James Brown, President of the Houston Auto Body Association (HABA), made a special presentation to the Society of Collision Repair Specialists (SCRS) at their open board meeting held in San Antonio, TX on July 17. The meeting preceded the Collision Industry Conference.
Brown gave a report on the association's recent efforts to address proposed changes to the Consumer Bill of Rights with the Texas Department of Insurance (TDI).
HABA testified June 26 at a public hearing before the Texas Department of Insurance concerning HABA's recommended changes to the existing Consumer Bill of Rights.
“We testified before the Deputy Commissioner as well as other representatives of TDI,” Brown said. “They were very courteous, and Larry Cernosek (HABA Board Member) and I were allowed to speak for about 20 minutes each. The Insurance Commissioner will review our concerns —the public hearing was recorded and they were taking notes during our testimony—and have yet to officially approve the proposed Consumer Bill of Rights.”
Comments Brown and Cernosek made regarding the proposed changes to the Consumer Bill of Rights included:
In regards to Item #27 in the Consumer Bill of Rights, which addresses Choice of Repair Shop and Replacement Parts. It currently reads:
27. CHOICE OF REPAIR SHOP AND REPLACEMENT PARTS. You have the right to choose the repair shop and replacement parts for your vehicle. An insurance company may not specify the brand, type, kind, age, vendor, supplier, or condition of parts or products used to repair your automobile.
According to HABA, “We believe that #27 of the Consumer Bill of Rights is incomplete because it does not define consumer rights as it relates to Section 5.501 of the TAC (Texas Administrative Code) concerning a clear definition of “reasonable amount.” We believe that reasonable amount for parts should be based of the suggested MSRP list pricing provided by vehicle manufacturers,” said Brown. The TAC is the current Insurance Code that governs insurers as it relates to auto claims.
Section 5.501 of the TAC requires an insurer to provide a notice to the insured or third-party claimant who makes a claim regarding damage to a vehicle. The required notice specifies that a claimant has the right to select where a motor vehicle is repaired and the parts used for repairs. The notice also specifies that an insurer is not required to pay more than a reasonable amount for such repairs and parts.
“It has been our experience that most consumers believe that when their vehicle is involved in an accident that OEM parts will be used in the repair process of their vehicle, especially if they are the claimant but also as the insured,” the HABA representatives testified the public hearing. “We acknowledge as the insured that they are limited to their policy agreement with individual insurers which may allow for salvage or non-OEM parts (Like Kind & Quality) to be used in the repair process. Some insurers do a poor job in communicating this issue. We suggest at the time a policy is sold or renewed that a separate signature line (bold print) should be required to be signed by consumer that states that “in the event of an accident I acknowledge that the use of non-OEM parts will be used in the repair of my vehicle which may or may not affect my manufacturer’s transferrable vehicle warranty (check with your vehicle manufacturer), and as a result may decrease the value of my vehicle.”
In a Commissioner's Bulletin (#B-0031-10), the Texas Department of Insurance said: “The Department is also concerned that setting reimbursement rates artificially low for specific motor vehicle repairs and parts that are used to make the repairs may lead to substandard repairs, which may also impact the warranty on a vehicle. The majority of personal automobile insurance policies require insurers to pay the amount necessary to repair or replace the property with other(s) of like kind and quality. It is an unfair claim settlement practice for insurers to pay claimants an amount for the repair of the vehicle, including parts, that is not a reasonable amount for repairing or replacing the property with other of like, kind and quality or is not sufficient enough to make the repairs necessary for the manufacturer to honor the vehicle warranty.”
Brown said the second concern HABA has regarding proposed changes to the Consumer Bill of Rights concerns sourcing parts.
“Some insurers are asking repairers to go outside of our local area (out of city and state) to source parts, OEM, salvage and non-OEM parts,” Brown testified. “They are listing the suppliers on the estimate with corresponding list prices for said parts. We have notified insurers of item #27 on the Consumer Bill of Rights and they have agreed with the mandate but also quoted section 5.501 of the TAC and are unwilling to pay the price difference for sourcing these parts locally, stating they are only required to pay “reasonable prices for parts.” This tactic used by some insurers prolongs the repair process and also results in underpayment of claims to claimants and the insured. Most auto policies sold in Texas have a 30-day limit on rental coverage, and in some cases, this causes additional expense to consumers.”