ASA opposes insurance companies having a controlling ownership interest in automotive repair facilities and views such ownership as being in direct conflict with the consumers' right to choose. ASA will continue to monitor the industry and work to ensure a level playing field that places consumers choice first.

The Automotive Service Association's Collision Division Opera- tions Committee met recently to discuss insurer-owned repair facilities. The committee proposed a new policy to the board of directors and outlined a strategy for the association over the next few months.

The ASA board endorsed the following policy:

ASA opposes insurance companies having a controlling ownership interest in automotive repair facilities and views such ownership as being in direct conflict with the consumers' right to choose. ASA has historically supported the consumers' absolute, unequivocal right to choose a repair facility for a collision or mechanical repair.

ASA has a strong history of supporting a consumer's right to choose a collision or mechanical repair facility.

ASA leaders also met recently with the Pennsylvania Department of Insurance to discuss the issue of insurer-owned repair facilities. Insurer-owned repair facilities or repair facilities with any insurer ownership interest are not prohibited in the state of Pennsylvania.

Pennsylvania had a relatively strong appraisal statute, but changed this in the past few years to allow more flexibility for insurers as far as recommending collision repair facilities. The test for steering in Pennsylvania is whether an insurer has “required” the use of a specific collision repair facility. The Pennsylvania statute also provides for protections from any “conflict of interest” in the process of appraisal and repair.

ASA met with the deputy insurance commissioner, the chief of field investigations, the director of the Bureau of Consumer Services, the director of Legislative Affairs and others from the department. ASA representatives also met with the executive director of the state House of Representatives Insurance Committee.

In California, Sen. Jackie Speier has introduced S.B. 1648 amending the state Insurance Code. The legislation addresses not only insurer-owned repair facilities, but also those collision repair facilities that have any insurer ownership interest.

Speier said, “This bill would make it unlawful for an insurer to acquire any ownership interest in those auto body repair shops. The bill would also make it unlawful for an insurer to offer an incentive or provide compensation to a person as reward for referring an insured to an auto body repair shop in which the insurer maintains an ownership interest.

“An insurer that has an ownership interest in an auto body shop shall divest itself of this interest within three years of the effective date of this section.”

The bill has been referred to the Senate Insurance Committee.

After Allstate purchased Sterling, a consolidator with shops in several states, ASA reviewed the appropriate statutes of those states involved. Clearly several of these states have anti-steering provisions of one degree or another but do not prohibit insurer-owned repair facilities. For state insurance departments to address any issues beyond steering concerns, state statutes will have to be changed. The California bill is an attempt to do just this.

Although it goes much further to include shops with any insurer ownership interest, watch for other states to use this as model legislation if it moves in the California Senate.

One issue highlighted in Pennsylvania that could certainly be applicable to any state is the lack of consumer interest in this issue. This has been prevalent with other collision repair state issues including replacement crash parts. To ASA's dismay, even consumer organizations testified against formal notice and consent replacement crash parts legislation in some states. They argued that reducing premiums is more of a priority than the right to know and choose a specific part. Replacement crash parts complaints from consumers are not volume business in consumer regulator offices.

The interest level is similar when compared to the insurer-owned repair facility issue or steering in general. The number of steering complaints in Pennsylvania is minimal. As with other states, without collision repairers educating the consumer as to their rights, the number of complaints would be even lower. Several years ago, regulators in Montana produced a public service announcement for television that illustrated the rights of consumers in choosing a repair facility. ASA asked Pennsylvania and other states to take the same initiative at that time.

The long-term effect of insurer-owned repair facilities is yet to be seen. With such a small sector of the marketplace impacted to date, the national profile will remain low.

More states will review this issue in the next legislative season. It is quite possible the best result for repairers will be a serious evaluation, by state policymakers and regulators, of their anti-steering statutes and how they are enforced.

The U.S. House of Representatives Judiciary Committee last year considered addressing antitrust issues by establishing a formal commission of experts to review the current state of antitrust law. Part of this review would have most likely included how states regulate insurers.

ASA believes other states will address this in their 2003 legislative sessions.

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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