The Discount Dilemma: Insurers Want You Out of Business

by Sean Preston, Coverall Law

For decades, insurers have pushed shops to lower their rates. This pressure is intensifying as insurers outsource negotiations to third-party companies like Control Expert. These companies – armed with AI tools – promise insurers cost savings, all while squeezing shops.

Many repair shops feel cornered, believing they must lower their rates to stay competitive or compliant. Some shops even fear they may be committing violations under M.G.L. Chapter 93A.

Despite these pressures, the reality is that repair shops should be charging their door rates without fear. Not all shops are succumbing to these demands, and many are thriving by sticking to their established rates. This article will explain why it’s legally and financially sound for shops to charge their posted rates and how to avoid legal traps.

II. Understanding Chapter 100A, Section 8(c): 

The Misconception of Pricing Discrimination

The statute is clear:

“No registered motor vehicle repair shop or other person shall…charge or offer to charge a higher rate or discount for an insured repair than for an uninsured repair.”

The language in this law was originally designed to prevent shops from inflating repair costs for insured customers. The fear was that shops would overcharge insurers, who were seen as having deep pockets. The law’s purpose was to maintain fairness and prevent price gouging.

Today, shops often feel pressured to lower their rates for insured repairs to avoid steering or to keep insurers happy. However, the law doesn’t require this – shops should charge their posted door rate, whether it’s for an insured or uninsured repair. Lowering rates under pressure is not a legal necessity and could hurt a shop’s long-term profitability.

III. Massachusetts Auto Body Ass’n, Inc. v. Commissioner of Insurance: Legal Precedent and the Race to the Bottom

In 1991, the Massachusetts Supreme Judicial Court addressed the pricing issue in the case Massachusetts Auto Body Ass’n, Inc. v. Commissioner of Insurance. The court upheld that repair shops could offer discounts, but those discounts must apply equally to insured and uninsured customers.

The Court clarified this point, stating:

“Since nothing in the regulation prevents a repair shop from offering the same discount to an uninsured customer, we cannot say that, on its face, the provision conflicts with G.L. c. 100A, § 8(c).”

This ruling has led to unintended consequences. Shops, feeling pressured to offer discounts to insurers, are lowering their rates unsustainably. The danger is that once shops start reducing rates, the overall market value of repairs falls, pulling quality, wages and safety down with it. However, not every shop is falling into this trap – some shops, in fact more shops, are standing firm and succeeding by charging their full rates by implementing balance billing practices based on the underpaid amount offered by the insurer. 

IV. The New Reality: Insurer Pressure Through AI-Driven Cost Negotiations

Insurers increasingly farm out their cost negotiations to third-party firms like Control Expert. These firms use AI tools to request lower rates, storage fees or discounts on repairs.

An example of a common tactic: 

“Thank you for sending those requested documents and 

charges over to us. Are we able to do $XX a day in storage, 

as anything above that comes from the customer’s 

settlement?”

On the surface, this seems like a simple inquiry. However, shops are being coerced into lowering their rates under the threat of losing business or seeing insurers steer customers elsewhere. Shops that comply may not realize they are hurting themselves in the long run and giving up more than they gain.

V. Legal Ramifications: M.G.L. Chapter 93A and the Illusion of Risk

Many shops are terrified that by sticking to their door rates, they may be violating M.G.L. Chapter 93A. However, this fear is misplaced. Chapter 93A penalizes unfair and deceptive business practices, but charging your posted door rate – whether to an insured or uninsured customer – does not violate this law.

Chapter 93A allows for treble damages (up to three times the actual damages), plus legal fees, for any violation of consumer protection laws. This is a serious penalty, but the key point is that charging your door rate, uniformly for all customers, is not deceptive or unfair.

The true risk lies in offering discounts to insurers while not offering the same to private-pay customers. This discrepancy could expose a shop to Chapter 93A liability. To avoid this, simply charge consistent rates for all customers, whether the repair is being subsidized by an insurance claim or not.. This will protect you from legal threats.

VI. Case Study: A Shop Pushed Back—And Won

One Massachusetts shop was contacted by Control Expert, which requested reduced storage fees. Instead of complying, the shop pushed back. They invoked the Driver’s Privacy Protection Act (DPPA), demanding documentation that Control Expert had proper authorization from the insurer to negotiate.

The shop’s response was simple but effective:

“We will be very happy to assist you with your request, once we receive documentation from the vehicle owner and/or the registered owner’s insurance company to act on their behalf. Storage charges are continuing to accrue daily.”

By holding firm, this shop avoided being coerced into lowering its rates. The lesson? Shops can successfully push back when they know their rights and stick to their rates.

VII. Navigating the Legal Minefield: Why Charging Your Door Rate Is the Best Strategy

So, how can repair shops protect themselves from the traps set by insurers?

•  Uniform pricing is key: The best way to protect your shop is to charge your posted door rate for both insured and private-pay repairs. This ensures compliance with Chapter 100A, Section 8(c) and eliminates any risk under Chapter 93A.

•  Document everything: Keep a detailed paper trail of all communications, especially when dealing with third-party negotiators. Demand proper authorization before engaging in any rate discussions with anyone other than the vehicle owner.

•  Consult a lawyer: Regular legal consultations will ensure you’re operating in compliance with state laws. A lawyer can help you navigate any tricky situations with insurers or third-party vendors.

•  Push back: Don’t be afraid to stand your ground when insurers or third parties request discounts. Know that charging your door rate is perfectly legal and protects your business from unnecessary financial loss.

VIII. Conclusion: Why Charging Your Rates Will 

Keep You in Business

The pressure from insurers is real, but shops do not need to lower their rates to survive. Charging your door rate ensures that your shop remains profitable and compliant with Massachusetts law.

Stop fearing insurers’ discount demands. Trust in your rates and your rights. By charging your posted rate consistently, you’ll avoid legal risks and ensure your business remains financially healthy. Don’t fall into the trap insurers have set for decades – charge your rate, and stay in control of your business.

Want more? Check out the November 2024 issue of New England Automotive Report!