Bill again in this current legislative session, and we'll hopefully see this Bill pass at this time. With that being said, anybody has any questions?

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sir.

FRANK O'BRIEN - AMERICAN PROPERTY CASUALTY INSURANCE ASSOCIATION - HB 962 - HB 1018 - HB 1109 - Good morning, Chair Murphy, Chair Feeney, members of the committee. For the record, my name is Frank O'Brien, I'm Vice President with the American Property Casualty Insurance Association. We're a large national P&C Property Casualty Trade Association, and we write a significant amount of all of the insurance, not all of it, but almost all of the insurance sold in the Commonwealth. We have 1000 member companies, several of our member companies are located here in the Commonwealth of many more do business year. We are, and we'll be submitting some extensive testimony on many of the issues, so I would commend that to the committee. During my time here, I'd like to focus on a couple of quick issues, maybe a couple of Bills that may not get the amount of attention that some others might get. First of all, we do support House Bill 962, that is a measure that would make a number of updates to the state's property casualty guarantee fund law and we certainly commend the committee's attention to that particular piece of legislation. Relative to House Bill 1018, which is the peer to peer Bill that the gentleman from Enterprise just testified on. I worked closely with the National Conference of Insurance Legislators, NCOIL in developing the NCOIL model, which has become the standard for peer to peer legislation across the country. I will be submitting a statement on the peer to peer legislation before you. I would note that it is based on an earlier version of the NCOIL model does not reflect, at least in my reading, the latest changes to the model. I will also note, that APCIA takes no position on many of the provisions within that particular model because it involves issues relating to taxation and the regulation of the rental car industry.

Our interest in it is on the insurance related coverage provisions, which thankfully are non controversial, but I'd be happy to work with the committee on this particular issue as I have done in the past, given that I was involved in the development of the model at NCOIL. Finally, I'd like to mention another piece of legislation, House Bill 1109, which is a new piece of legislation before the committee this year. It is a piece of legislation that would up the current $750 relocation benefit for tenants in2597 a multi family dwelling. It would assist in payment of expenses after a fire, it would up it from2605 $750 to $5000. Massachusetts is one of the very few states, and they indeed may be the only state that acquires this particular type of coverage. Moving it from $750 to $5000 is2619 a significant jump. I'm not2621 sure what the right number is, we certainly would make ourselves available to work with the sponsor on this particular piece of legislation. I would note that renters insurance is widely available in the Commonwealth and this particular benefit, should not be viewed by anyone as a substitute for rent coverage, but certainly, could be viewed as an emergency fund. This is one of those difficult ones where the legislature was going to have to balance some policy choices because there would be a cost in providing such an increased amount of coverage. We also want to not be in a position, I know from my, service on my local board of appeals, we are very much interested in affordable housing, building more multi family dwellings, we certainly don't want to add anything that could provide an unattended consequence that would discourage development of more multifamily buildings. With that, Mr. Chairman, I'd be happy to answer any questions.

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ROBERT O'KONIEWSKI - MASSACHUSETTS STATE AUTOMOBILE DEALERS ASSOCIATION - SB 639 - HB 1121 - HB 995 - SB 701 - HB 1095 - HB 1118 - HB 950 - SB 688 - I appreciate the opportunity to be here today. Robert O'koniewski, Massachusetts State Auto Dealers Association, the Executive Vice President and General Counsel, we represent 47, franchise new car and truck dealers across the Commonwealth, over 25,000 employees, 20% of the retail economy in Massachusetts. There's a number of Bills that we're here on, we've submitted written testimony. I'm going to get to the easy one first. There's four Bills on a service contracts; Senate 639, House 1121, House 995, and Senate 701, we have been supportive of this legislation since it was first filed well over a decade ago.2738 There are two Bills that do have a Section in them that will strongly support both Senate 639 and House 1121 has in Section 4 language that will protect consumer choice2751 on the sale of service contracts by the dealerships so that the manufacturers cannot prevent them from offering up competitive products at a competitive price, enable the consumer to have a well stocked menu of service contract choices. We've been very supportive of that over time, in fact, the Senate put it out all the way through into the House, the first time this Bill was filed over a decade ago, so we would ask that we respectfully get your support on that provision.

Again, there are four Bills on the labor rate, auto body labor rate, House 1095, House 1118, Senate 688 and House 950, which2791 we're strongly supportive of, and I know there's a number of repairs including some dealers who are going to be on today's hearing. I would just point out that I don't know where to start on this, other than, we've been down this road for many, many years. Back in 2001, when I first testified before the predecessor committee, the committee on insurance, the minimum wage was $6.75 an hour, a gallon of gas was $1.50, we're at 15 bucks an hour now on minimum wage, gas is close to $4 again. Our electricity costs are up, health insurance costs are up, rent factors are up, everything is up at the repair shops except the labor rate. We are very willing to work with this committee and others in this legislature as well as the interested parties who still refuse to acknowledge that there's a problem here as getting to an agreement of some sort on how we can address this problem of the repressed labor rate to the repairs. I'm a very optimistic person, it took us, over 40 years get rid of Berlin Wall. 33 years ago, today, there was a reunification of East and West Germany. Clearly, if the world can put aside some of these problems, I think, we working together can come up with some solution to a problem that has vexed the repair industry for over a couple of decades now. So we would respectfully ask for your support on moving in some direction towards a solution toward

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DAVID BROWN - BILL DELUCA AUTO GROUP - HB 1095 - HB 1118 - HB 950 - SB 688 - Thank you for the opportunity to speak today. My name is David Brown, I've been with the DeLuca family of dealerships for 24 years now. We're dealership group located in the Merrimack Valley, we employ around 140 employees. I'm testifying today to ask for your help, I remember being part of a conversation with a few body shop owners, one of them being a new car dealer. Somebody asked why you want to be in the business, auto body business and the answer kind of surprised me, he said, he doesn't want to be, the only reason he's in the business is for his customers, he didn't want to see him go somewhere else to get the vehicle repaired. Over the years, the collision repair workforce is thinning due to a lack of wages, the thing has created such a hardship on the new car owners. It's led to delayed appointments, prolonged repair times, and upset customers. I don't know how a person could survive in today's times without a car. People have been maxing out their rental coverages before the car is even completed. The insurance company's answer is to have the customer pay for the rental, I don't think it's fair. The collision repair technician in our shop makes around $21 an hour, a service technician makes around $45 an hour. The collision repair technician needs to invest in the same amount of tools, training as a repair technician does. The body shops are only collecting 25% per hour of what a service shop is currently collecting. How can that be equal pay for equal work? I'm sure the insurance rates has increased over the years to the customers, and we live in a state that has one of the highest cost of living, 131% of the national average. The average body shop rate not country is $59 per hour $73 an hour for a framework, that should put Massachusetts at $78 an hour and $96 an hour with respectively. The increased rate would allow me to bring the collision repair technicians pay to the level that reflects3042 their skill, investment and talent needed to be a collision repair technician. Thank you very much, I appreciate your time.

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EVANGELOS LUCKY PAPAGEORG - ALLIANCE OF AUTOMOTIVE SERVICE PROVIDERS OF MASSACHUSETTS - HB 1035 - HB 1005 - HB 1118 - Good morning, Chairman Murphy, Chairman Feeney, and members of the committee. Thank you for the opportunity to present testimony before you today. I am Evangelos Lucky Papageorg, the executive director of the Alliance of Automotive Service Providers of Massachusetts. I am joined by three shop owners who will make brief statements at the end of my testimony time permitting. The alliance represents over 200 collision facilities across state, as well as dozens of affiliate industries. We represent tens of thousands of collision employees who rely on the collision repair industry for their livelihood. Our employees provide a critical service to the consumers at the time of their most need. Our industry has gone from being body men and banging out dents and painting cars to a group of highly skilled technicians working on vehicles to carry computers processing more code than rocket ships than travel to the moon. The painting and refinishing process has caused our technicians to become chemists and have to be able to measure additives to achieve color matches and the same time the long lasting finishes produced at vehicle manufacturing factories by robots.

Sadly, the labor rate of reimbursement has not kept pace with the changes in technology, training, and equipment required to perform proper repairs as well as with all the other escalated costs in running a business here in Massachusetts. Massachusetts ranks in the top five states in the nation in which to own and maintain a business of any kind. While being in the top five regarding business expenses, we ranked dead last when it comes to labor rate reimbursement by insurers. As an industry, we have been before this committee for nearly two decades attempting to rectify the situation that has been precipitated by the insurance industry, they continue to manipulate and use suppressive means. From more than 30 years ago, the labor reimbursement rate was $30 an hour, today, that rate has risen to a little bit over $40, that is just over a $10 average increase in more than 33 years. Other states with much lower costs of running a business are in the $50 to $70 range and in some instances, even higher. In some instances, those states with higher labor rates abut our own state. You can go into Connecticut and get paid $55 to $60 an hour3224 in here in Massachusetts, as I said, were3226 just over $40 an hour. The labor rates study Commission reported back in 2008 and more recently in 2021, and it made a recommendation that the legislature take the corrective steps to fix this issue. These commissions based their findings because they realize the insurance company and industry would not take any action unless legislatively forced to do so.

Those commissions have been proven right time and time again, the legislature can no longer wait for the insurance industry to do the right thing. They have been proven time and time if left to their own devices, they will adhere to the status quo. While they do so, thousands of potential employees do not even consider entering this profession, and hundreds leave or age out on a yearly basis. Businesses close down yearly, not because of the lack of work, but because of the lack of employees to do that work and the lack of a fair return on your investment. The collision industry is on the brink of collapse because of this and who will ultimately pay for the price for this? It is and it will continue to be your constituency on an ever growing scale. Already, those individuals who are struggling and in the most need because of a vehicle accident are being asked to subsidize repair costs, they expect the insurance they purchase to protect them and cover. The gentlemen seated with me here will attest to how difficult it is to find and keep quality technicians and how they have struggled for years and are at the breaking point. They've been left no option, but to start charging their customers for the fair and reasonable labor rates their insurers refuse to pay. It is unthinkable that this should be allowed to continue. For far too long, the legislature has kicked this issue down the street, for far too long, the insurance industry has been successful in reporting that they are controlling premiums.

The facts speak for themselves, Massachusetts is the lowest in the country regarding labor reimbursement rates while being in the top 16 most expensive in the country for insurance premiums collected. It is time that the legislature addressed3363 this anomaly, and in particular, because the portions of the premiums that are collected that cover the collision aspect of the repair or of a loss are minimal compared to those on the medical and legal sides. The bottom line is your constituency is not getting what they paid for. House Bill 1035 is a Bill before your committee which addresses the labor rate reimbursement issue on a long term basis and does so in a very clear and understandable manner. It takes away the power of the insurance industry to artificially suppress the rate to their benefit and to the detriment of the policy holder and the collision repair. Simply, 1035 takes corrective measures to bring the labor rate reimbursement to a fair and reasonable level over a set period of time and then creates a mechanism to guarantee an increase going forward based on the consumer pricing index, the CPI. In doing so, all party collision repairs, insurers, and consumers will know what to expect, this will allow the collision repair industry to run just like any other retail business. It will allow the industry to become competitive once again and be able to bring in skilled technicians and keep the ones3441 that we have.

We will once again be able to attract and keep highly skilled technicians in our profession, which will ultimately benefit your constituency. As an association, we applaud any language and bills before you today that seek to address and rectify the labor reimbursement language. However, we vehemently oppose any language which seeks to leave the final decision of labor rate reimbursement, regardless of the mechanism used to determine it, with the division of insurance or the commissioner of insurance. Why? Because the division of insurance is there to oversee the business of insurance not collision repair. They are there to cover the costs associated with collision repair for their policy holders, they are not there to determine what those costs are. The insurance industry is already proven that they will do3497 nothing to correct the situation on their own. As stated previously, the labor rate study commissions have repeatedly recommended that the legislature take measures to correct the issue, it is time to do so now. 1035 has strong bipartisan support, both in the House and in the Senate. We asked this committee to vote favorably to release House 1035 as it has in the past and can allow this Bill to continue its journey through the legislative process in the most expeditious manner possible and finally be enacted.

In closing, we would like to voice our opposition to several Bills, which seek to legitimize the practices of the insurance industry now and give power to the division of insurance and the commissioner, which they do not currently have or have a right to. In addition, we would like to speak in opposition to House 1005, which is a not so subtle attempt to abolish the auto damage appraiser's licensing board and and giving full licensing and enforcement to the commissioner of insurance. The auto damage appraisers license is a professional license, it has nothing to do with the business of insurance, and giving that power to the commission of insurance does not make any sense, it does not follow any logic. The final Bill that we would like to voice support on is House 1118, it is a viable mechanism to determine a labor rate, however, it does give the final say to the commissioner of insurance with that language being changed, we would be more than in favor of that Bill. I'd be happy to answer any questions for the committee after my fellow panelists have had an opportunity to make brief comments. Thank you for the time.

DON DOWLING - MARBLEHEAD COLLISION - HB 1035 - Thank you, Chair Murphy, Chair Feeney, and members of the committee for the opportunity to present testimony before you today. My name is Don Dowling, owner of Marblehead Collision, I have been in the auto body business for 25 years. I started at my father's shop and still work with him today. At the repair shop, more than half of the technicians are eligible for social security, this is a trend around the common law. Insurance appraisers and insurance3638 supervisors all know the figure of $40 an hour is an absolute joke, everybody knows it's a joke. Why does the Massachusetts insurance industry reimburse every other trade more than auto body repair? Because nobody is stopping them. On another note,3654 Mr. Stark mentioned that there frivolous claims to the ADALB. I don't think these claims were a frivolous as it was me that sent in a 158 of them, fortunately, 45 of those got lost in the mail. As a trained repairer, I feel it is to follow the safety requirements of the manufacturer. Please raise your hand if you would allow your children a vehicle where a safety operation was not performed even though it's required by the manufacturer? The board members of the ADALB also did not raise their hands when this was presented to them, yet, the votes always side with the insurance industry. Just these complaints for roughly $40,000 put on the customer, these are our people, and we're making them pay. Thank you.

JEFFREY WHITE - ALLIANCE OF AUTOMOTIVE SERVICE PROVIDERS OF MASSACHUSETTS - HB 1035 - Hello, Chairman Murphy, Chairman Feeney and members of the committee, thanks for my opportunity to speak today. My name is Jeffrey White, and I own North End of Over Harbor Body in North End of a mass. Been doing this business my entire life. As a shop owner, I see an average reimbursement rate coming in at about $43 per hour, which we all know it's the lowest in the nation. I pay the same money for tools, for welders, for training, for all my expenses than every other state in this country, yet I'm supposed to be able to do it for 43 bucks an hour. A shop that's collecting $43 an hour would be able to budget the same training that the shop say get $60 or $75, of course not, it's just not possible. So because of that, what eventually is going to happen is what happened with me. I had to raise my rates, I have to co pay with proper education to make sure that I'm putting out a safe product and making sure that my customers and their families are protected after I repair their vehicles. It's ridiculous that we're the lowest in the entire country. I know that Mr. Starks made a couple of comments about the rate needs to be suppressed because so many shops, but if the rate went up today, would the amount of claims go up? Because if it wouldn't, I don't see how that is relevant. He also stated that the higher rates would increase total loss, so now the total loss rates higher at every other state in the country because the average is $59 an hour, and I just don't understand that if we're three, why can't we be on an average playing field with all the other shops? I am sorry if I'm coming through, like, kind of frustrated because I am really frustrated, this is my life, this is my business, and I'm seeing that I have to charge my neighbors and my customers more money just to make sure I can give them a safe product, and it's not fair. Thank you for listening to me today.

BRIAN BERNARD - ALLIANCE OF AUTOMOTIVE SERVICE PROVIDERS OF MASSACHUSETTS - HB 1035 - Thank you, Chairman Murphy and, Chairman Feeney. My name is Brian Bernard, and I'm speaking in support of House Bill 1035 as well. Just a few points I want to make. A lot of these points have already been made, but, the problem is that insurers set reimbursement rate that are far below market rates. There is no mechanism to adjust the rates with the cost of living, and it's a fallacy that the insurers are helping consumers by keeping rates down. Insurer profits rise when they squeeze collision repairs like me. I have a landscaper too who comes to my shop, I pay him $85 an hour for a person to use a weed whacker. I don't begrudge them for their rates, but rather I understand3900 it very well. I know that the owner has to maintain a fleet of truck and to pay for the equipment, the owner has to pay workers' compensation insurance, the owner has to pay for health insurance and benefits required by the state, the owner has to pay high enough wages to attract and retain talent, the owner still struggles to make that work. Imagine trying to do this at $41 an hour. Thank you, Liberty Mutual. Thank you, MAP Free. Thank you all your insurance companies that are suppressing these rates. We're proud to have 44 petitioners on our piece of legislation, our supporters recognize that the system is broken and something must be done about it. The insurance appraisers who do come into our shop, they know that the rate is obscene, my customers know the rate is obscene, my employees know the rate is obscene. Insurance companies think everything is just fine the way it is and there's no plans for them to fix the problem. Shame on them for being oblivious. I ask for your support for House Bill 1035 to help create this mechanism to end the madness. Thank you.

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JOHN SANTILLI - CONCERNED CITIZEN - HB 1035 - Good morning. I'm here this morning to represent myself. Number one as an independent consultant, my history is I was a new car dealer for over 35 years. One of my primary sources of income during that time was I had a major collision center very successfully through that time. But going back to 2008, I was sitting in the room, I believe, probably in the same room you're sitting in today with the same issues, the same discussions, and the rate was $28 at that point, if I recall. Frankly, I don't understand how these four dealers are doing what they're doing other than subsidizing the insurance companies by digging into their own savings to keep these places afloat. I can't tell you that at least once a month, I get a call from whether it's an independent in Massachusetts that needs help trying to liquidate his business because they cannot continue to subsidize their employees, their expenses.

It's absurd to think that over, however, many years that our expenses have not gone up and when an automotive technician, mechanical technician is making inaccessible $45 an hour,4105 and we can't pay a body check over $20, it's frankly embarrassing. It's difficult to explain to the customer, and the insurance companies, I don't understand how they've won this argument so long. Obviously, our expenses, rent, cost of materials, all of those expenses have gone up over time and there is no fee for proper training and recruitment of new technicians. Frankly, I've done work in Rhode Island, in New Hampshire where the rates are somewhat higher, it's much easier to do business, but in those states, the expenses are less. Our rent factors in Massachusetts are tremendous compared to those two states. I don't want to be repetitive, I think my counterparts who have been on the call have have pretty much enforced their primary complaints about not being able to survive in this current environment. The insurance companies, I think, have figured out that they keep keep us afloat barely, but like, Lucky had mentioned, it it can't go on for much longer. In balance billing, the customer presents all the problems. I'm quite sure, people aren't happy about. I'd be glad to take any questions, but I'm only here to confirm the fact that 2008, nothing much has changed. Thank you.

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4207 REP4207 MURPHY4207 -4207 John,4207 I have a question; you said you do consulting. What what are you doing for work now?

SANTILLI - I'm an independent consultant; I do various things, I broker deals, I go in and, like, an efficiency type of situation. I go in there and the guy's not making any money, my process is to help him do that, but when the labor rate is limited, I can't recruit people for them, I can't change their rent factors. That's basically what I do, and then I work on the new car side. I've broken some franchises, that type of thing. Like I said, I'm independent of all of these other factors, I'm just looking from the outside in. I've worked for block, I currently work primarily for McGovern. McGovern probably has the biggest investment in Massachusetts for auto body currently building up an enormous facility.

MURPHY - Are the manufacturers requiring body shops with the new comp facilities for the franchisees so they have to open up body shops as part of the?

SANTILLI - I don't believe they are. I mean, there's training that's required if you have a body shop but most dealers do not want a body shop because it's another business, number one, it's very difficult. I compare it to the restaurant or the bar business that when you're measuring things by the ounce that costs $600 a gallon and you have waste or the prices have gone up almost 30% over two years, it's very difficult to control, and the insurance company is only giving them a minimal amount of reimbursement, it never covers the cost of the paint materials.

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ANDREW BEDARD - CONCERNED CITIZEN - HB 1035 - My family had a dealership in Berkshire County for over 60 years now. We've been in the body business for over 40, and Just the cost of living has gone up. In my county, specifically, eight body shops have closed this year because they don't want to continue doing business because it's only $40 an hour to do business. Currently, the body shops that are still open, they're kind of almost refusing insurance work because we can get paid $70 an hour customer pay. So all of us take customer pay work before any insurance work in our county, and we're all booked until February in my county. So currently, just a price increase would just change everything dramatically in the labor community, and then we're so close to New York where it's $55 to $65 an hour that insurance pays over there, that I lose all of my body techs that come out of the trade schools in our area, they go over there and as a beginning tech, they're making more than some of our ATAX in our area. They're paying almost $26 to $30 an hour in Albany and the New York regions. It's just frustrating to keep continuing this with the cost of labor or the cost of living going up all the time. I'm losing techs even to target because they'll pay $23 an hour, I can't even pay a kid out of high school that because he's got no knowledge, because I won't be able to make any money on $40 an hour. That's about all I have4460 to say, though.

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CHRIS GILREIN - TECHNET - HB 1018 - Chair Murphy, Chair Feeney and members of the committee, I appreciate the time. I will be brief. My name is Chris, I represent TechNet in the Northeast. We are an industry association up of over 100 companies in the innovation ecosystem, which includes several peer to peer car sharing companies. I just want to briefly weigh in in opposition to H 1018. We did submit written testimony, but I will briefly run through our issues here. Peer to peer car sharing is a process by which your constituents can list their personal vehicles on an online platform for a fee and people can use them for a fee. It's actually really convenient, if you haven't tried it out, I highly recommend it. The Bill before you would actually roll back the process that we've made since 2020, when a provision was included in an economic development Bill that allowed peer to peer car sharing companies to use surplus line insurance, that is consistent with every other jurisdiction in the US. So this Bill would actually, put us out of step with every other state, that allows peer to peer car sharing. As you heard earlier, there is model legislation based on the national conference of insurance legislators which TechNet has supported, in other states and we would gladly work with the committee to advance something more like that. Unfortunately, the Bill before you today is more likely a effort by an incumbent industry, to kind of strike back at competition through regulation. In this case, however, the competition is your constituents who are making some money on the side by listing an asset, that otherwise would sit, unused. It's a process that helps people make a little extra money, it's a good mobility option for people who maybe wanna downsize, maybe get rid of one car and so we4612 really hope that we can work with the committee on advancing the model legislation, and not advancing H 1018. Appreciate your time.

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GILREIN - So, I can't speak to the individual, company's procedures, however, I am going to get back to you on this, but I'm fairly certain that the NCOIL model does have provisions for recalls and we can4682 research that and get that to the committee.

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