Body shop associations and automakers increased efforts this year to get state legislation that would mandate the use of OEM repair procedures for collision repair claims.
Since these efforts, insurance regulators in some states have shared written statements relative to any such obligation on insurers.
Insurance regulatory agencies in about half of all states have responded to a letter the Society of Collision Repair Specialists (SCRS) sent out last year asking, among other things, if anything in their state “holds insurers and insurance policies sold in your state accountable to recognize manufacturer documented procedures as a basis for settling claims.”
During a SCRS event earlier this year, the association’s Aaron Schulenburg said the written responses were “reflective of what we anticipated,” namely that “regulatory bodies don’t have a solid understanding of the repair process and therefore don’t understand” how OEM procedures impact claims settlement.
“This really was a mechanism to expose what I think is a gaping hole in the statutes in most states to hold [insurers] accountable for the things we [as repairers] need to do,” Schulenburg said.
Responses Often Address Other Issues
In one state’s response, Alex Avalos, senior insurance compliance officer for California’s Department of Insurance, said that state’s “insurance laws and regulations are silent on vehicle manufacturer documented procedures.” Would the Department consider it a “reasonable expectation that if an OEM repair procedure or instruction existed, that the claim should cover the associated costs,” the SCRS asked in its letter.
“That one would need to be looked at on a case-by-case basis,” Avalos responded. “Our regulations mandate that insurance estimates allow for repairs to be made in a workman-like manner.”
Many of the responses received from insurance regulators focused largely on state statutes related to OEM parts or noted only that the regulatory agencies couldn’t comment on some of what they saw as hypotheticals posed in the SCRS’ letter. But some more directly addressed the SCRS’ primary question.
For example, Ian Shapiro, insurance analyst with the Illinois Department of Insurance, wrote that his agency “would consider it a ‘reasonable’ expectation that if an OEM repair procedure or instruction existed, the claim should cover the associated costs.” However, Shapiro also added that “there is nothing currently written in the statutes that requires an insurance carrier to cover those costs.”
Donald Beatty, deputy commissioner for Virginia’s Bureau of Insurance, wrote in his response that standard policy forms insurers must use in his state would not allow an insurer to say costs associated with automaker procedures are not covered, but those forms also “do not require insurers to accept manufacturers’ procedures for repair.”
In perhaps even more troubling news for shops and their customers, Suzanne Tipton, insurance deputy commissioner of the Arkansas Insurance Department, wrote that if an insurer directs a shop not to follow OEM repair procedures, that “may be considered to be reasonable” as long as the vehicle “is shown to have been ‘restored to its condition prior to the loss.’”
One of the more promising responses the SCRS has received came from Andy Case, director of the Mississippi Insurance Department’s Consumer Services Division. Case wrote that there is nothing in that state’s laws that mandates that OEM repair procedures be followed, and that the most an insurer is expected to pay under state regulation is the “lowest amount that such vehicle or glass could be properly and fairly repaired or replaced by a contractor or repair shop within a reasonable geographic or trade area of the insured.”
Case went on to say that “if a vehicle manufacturer outlines a specific recommended repair procedure … the Mississippi Department does ask that insurers recognize that procedure as it relates to repair methods only.”
Schulenburg said overall, however, the responses demonstrate the need for state legislation recognizing OEM repair procedures as “what we have to do as repairers and what insurers are obligated to under their policies.”
Copies of the SCRS letter and responses received to date can be viewed at https://scrs.com/doi-responses/.
Speakers Share Idea to Grow Workforce
Also during the SCRS meetings held earlier this year in Nashville, TN, a number of speakers focused on public and corporate efforts to improve workforce development in that state. Given the challenge shop owners nationwide face in finding the employees they need, Schulenburg asked the panel to share what they believe small business owners can do to address the situation in their market.
Ann Thompson of the Tennessee Department of Economic & Community Development said her father is a small business owner who has implemented something that she suggests shops do.
“How many of you have some sort of internship program, or an opportunity to let either a teacher or some high school students come into your business,” Thompson asked attendees at the event. “That is the best thing you can do. Look around at the different occupations and the different processes that you have, and find some things that are low-skilled where you can get those students in early.”
Jon Mandrell, president of the Tennessee College of Applied Technology in Murfreesboro, TN, said that as with many technical and community colleges, his school’s programs are guided by industry advisory councils. Getting involved with such councils at a local level are a great way for shops to influence curriculum or have an opportunity to speak to students, Mandrell said. He said shops and industry vendors can also help local schools get the current tools and equipment to help students prepare to enter the industry successfully.
“Most institutions work closely with alum and donors and talk about funds and scholarships, whereas technical colleges look at how to get that cutting-edge equipment to help us embed things as fast as possible, ahead of the curve,” he said.
Dan Caldwell of Nissan acknowledged that as a large employer in Tennessee, his company had some sway in gaining government support for workforce development efforts that are helping create employees with the skills Nissan needs. Even smaller employers have opportunities to create a large “voice” through a vibrant chamber of commerce that acts as an intermediary to communicate to schools and local government the industry’s needs, he said.
Kenyatta Lovett, of the non-profit education advocacy group “Complete Tennessee,” encouraged shops to get involved in government and workforce development even on a local level because statewide programs in Tennessee grew out of local efforts by a mayor who went on to be governor.
“Once you articulate this challenge and what role locally-elected officials can play, you’d be surprised how they can become a champion who can move it a long way,” Lovett said. “You never know who is going to become governor next.”
An event attendee, Andy Tylka of Tom & Ed’s Autobody, which operates five shops in Indiana, said he recommends shops get involved with Jobs for America’s Graduates (JAG), a national non-profit organization (with programs in 34 states) working to help young people who have serious barriers to high school graduation or employment.
“It’s an elective program in high schools where students can learn soft skills and then get placed in a job, with the government funding 200-300 hours for them to work for you,” Tylka said.
John Yoswick