Thursday, 31 March 2005 17:00

Oregon lawmakers hear testimony on DRP disclosure bill

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A committee of Oregon lawmakers last month said they like the concept of consumers being made aware of direct repair agreements between collision repair shops and insurers, but the details of how to accomplish that still needs some work. 

Other news related to Oregon SB 210
 

•Rhode Island lawmakers are now considering a bill that would require shops involved in direct repair shops to post a sign with virtually the exact wording as initially proposed in Oregon Senate Bill 210.

•A bill pending in the Maryland legislature would require insurers to provide copies of DRP agreements to claimants or insureds, and to have a copy of the agreements on file with the state insurance commissioner.

•During the hearing on Oregon SB 210, Kevin Neely of the Oregon Attorney General's office said his department receives about 40 complaints a year about collision repair shops, which he said is "not exceptionally high." He said he didn't know how many of those complaints are related to direct repair agreements because his department does not know which shops have such agreements.

•Also at the hearing, Leif Hansen of Leif's Auto Collision Centers said that of the vehicles that come into his facilities with previous structural repairs, he believes 90 percent of them need re-repairs.

Oregon Senator Rick Metsger (D-Mt. Hood), chaired a March hearing on Senate Bill 210, which would require shops with "preferred provider agreements" with insurers to post a sign disclosing that such agreements exist. Two different wordings for that signs have been proposed, and Metsger's committee heard testimony from those preferring one version or the other.

At the end of the hearing, Metsger said it appeared to be an important consumer issue, but said he found neither version of wording for the sign appropriate, and said the language was something shops, insurers, and the state's Attorney General's office should review and bring back before the committee.

Kevin Neely of the Oregon Attorney General's office, which introduced the legislation at the behest of trial lawyers, was the first to speak at the hearing followed by two consumers, three shop representatives, and an insurance industry lobbyist.

Neely told the committee the focus of the bill was to disclose to consumers that a business relationship exists between a direct repair shop and the insurer. He said the goal was to give consumers enough information that they would be prompted to ask questions about the "preferred provider agreement" if they wished.

First language overly negative?

Neely acknowledged that the wording of the sign as initially proposed made such shop-insurer agreements sound overly negative while some such agreements may actually benefit consumers.

The original bill called for the sign to read, "This repair shop has an agreement to provide an insurance company with discounted prices or a limit on the scope of work performed in exchange for the insurance company's referring worked to this repair shop."

Neely said his office was suggesting amending the bill to require a sign that reads, "This repair shop has a preferred provider agreement with the following companies," followed by a list of those insurers.

Section option too watered down?

Two shop owners who testified at the hearing called this language too "watered down" to address the problem of consumers not being aware of the impact shop-insurer agreements could have on the repair of their vehicle. Leif Hansen of Leif's Auto Collision Centers in the Portland area, and Fred Linenko of Specialty Auto Body in South Beach, Oregon, each said they felt the original wording for the proposed sign was an accurate description of what shops offer insurers in exchange for direct repair referrals.

"Insurers and body shops have developed a mutual protection system," said Hansen, whose company runs regular ads criticizing the practices of auto insurers and shops in direct repair programs. "The system encourages DRP body shops to perform shoddy repairs and give kickbacks in the form of hidden discounts to various insurers in exchange for the referrals..."

Two customers of Hansen's shops then told lawmakers briefly about problems with repairs they encountered after taking their vehicles to direct repair shops recommended by an insurer.

Upfront disclosure benefits consumer

"Up front disclosure of these direct repair programs would be a benefit to consumers," Ron Davies, one of the consumers, said.

Don Braden, chief operating office of Kadel's Auto Body, which operates nine shops in Oregon, said his company was not opposed to the language of the sign proposed under the amendment, although a sign with the required 2-inch-high letters listing the more than 20 insurers his company has agreements with would have to be about 3 feet by 4 feet in size.

"We also believe that in fairness to the consumer, those [shop] locations that do not have preferred provider agreements with insurance companies should disclose the lack of relationships to consumers, and explain the impact on the consumer of the lack of relationships," Braden said.

Shawn Miller, an insurance industry lobbyist, voiced opposition to both the proposed amendment requiring shops to list insurers with which they have agreements, and to the definition of "preferred provider agreement," in the bill. He said that to say all such agreements involve "discounted prices for parts or services or a limitation on the scope of work performed" is just not accurate.

At the conclusion of the hearing, Metsger said he felt the sign required under the bill's original wording was too "accusatory" while he viewed the proposed amended language as too vague to be of much value to consumers. He closed the hearing by saying the parties involved with the bill would need to develop language for the sign that fell "somewhere in between" the options discussed at the hearing.

John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988.

 

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