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Two industry associations representing the same constituent group agree that strong anti-steering laws are needed, but they testified on different parts of a proposed regulation during a California Department of Insurance (CDOI) public hearing Feb. 25.
The proposed regulation, Insurer Recommendations of Automotive Repair Dealers, would provide guidance and specificity to insurers regarding the nature and degree of involvement they may have in a consumer’s choice of an automotive repair dealer.
The proposed regulation states: “Except when a referral is expressly requested by the claimant, after a claimant has chosen an automotive repair dealer, the insurer shall not suggest or recommend that the claimant select a different automotive repair dealer.” The proposal continues to define the consumer-insurer relationship: “a claimant has chosen an automotive repair dealer when the claimant has specified to the insurer a specific automotive repair dealer.” The regulation, if approved, also defines what it determines “suggest or recommend” includes as far as insurer actions.
The Automotive Service Association (ASA) said it supports the proposed anti-steering regulation because it should assist in improving the insurer-consumer-repairer relationship. ASA wants insurers to make sure that any shop that’s selected by policyholders meets equipment and training requirements for spray booths.
The California Autobody Association (CAA) also supports it, but suggested deleting the section that says “to the claimant, including the insurer’s obligation to pay only costs that are reasonably necessary to restore the damaged vehicle to its pre-accident condition.”
That language could be a major loophole for insurers that want to steer customers to their direct repair program shops, CAA said. For example, an insurer could communicate to claimants that they will have to pay the difference of costs to repairs if the vehicle is repaired at the claimant’s choice of shop. This could be communicated even if the insurer has not even inspected the vehicle or communicated with the repair shop to determine the actual damage. This could lead to potential abuses and more illegal steering, CAA said.
“Steering is still the number one issue with CAA members and even though we have made some progress with this issue, we have an opportunity here to make this regulation fair for the consumer,” David McClune, CAA executive director, said in the hearing. “Not only do we need to get this regulation right but there has to be aggressive enforcement in order to be successful and complaints must be thoroughly investigated.”
The insurance industry’s main argument on the proposed regulation is that it goes beyond the department’s authority and that it is not consistent with federal law on commercial free speech and first amendment rights. They believe they have the right to explain their program and benefits at any time to the consumer.
The department will consider the testimony and written comments submitted to determine adopting the proposed regulation. The final statement of reasons from the department will go to the Office of Administrative Law to determine its legality.
Meanwhile, the ASA has a different target in sight: enforcing stricter auto refinishing regulations recently enacted by the U.S. Environmental Protection Agency (EPA).
Don Hayes of Hayes Brothers Collision Center in Sacramento, Calif., represented ASA and submitted written comments asking that CDOI consider additions to the proposed regulation that would help ensure vehicles are repaired at a qualified repair facility.
“ASA recommends that if the consumer mentions a specific repair facility, that the insurer asks that the consumer verify the credentials of the repair shop — such as technician training, I-CAR certifications and proper equipment, including a spray booth,” Hayes testified. “Both training and the spray booth are now requirements of the U.S. EPA for all collision repair facilities.
“ASA appreciates protection of the consumer’s right to have his or her vehicle repaired at the facility they prefer, but these issues run much deeper. Repair facilities could be selected with little information about their ability to make a quality, safe repair. This could be a product of marketing, a friend’s recommendation or an acquaintance. The selection of a shop focused on a quality, safe repair is critical.”
Hayes requested that CDOI help consumers, repairers and insurers by ensuring that selected shops meet equipment and training requirements that are up-to-date with EPA standards.
McClune said that what ASA proposed needs to be addressed, but not necessarily in the anti-steering legislation.
“This isn’t a bill, it is a proposed regulation change by the department,” McClune says. “It just has to go through the office of administrative law for their opinion.”
He reinforced that CAA’s only objection to the regulation is the section he testified on.
Bob Redding, ASA’s Washington, D.C. representative who handles all federal and state legislation, said he doesn’t have a problem with CAA’s position.
“The proposed regulation would go some distance in halting the most egregious steering opportunities, but there is a bigger picture to consider,” Redding says. “U.S. EPA standards (on auto refinishing) are very clear. This is federal law and should be part of the process.”
Stricter national emission standards for auto body refinishing businesses that paint cars became law Jan. 9, 2008. Repair shops affected by it must use paint booths and spray guns to minimize air pollution. Shops in business when the law became effective have until Jan. 9, 2011 to comply. New shops must comply upon opening.
To see the text of the proposed anti-steering regulation in California and Hayes’ statement, visit ASA’s legislative Web site at www.TakingTheHill.com.
About the Author
Bruce Adams
Bruce Adams is a former managing editor of Aftermarket Business World magazine and content manager for the distribution channel at UBM Advanstar. He was editor with UBM Advanstar Automotive Group since 2007 and was managing editor of ABRN. Bruce is a veteran journalist and communications professional who worked 10 years in corporate communications and publications at The Goodyear Tire & Rubber Company. He also worked as a senior editor at Babcox Publications and as a reporter and columnist for a daily newspaper in Northeast Ohio. He is also a former senior editor of Hotel & Motel Management Magazine.