The British Columbia government’s review of collision repair rates might be good news for the industry—or it might not.
As cars are becoming more complicated, margins are being stretched even thinner. Many car parts can’t be repaired—only replaced— and it’s becoming difficult to keep up with technology. For those of us in the collision repair industry, it has never been more challenging to put out the capital to keep up with all the new welders, software, equipment, and training.
A year and a half ago, the British Columbia government committed to do a third party review to determine how rates should be set to be profitable for the industry, and to keep people safe on the roads. Recently, the government officially announced the review was accepted in principle.
Saskatchewan did a similar review a couple of years ago with Saskatchewan Government Insurance (SGI), and they received a stepped increase over the last few years. They’re getting close to their maximum now, just over $90/hour. In B.C., we’re sitting at around $74/hour, and in most western provinces, private insurance will pay $70 to $75/hour.
But we definitely need to be in the $80/hour range and above, to pay for all this capital in the future.
The third party reviewer is an expert in the field, and has created a shop model with standard rates and inputs. They’re running six bays, five technicians, two managers, and so on. Now they’re working out the details when it comes to costs. Hopefully, the output will be what the new rate should be. The expectation is that with all the new technology, extra training and capital, this is the rate that will support it.
Right now, many shops are struggling to keep up. Insurance companies are going to start seeing some pressure on rates because everything just gets replaced, and we’re not making the margins on parts and materials. We need to see movement in rates across the country for us to stay profitable and viable.
Shops are going to start pushing back, and many of the smaller independents could go out of business. They’ll either shut their doors or get snapped up by bigger chains or banners.
There are costs in the industry that didn’t exist as recently as five years ago, such as aluminum welding, structural or ultra high strength steel with brass welding. Even if we had volume, we still need a rate increase to be able to provide all the equipment, tooling and training that we need to make safe repairs.
The third party reviewer has had plenty of data to work with. Everyone was open and honest, gave them financial books and showed them all the new technologies. In the coming weeks and months, together with the Automotive Retailers Association (ARA), we’ll be working with the government to see how it all pans out. And if all goes well, the data will show that an increase is required.
Rates have been stagnant over the past five years. I think it’s more the revelation that we’re seeing that technology, equipment and training are taking a dent out of profits and making it harder for all of us in the collision industry. Cars are being built differently and it’s changing all the time, so the way they get repaired also has to change.