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California insurers testify against proposed regulations

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Aug. 16, 2012—The California Department of Insurance has proposed new regulations that could hurt auto insurers and consumers, according to a statement from the Association of California Insurance Companies (ACIC).

New regulations proposed favor body shops and original equipment manufacturers (OEM), which could increase insurance premiums, according to the ACIC, which testified against regulations REG-2011-00024 at a hearing last week at the California Department of Insurance in Sacramento.

According to the ACIC, the regulations would include the following requirements:

-Insurer estimates for repairs would have to align with commonly accepted collision industry standards.

-Insurance companies would pay costs of inspections and tests of non-OEM replacement crash parts.

-Insurers would be required to stop using non-OEM parts if they know the parts are not equal to OEM parts. The insurance companies must then contact the estimating software provider, and request that the part get removed from their list, according to the ACIC. If the part were defective, then the certifying entity and the distributor would have to be notified, as well.

“These regulations essentially allow the auto body repair shops to ‘name their own price,’ charging whatever they want for auto repairs and insurers will be required by these regulations to pay,” said Armand Feliciano, ACIC vice president. “Insurers pay for approximately 90 percent of the auto body repairs in the nation. The current free market system provides checks and balances by allowing the parties to work together to determine prices for auto repairs and parts—these regulations will undermine insurers’ ability to manage costs and basically provide auto body shops a blank check. These regulations completely ignore the fact that auto body shops are vendors with a financial stake in the system, not consumers. It is not the role of the insurance commissioner to interfere in the free market system and propose regulations that will financially benefit one party—auto body shops—at the expense of policyholders.”

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