Aug. 21, 2014—Farmers Insurance has removed its Most Favored Nation customer clauses from insurer direct repair programs (DRP), the Automotive Service Association (ASA) announced Wednesday.
The ASA has been working to have the clause banned or removed in the industry for years. After the insurance company’s decision to remove the clause from DRPs was announced, ASA president Dan Risley wrote a letter of thanks to Farmers’ executives.
“We are very pleased that Farmers has removed the MFN clause from the DRP agreements,” he said. “I want to personally thank you and the Farmers team for your leadership in eliminating these clauses, which have become a significant burden for ASA members.”
Companies or countries may be granted the status of a “most favored nation,” which is often enforced by the World Trade organization. The MFN Clause is an agreement where a seller promises a buyer it will not offer another buyer better terms, according to Practical Law, a Thomson Reuters company.
The benefits of the MFN Clause may include cost savings for buyers that can be passed down to other buyers and customers. Negative implications may include discouraging price cutting or even encouraging monopolies, according to Practical Law.
To view a copy of ASA’s letter to Farmers, or to learn more on ASA’s work to eliminate most favored nation clauses from DRP agreements, visit TakingTheHill.com.
