Thursday, 22 September 2011 15:54

State Insurance Divisions Differ From One Another in Terms of Addressing Repairer Concerns

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It’s a common complaint among collision repairers: It’s not worth contacting the state insurance commissioner’s office because they don’t do anything about our complaints.

Yet in recent months, some state insurance commissioners have taken actions cheered by some shops, from radically changing their department’s focus, to issuing bulletins reminding insurers of state laws on steering or other shop-related activities.

What has led to these changes, and does it mean now is a good time for shops to reassess their interactions with state insurance regulators?

Some Success Stories
For decades, shops in many states have taken concerns about auto insurer practices to insurance divisions only quite often to be told, in essence, that such regulators are there to address consumer complaints about insurers, not business-to-business issues.

But even that mission isn’t being met well in some states. When John Doak took the helm of the Oklahoma Insurance Department earlier this year, he quickly announced  he was reorganizing the department’s anti-fraud division to focus on investigating insurance company fraud against consumers, rather than the other way around.

Doak fired six of the nine investigators of the anti-fraud unit, which had 142 open fraud cases, 120 of them involving complaints by insurance companies against policyholders. The anti-fraud division “had lost sight of its core mission,” Doak said, and it must now “focus on the white collar crime that threatens our policyholders.”

“Investigating policyholders is not a function of the Insurance Department,” deputy insurance commissioner Randy Brogdon said.

Steve Regan, chairman of the Collision Industry Conference (CIC) Governmental Committee, points out that insurers still have other ways to pursue the consumer fraud or other concerns they had brought to the Oklahoma Insurance Department. Regan said Doak was realigning a department that had essentially become an extension of insurance companies—without the authority to do so—rather than a regulator of insurers.

Buoyed by the apparent change in focus, the Oklahoma Auto Body Association is reportedly trying to increases its interactions with Doak’s office.

Meanwhile the Georgia Collision Industry Association helped develop a working relationship with Ralph Hudgens, that state’s insurance commissioner, by getting involved early in the election process last year. The association interviewed all the candidates for the office, both to understand their positions and to help make the candidates aware of the association and it’s members’ interests. When the commissioner’s office formed a property and casualty advisory board after Hugens’ election, GCIA had a seat on that board.

Shop owner Bruce Halcro, president of the Montana Collision Repair Specialists, said “persistence” has been the key to his group’s working relationship with that state’s insurance division. The commissioner’s office, Halcro said, has been good about issuing bulletins to shops and insurers about new state laws the association has helped enact.

Those laws include a prohibition on insurers requiring vehicle-owners to take their cars to a specific shop for an estimate or repairs, and a requirement that insurers establish criteria for participation in a direct repair program—and open the program to any shop meeting that criteria.

This year, Halcro said, a new law was passed that prohibits an insurer from “unilaterally disregard(ing) a repair operation or cost identified by an estimating system” that the insurer and shop have agreed to use to determine the cost of repair. Halcro said the association will be meeting with Insurance Commissioner Monica Lindeen’s office “to find out how she will regulate that.”

The California Department of Insurance last year issued a memo reminding insurers of the state’s regulation requiring that all non-OEM parts specified be equal to OEM in terms of quality, safety, fit and performance, and carry permanent identification of their manufacturer.

“It has come to the Department’s attention that certain aftermarket bumper reinforcement bars may be significantly different in terms of like kind, quality, safety, fit and performance,” the memo states.

At the time, California Autobody Association Executive Director David McClune called the memo “a first step” toward the standardized parts traceability system the association said is necessary to enable a recall of parts found to be faulty or unsafe.

Though it operates essentially independently of the state insurance commissioner’s office, the Massachusetts Auto Damage Appraiser Licensing Board (ADALB) helps shops in that state deal with concerns about insurers, said shop owner Carl Garcia, who serves on the board. The ADALB consists of two shop representatives and two insurance representatives, all appointed by the Governor, and a fifth member, appointed by the state insurance commissioner, who serves as the chairman.

Garcia said one function the board serves is to oversee the licensing of all appraisers, both at shops and insurers. He said that process includes a written estimating test on the fundamentals of estimating.

“If you don’t know how to use the manual and don’t understand the concepts, you’re not getting licensed,” Garcia said. “It’s amazing how many people aren’t passing the test because they don’t understand how to correctly use the manuals.”

Garcia said the ADALB and insurance division help enforce such regulations as a prohibition on running drive-in claims at a shop, and a requirement that insurers send an appraiser to a shop within three business days of a supplement request, returning the completed supplement within one more business day.

Texas Among the Most Active

Texas has had perhaps the most active insurance division in terms of addressing shop associations in recent years. For the second time within a year, the Texas Department of Insurance this past June issued a bulletin reminding insurers that a one-year-old state law prohibits them from “directly or indirectly” limiting auto insurance coverage by limiting policyholders from using a shop of their choice.

The bulletin also states that while an insurer is not required to pay more than a reasonable amount for repairs or repair parts, neither that nor policy language suggests that the reasonable amount for repairs or parts must be based on the amounts charged by DRP shops.

Aaron Schulenburg, executive director of the Society of Collision Repair Specialists,  said the bulletins were triggered in part by a survey of insurers the Department conducted with input from the Houston Auto Body Association. The Department asked about labor rate determination, shop referrals to consumers, DRP agreements, reimbursement caps or thresholds and other claims practices by the insurers.

“The Texas Department of Insurance, and not the association, said, ‘Hey, this is existing Texas code, and based on some of the survey answers we’re getting (from insurers), it may or may not be being followed,’” Schulenburg said.

Elected vs. Appointed
What do many of these states’ insurance commissioners have in common? Many are among the 11 such commissioners in the U.S. (including those in Kansas, Louisiana, North Carolina and North Dakota) who are elected to the position rather than appointed by a governor.

“If you operate in one of those 11 states where you have elected insurance commissioners, it seems like inquiries from individual or organization may be addressed a little quicker,” Regan said.

So is working toward making insurance commissioner an elected position a worthwhile endeavor for collision repairers hoping a state regulatory body more responsive to its needs?

The last time such a change was made in a state was in 1988, when California voters passed sweeping insurance reform with Prop 103. Many long-time collision repairers in that state say the change to an elected insurance commissioner has been a positive one though hardly a cure-all.

Regan said elected or appointed, the key to getting an insurance commissioner attuned to the needs of the industry are tenacity and consistency.

“The most  important thing is you have to ask,” Regan said, noting that a state representative can sometimes provide a good entrée into a commissioner’s office for shops. “I hear it all the time: divisions of insurance do nothing. All that leads to really is people saying. ‘Why bother asking?’ I’d like to flip that on its head. Let’s start asking. We’ve seen some success stories. If you don’t ask, you won’t get anything.”

John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at jyoswick@SpiritOne.com.

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