Online Auto Insurance: Calif. Proposals Pit Trade Groups Against Repairers

In a familiar face-off that highlights legislative battles between insurers and car mechanics, industry groups in California are battling auto body shops over the process through which cars are repaired and claims are compensated, according to Online Auto Insurance.

The state Department of Insurance (DOI) is seeking tighter regulations over the repair process and use of aftermarket parts because, officials say, the claims-handling process is being negatively affected by "disputes regarding the true cost of repairs of damaged vehicles" and pertinent regulations.

Trade groups contest that more regulation of aftermarket parts would spur a shift toward original equipment manufacturer (OEM) parts that are costlier for insurers. Ultimately, they said, there would be increases to how much car insurance costs across the state as insurers pass OEM-related expenses onto consumers.

But state regulators say the current criteria governing insurers' claims settlements and adjustments and use of aftermarket parts could mean safer cars and, in effect, lower costs to insurers that would result in consumer savings on liability premiums.

Aftermarket parts are used to replace vehicle components made of sheet metal, including the bumper, hood and door panels, and come from generic suppliers.

Aftermarket parts saved consumers over $2.2 billion in coverage costs in 2010, according to the Property Casualty Insurers Association of America (PCI).

Despite the savings brought by the use of aftermarket parts, regulators said the loose regulations have created "substantial costs borne by auto repair shops and their customers associated with installing defective or poorly fitting parts required by insurers," adding that more regulation would promote public safety.

At the hearing, industry advocates said the current system is already well-regulated by "checks and balances" that insurers use to keep costs down for consumers. More regulation would hand auto repairers "a blank check" to run up costs on insurers, who would pass on those costs to motorists, they said.

Insurers jockeying with repairers isn't new. PCI was behind a statewide media campaign in Rhode Island in July attacking HB 7782, which would have given repairers the right to sue insurers over compensation disputes.

The bill was passed by legislators, prompting an intense, weeklong blitz of radio and television ads against the measure; it was ultimately vetoed by the governor.

The American Insurance Association said the legislation granted too much power to auto repairers, padding their wallets "at the expense of consumers."

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