How the Dodd-Frank Reform Affects Your Shop
There was no help for Scott Benavidez. He was struggling to get in contact with the New Mexico insurance commision enforcer.
Benavidez, owner of Mister B’s Paint & Body Shop in Albuquerque, N.M. , says it’s difficult for independent shops to repair vehicles without some fight from insurance companies on whether certain procedures are necessary. Specifically, different insurance companies tend to disagree on whether pre– and post-repair scans are needed, he says. And with autonomous vehicles gaining traction, he says there needs to be regulation to protect independent shops.
The Dodd-Frank act introduced by President Obama in 2010 has recently undergone consideration within the U.S. Senate. The law places regulation of the financial industry in the hands of the government.
The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Federal Insurance Office in 2010. The bill was introduced by the Obama administration as a way to keep the economy from crashing and create oversight to prevent financial failure.
The act created the first-ever office in the federal government focused on insurance.
In March 2018, the U.S Senate passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which is a wide-ranging bank deregulation bill that would scale back key parts of the 2010 Dodd-Frank law.
Automotive Service Association (ASA) members share how a repeal of the act could affect the collision repair industry.
The Federal Insurance Office (FIO), created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act, was vested with the authority to monitor all aspects of the insurance sector, to survey the extent to which traditionally underserved communities and consumers have access to affordable non-health insurance products, and to represent the U.S. on prudential aspects of international insurance matters, including the International Association of Insurance Supervisors.
The FIO also serves as an advisory member to the Financial Stability Oversight Council, assists the Secretary of the Department of the Treasury with the Administration of the Terrorism Risk Insurance Program and advises the Secretary on important national and international insurance matters, says Bob Redding, the Automotive Service Association’s (ASA) Washington D.C. representative.
On March 14, 2018, the U.S. Senate passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which is a wide-ranging bank deregulation bill that would scale back key parts of the Dodd-Frank law but not directly impact the FIO and the collision industry.
The U.S. House Financial Services Committee created its own bill to reform the Dodd-Frank law. This bill, The Financial CHOICE Act, will replace the FIO with the Office of Independent Insurance Advocate. The new office would not be a civil servant representative but would have an advocate appointed by the President and the Senate. The Advocate would observe the industry and not be granted permission to subpoena information.
As congress considered banking reform over the past few months, the Automotive Service Association (ASA) worked to ensure that the FIO would be protected.
“There are areas of the Dodd-Frank,” says a National Association of Insurance Commissioners (NAIC) spokesperson, “we think Congress should revisit to make adjustments including certain authorities of the Federal Insurance Office, the Financial Stability Oversight Council non-banks designation process, and the state insurance commissioner's non-voting status on the FSOC.”
The ASA's Take
Redding, says right now there is a need for federal regulation because each state handles insurance issues differently.
During the Senate Banking Committee consideration of Dodd-Frank reform, the ASA Collision leadership met with the committee and various Senate offices to discuss concerns about repealing Dodd-Frank and, specifically, the House FIO language, Redding says.
Redding says ASA is concerned that, compared to the insurance industry, which has representatives across all 50 states, the collision industry does not have the resources available right now to represent and advocate for body shops.
“This is not a new conflict,” he says.
Redding says there are two options going forward. Option one includes the Senate and the House getting together to discuss differences in a Senate-House conference and then neither bill goes forward. Option two involves the House accepting the Senate bill language.
“The first step, once these reform efforts are put to bed, should be FIO including the collision industry on its federal advisory committee,” Redding says.
Although the intent of its original mission has not been achieved, having the bones or structure of the FIO in place has value to the collision repair industry, he says.
“After missed report deadlines and a very timid approach to even its most conservative role as a federal oversight agency, the FIO has settled in as part of the U.S. Department of Treasury,” he says.
The Independent Shop Impact
“One thing I’ve been surprised to learn in my time on this subject is how keeping the Federal Insurance Office in place can benefit the insurance company,” Scott Benavidez says.
The FIO has the potential to make competition fair between insurance companies.
For example, if one insurance company decides that pre– and post-repair scans will be done, their estimates are going to be higher and their severity rate is going to be higher versus an insurance company that decides not to scan before or after because they believe it is not accident related.
Through the FIO, both companies would have the same severity rate and would be able to compete evenly, Benavidez says.
“Often times, the manufacturer will require a repair but the insurance company will tell the shop they don’t need to do it,” Benavidez says. “It’d be nice for the FIO to step in and say, ‘Yes, this needs to be done.’”
According to Benavidez and Roy Schnepper, owner of Butler’s Collision in Roseville, Mich., contacting local insurance commissioners in their states is difficult.
Schnepper says this is due to the commissioner’s primary oversight being the insurance companies. And when they do step in, he says, the advice is more of a recommendation on how to handle repairs than a mandate.