What Exactly Are “Insurance Prevailing Rates”?

Who determines ‘insurance prevailing rates’, and why should it matter?

We see it every day. Insurance companies, whose only mission in life is to deny full payment for proper repairs, cite ‘prevailing rates’ as their main reason for not paying. They blame shift from themselves to the independent body shops, citing that prevailing rates (sometimes referred to as ‘reasonable and customary’) for a certain geographic region prevent them from paying beyond a certain threshold.

This begs the question, “who sets that threshold”? The insurance companies would have you believe that it’s the body shops themselves that set “prevailing rates”… but what they don’t tell you is that most of the body shops are in direct partnership relationships (DRP) with the insurers. As a result of those partnerships, insurers write estimates for the amount of money THEY think should be paid, and their partner body shops are encouraged not to contest those prices if they want to remain on the partnership program.

Insurers are not the experts on repairing vehicles. How is it that they get to determine the prevailing rates? Either you have a policy to correctly repair your vehicle or you don’t. Just because the DRP shop down the street doesn’t perform a certain proper procedure (per manufacturer requirements), doesn’t mean it shouldn’t be done.

Even the manufacturers caution you about taking your vehicle to a DRP shop. Take, for example, Lexus’ position:

YOU HAVE THE RIGHT TO CHOOSE YOUR REPAIR SHOP

‘Insurance prevailing rates’ means average. Made up of low, medium and high quality repairs.  It’s an AVERAGE. If you want to have your vehicle repaired to an average level – there are plenty of places to take it. If you want to have your vehicle repaired to an exceptional level – average won’t suffice – and neither will prevailing rates. 

Insurance companies will say that shops that perform repairs to manufacturer standards are more expensive. We say that they are more thorough.

Even so, there are several insurance companies that agree with proper repair plans. Prevailing rates never enter into the conversation. This expedites the repair, and serves you, the guest and your best interests.  Bottom line: just as you don’t want an average repair… you shouldn’t want an average insurance company.

Look, there will always be someone out there who save you 15% or more on your monthly premiums. But when you need them the most, it will cost you far more than your 15% savings to get your car fixed properly.  Cheaper doesn’t necessarily mean better, and in most cases, it means lower quality, or ‘average’.

If the shop down the street either doesn’t perform a proper or compete repair – or charge for it – that becomes the new insurance prevailing rates. So the question is – is the correct repair getting done – and if it is – is it being done via the cheapest parts and labor possible? Or is it being done to the the specifications outlined by the manufacturer? Both solutions cannot occupy the same space. It’s one or the other.

When the insurance company says, “these are the prevailing rates” – how do you know? They don’t have to prove it. Is it fact, or just an opinion? Or is it just their way of saying, “that’s all we’re willing to pay.”? Their job is to make you whole after a loss. Which usually turns out to be their interpretation of what makes you whole – not necessarily what actually makes you whole. Cosmetics don’t equate to structural integrity.

Increasingly, because the insurers are using these tactics, guests are required to pay out of pocket over and above their deductibles to cover the expense of performing the proper repairs.

In the end, make sure you’re using a shop that has your best interest at heart.  And it’s safe to say that shops that are in partnership with insurers have to please the insurer before they care for you. The insurer is their customer – not you. Insurance prevailing rates shouldn’t have a seat at the table when what’s most important is the proper repair with original manufacturer’s parts. Choose both your insurer and your repairer wisely – your life may rest in the balance.

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