The collision repair industry remains under close scrutiny regarding fraud in California. In mid-September, 40 felony arrest warrants were issued for insurance fraud violations. The majority were for owners and operators of 25 Santa Clara county body shops. This has resulted in the closure of 10 body shops and the arrest of 29 shop employees.

The arrest warrants were issued following a six-month undercover investigation by the combined efforts of two California anti-fraud groups, the Regional Auto Theft Task Force (RATTF) and the Organized Auto Insurance Fraud Task Force. (ABRN was going to press with this issue at the time of the announcement; however, full coverage of the story will appear in the December issue.)

This sting operation is the latest effort to reduce the amount of auto insurance fraud in California. As reported in several of our recent issues, the state’s Bureau of Automotive Repair (BAR) is in the process of conducting reinspections of repaired vehicles where the vehicle owner suspects an impropriety. (See “BAR inspections expected to continue,” ABRN, News, October 2002.) The BAR’s preliminary results show violations of California law in up to 43 percent of these inspections. This troublingly high figure was spun during the debate on California Senate Bill (S.B.) 1648, which would have banned insurer-owned repair centers, and painted a very negative picture of the repair industry. 

Industry members have rightly criticized the BAR’s characterization of high levels of fraud due to the fact that the study is not based upon a random sample of work. Naturally, those who suspect fraud are the most likely to pursue a reinspection by the BAR. 

The BAR also applies the term “fraud” to any violation of California procedures, even honest mistakes, paperwork errors, or a failure to communicate every change in the repair process. Also, the issue of auto insurance fraud is much larger than that solely related to collision repair work. Consumers, shops and insurers all share responsibility for pieces of the fraud issue.
Criticism aside, these most recent arrests should raise serious concerns among all the honest, hard-working collision repairers in both California and the rest of the United States. While much work has been done to identify the issues surrounding fraud in the collision repair industry, much work remains. 

The California Autobody Association (CAA), naturally, is actively engaged with the BAR to move beyond the heated rhetoric towards solutions. The Collision Industry Conference (CIC), through its Write-it-Right and Anti-Fraud committees, has also worked diligently for many years to both identify systemic problems and find solutions to address the concerns of regulators. The efforts, coupled with the work of national and local collision repair associations, must find renewed vigor in the face of the negative publicity hounding the repair industry in California.

The majority of California repairers I have talked to about the BAR fraud study and the recent sting operation express frustration at the complexity of regulations and lack of information available to help facilities comply. Many honest repairers doubt they could pass a detailed BAR audit with an unblemished record. This shows there is a need that must be satisfied if any improvement on auto insurance fraud is expected in the repair industry.

Regulators and law enforcement agencies dealing with insurance fraud in the repair industry must take a page from the playbook of the governmental institutions who deal with occupational safety and environmental issues. These institutions have dedicated significant resources towards education on both the law and the tasks necessary to comply with it. Environmental and occupational safety regulators offer confidential audits of health, safety and environmental systems in shops that want to comply. Additionally, training on the legal issues of safety and environmental compliance is increasingly available to repair facilities. 

Providing detailed training would go a long way toward reducing fraud and minor violations among repairers who want to do the right thing.

The industry must do its part and take a proactive stance by institutionalizing anti-fraud training and ethics into its own educational efforts. Industry associations, training providers and insurers should work together to provide this training as part of estimating and technical courses in the same way that safety and the environmental compliance have been woven into technical courses for repairers.

Auto insurance fraud, however, goes far beyond the collision repair industry. The costs associated with staged accidents, fraudulent health care and phony claims far outweigh the impact of fraud committed by the repair industry. Certainly, unethical repairers, consumers and insurance company personnel will always present a challenge no matter how much education is provided. But, the issue gives concerned repairers the opportunity to show the public their true professionalism and integrity through a proactive approach to solving a vexing problem.