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Letter to the Editor

Mitchell Study Identifies High Variance in Labor Rates by State, County, and Metro Area

Labor costs are computed as the product of labor hours worked and hourly labor rates, and comprise approximately 45 percent of the estimated repair cost of physical damage appraisals, thus play a critical role in collision repair costs to insurers, total loss determinations, and collision repairer revenues. The Mitchell study identified a 55 percent variance in labor rates between the lowest and highest cost states, and variances up to 34 percent within individual states for similar labor types pertaining to automotive collision repair.

Also of note, an examination of labor rates by telephone area code within the San Francisco-Oakland-Fremont, CA metro area showed that the 707 area code had labor rates that were consistently 14-15 percent higher than the neighboring 510 area code.

Of particular interest to both insurers and collision repairers was the finding that year-to-date growth in labor rates is one percent higher than last year, but still behind the national rate of inflation.

"Our study clearly outlines the existence of highly variable labor rates by state, county and metro area," said Paul Rosenstein, Senior Director-Business Analytics at Mitchell. "These rate variations are largely due to local conditions, such as demand for vehicle repairs, the supply of repair shops in the local market, and claim-specific factors like insurer guidelines and complexity of the repair."

The Mitchell Business Analytics group produces comprehensive labor rate reports providing statistics on Body, Body Structural, Frame, Glass, Mechanical, and Refinish Labor types, covering minimum, maximum, median, mean, mode, and standard deviation. Labor rate data in the reports is organized by state, county, MSA, and area code. The most recent study sampled a selection of auto physical damage appraisal data from 17 insurance carriers with consistently significant estimating volumes from 2003 through 2006. Only estimates for repairable vehicles were used in the study.

Mitchell International is a leading provider of information and workflow solutions to the automotive insurance claims industry, serving carriers, collision repair facilities, and other commercial participants in the physical damage and auto-related medical claims processes. Mitchell facilitates millions of electronic transactions between more than 16,000 business partners each month.

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