With the growing number of insurance company direct repair programs - and with many insurers processing an increasing percentage of their claims through such programs - it's easy to understand why some states are looking to put the brakes on "steering" of work by insurers.
In particular, shops left out of such direct repair programs - whether through their own choice or that of insurers - are calling on lawmakers to address the issue of protecting the "customer's right to choose" where their vehicle in repaired.
A House committee in Minnesota, for example, has passed a bill that would make it an unfair settlement practice to engage in any "act or practice of intimidation, coercion, threat, incentive, or inducement for or against an insured to use a particular contractor or repair shop."
Under this bill, when a claim is reported in Minnesota, the insurer would be required to provide the following advisory to the insured: "Minnesota law gives you the right to choose a repair shop to fix your vehicle. Your policy will cover the reasonable costs of repairing your vehicle to its pre-accident condition no matter where you have repairs made. Have you selected a repair shop or would you like a referral?"
If an insured has indicated that he or she has selected a repair shop, the insurer must cease all efforts to influence the insured's or claimant's choice of repair shop.
The Alliance of Automotive Service Providers of Minnesota said it developed the bill (HF 1528) in cooperation with insurers over a 9-month period.
Agreements must be made available
A different approach to the steering issue is being taken by lawmakers in Maryland, Oregon and Rhode Island. Oregon Senate Bill 210 was recently amended to require collision repair shops with direct repair agreements to post a sign informing consumers that a copy of those agreements is available for their review.
The bill was passed in April and sent to the full Senate with a "do pass" recommendation, over the objections of two of five committee members on the Senate Business and Economic Development Committee. Although the bill was subsequently re-referred back to the committee - usually a sign that it didn't have enough votes for passage by the full Senate, proponents aren't giving up on the bill.
The bill requires shops participating in DRPs to post a sign in 2-inch high lettering stating, "This repair shop has a financial agreement with one or more insurance companies to direct business to this facility. Details of these agreements are available upon request."
Oregon Senator Rick Metsger, the Democrat who chairs the committee, said the amended wording for the sign was developed by the committee after several other proposals were considered.
The bill as originally introduced by the Oregon Attorney General's office, 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." (This is almost the exact wording called for in the Rhode Island bill.)
Wording too accusatory
At a hearing in March, Metsger called that wording too "accusatory," but also did not like a proposed alternative that would have required a sign reading, "This repair shop has a preferred provider agreement with the following companies," followed by a list of those insurers.
During the April 7 hearing, the committee rejected another proposed amendment to the bill presented by insurance industry lobbyists. That amendment eliminated any required postings for shops regarding direct repair agreements. It would have mandated, however, that if the Attorney General received more than one complaint about a particular shop, that shop would be required to post a sign acknowledging and offering to provide copies of the complaints or reports from the Attorney General to anyone who requested it.
State Farm lobbyist John Powell told lawmakers that such a sign about complaints filed with the state's Attorney General would better serve the Legislature's interest in providing useful information to consumers.
Another lobbyist for property and casualty insurers, Shawn Miller, agreed, telling lawmakers that the trial lawyers who originally pushed for the introduction of SB 210 were agreeable to the amendment.
Licenses before complaints
But Oregon Senator Laurie Monnes Anderson said it would make more sense to require licensing of shops before requiring them to post a sign about consumer complaints. She said as a nurse, she recognizes that referrals by insurers or others are common in business and that she doesn't see anything wrong with them. She said she has a friend who owns a collision repair shop with direct repair agreements and that the agreements don't involve any kickbacks or other questionable practices. The quality of the work at a shop, regardless of agreements with insurers, is controlled by the shop owner, she said.
Kevin Neely of the Oregon Attorney General's office, said his office had no concerns with either of the proposed amendments. The bill as eventually passed, he said, fulfilled his office's goal of making consumers aware that a relationship between a shop and insurer may exist and that details of those agreements were available upon request.
Insurer association disapproves
The Property Casualty Insurers Association of America (PCI) has urged the Oregon Senate to reject the legislation. PCI Regional Vice President Sam Sorich said his organization is concerned about the confidentiality of insurers' DRP agreements.
"Providing a copy of a confidential contract would violate the non-disclosure clause in the contract, jeopardizing the privacy of the parties to the contract," he said. "It would also raise other legal issues if the customer provides the agreement or contract to a third party."
The PCI feels that the result of the disclosure requirement could be a reduction in such agreements due to the possible unwillingness of some current participants to make confidential agreements available. According to the PCI, this would impact consumers by making fewer of these "preferred" shops available to them.
"Insurers can not and do not direct claimants to repair facilities," Sorich said. "They can, and do, suggest shops where they know quality work will be performed. The added bonus to consumers is the repairs done by 'preferred' shops are guaranteed for the life of the car."
The PCI points out, however, that Oregon law is concerned only with provider contracts that contain an agreement to provide an insurer "with a discounted price for parts or services or a limitation on the scope of work." If a contract does not require discounts (or a limitation on the scope of work), it would not fall under the definition of a preferred provider agreement in Oregon, and could remain confidential, the PCI contends.
"Any willing provider" in Montana
Another legislative attempt to curb steering is often referred to as the "any willing provider" clause that has been considered in several states. Such laws require an insurer with a preferred provider program to open participation in the program to any provider able and willing to meet the terms and conditions of the program. This type of legislation recently passed in Montana and is awaiting the Governor's signature there.
The Montana legislation also requires the insurer, if requested, to provide a list of all shops reasonably close or convenient to the insured and willing to provide services that meet the insurance company's criteria.
While the legislation could eliminate steering and provide a level playing field for repairers, it also specifically eliminates insurer liability for work by shops that are outside of its referral network.
"If the insured person uses an automobile body repair business or location that is not on [the list], the insurance company may not be held liable for any repair work performed by the [shop] chosen by the insured person," the legislation states.
Some view that portion of the law as a boost for steering of work by insurers.
John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988.
John Yoswick