Insurer-owned repair facilities are located in the state of Texas. Texas independent collision repair shop owners are supporting legislation that would prohibit these insurer-owned repair facilities.

The Automotive Service Association hosted Texas state Sen. John J. Carona at a Town Hall meeting and an industry press conference during the International Autobody Congress and Exposition (NACE) in Dallas last month. As this publication goes to print, Carona plans to introduce legislation in the Texas state Senate before the end of 2002, prohibiting insurer-owned repair facilities. The draft legislation reads:

"Effective Sept. 1, 2006, an insurer may not hold or acquire any ownership interest in a repair facility."

The draft bill continues:

"An insurer that, before Sept. 1, 2006, has an ownership interest in a repair facility must disclose to each insured that the insured has the right to use any repair facility selected by the insured. The insurer shall make the disclosure in writing in the manner prescribed by the department and shall provide the disclosure:

1. at the time the policy is delivered, issued for delivery, or renewed; and
2. when an accident claim covered by the policy is reported to the insurer by the insured.

An insurer subject to Article 5.07-2, Insurance Code, as added by this Act, shall divest itself of any interest in a motor vehicle repair facility in which the insurer has an ownership interest before Sept. 1, 2006."

The Texas legislation, similar to California, is the first of a series of state bills expected across the country in the 2003 state legislative sessions. Repairers in Virginia, Ohio, Maryland and other states are discussing similar legislative initiatives. Some states are reviewing current anti-steering statutes in order that all options are considered as far as the best strategy for prohibiting insurer-owned repair shops is concerned.

Although the California legislation did not pass the California Assembly, repairers in California are to be commended for their hard work and hopefully will make another effort in 2003.

Like California, Texas is a large state and the legislative debate on this issue will be of high profile. Repairers are assured that other states will monitor the Texas effort and there is a strong likelihood that states will follow with their own legislation. This pattern was evident with the post-West Virginia replacement crash parts initiatives, with up to 20 states considering as many as 40 different pieces of legislation per year for several years.

Although some would argue that state anti-steering statutes should prevent problems with these insurer-owned repair facilities, ASA Chairman-Elect Kevin Caldwell, AAM, testified before California policymakers:

"The potential for conflict abounds when insurance companies have a stake in our small businesses. How do you enforce the most limited of anti-steering statutes when the insurance company owns the repair facility?

"We are the first line of defense for the consumer. Demanding the best of parts and the best repair will fall prey to a process of cheaper and quicker under a system that allows no checks and balances. Insurer-owned repair shops will eliminate checks and balances."

With the advent of insurer-owned repair facilities in Texas, independent repairers have stepped forward to change Texas state law. Seven collision shop owners from across Texas signed a letter to 4,650 collision shop owners asking that they contact their state senators requesting support for Carona's legislation. Collision repairers can follow the Texas legislation by viewing the ASA Web site, www.asashop.org.

In Dallas, Carona emphasized the importance of protecting the rights of consumers. Repairers should note that whether it's notice and consent, replacement crash parts legislation or insurer-owned repair shop legislation, insurers will argue that consumers miss out on lower premiums when there is insurance reform. Consumers have to be educated about the importance of choice and a quality repair.

Repairers should watch for similar legislation in their own states and ask policy-makers to take a hard look at the impact of insurer-owned shops on the small business community.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.

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