It was disheartening that not one collision repair shop was in attendance at the first meeting and only four shops showed up for the second. When issues as important as these don't generate more industry participation than these did, it is little wonder the collision industry is constantly losing ground.
|Changes California DOI is considering|
Section 2695.7(g) (7) Unreasonably Low Settlement Offers (Amend): Ensuring the accuracy of Data (adopt.) The proposed subsection specifies that insurers must take reasonable steps to ensure the accuracy of data used in evaluating and settling claims. Although insurers are permitted to use third party vendor services to determine damages, they are required by law to offer adequate, accurate settlements no matter what information and resources are used to establish damages.
CCRE's view is that this is missing the entire point of the insurers' duty… which is making sure the money they do spend gets the car repaired in compliance with their policy contract with the vehicle owner. For insurers to be involved in determining what is the basis for what money is charged to them is a complete reversal of what business, competition and economics are all about.
Regardless of the intent of this section, as proposed to be amended, it will allow the insurer the legal opportunity to be the final authority on whether the data is "accurate" (whatever that means), regardless of whether or not the vehicle is repaired, or whether or not the data allows the collision repair market to achieve a high enough price for their product, to survive.
Section 2695.8 (k) This subsection is amended to clarify that insurers shall reimburse the insured for those reasonable fees incurred in having the loss vehicle towed from the accident scene and stored thus protecting the vehicle from further damage. The subsection is also amended so that third parties are similarly treated while recognizing the differences between first and third party claims.
Does the word "reasonable" in the above subsection include a reasonable profit for the providers of that service? In the past, courts have often neglected to consider the reasonable costs of such providers of services.This would appear to leave a door open for more control and regulation of costs and prices by insurers.
Section 2695.9 (f) (1) Depreciation and Betterment and Salvage in Residential and Commercial Property Claims (adopt.) This new subsection clarifies that, although property may depreciate, the cost of the labor used to replace that property is not subject to depreciation.
Betterment has been illegal in California for years, yet nothing has been done to stop certain insurers from profiting from it. Not paying for Diminished Value of vehicles is a form of betterment.
Section 2695.10 (h) No unreasonably low Settlement offers (adopt.) This new subsection states that no surety insurer shall attempt to settle a claim by making unreasonably low settlement offers and lists factors the commissioner shall consider in determining whether a settlement offer is unreasonably low.
Again, the words "unreasonable/ unreasonably" when dealing with low settlement offers, is the word that best describes the majority of complaints from all sides. So, who is to determine if what an insurer considers "reasonable" is truly that? This is putting the insurance industry on the honor system… a situation too sad to laugh about. And what "factors" will be "listed" by the Insurance Commissioner to have to be considered?
Section 2695.12 (a) Factors Considered in determining Penalties (amend.) This subsection is amended to reflect that the commissioner shall consider the factors described in the subsection to determine appropriate penalties and not whether a violation of the regulation has occurred.
It appears that this will lead to yet another way in which the fox is able to guard the henhouse.
Section 2695.12 (a) (7) Number of claims reviewed by Department (amend.) This subsection is amended to clarify that, in order to determine appropriate penalties, the commissioner shall consider the number of claims where violations have been found against the number of claims examined by the Department during the relevant time period.
This information and data being regulated could extend into many other insurer-pay issues, such as medical rate pay programs (such as Colossus) or, in CCRE's opinion, the estimating programs that most all collision repairers use in computing costs of repair.
Such data collected would be under the control of yet another private industry that will be biased and have check-writing authority, and could very well also influence automotive resale valuation books, value- scope programs used by insurers to establish their vehicle estimating claims, and/or all other forms of information or data collection. This would most likely create additional interference through guidelines these adopt that could adversely affect the industry and consumers served. Presently, there are no limits or specific exclusions in this California legislation being considered to deter insurers from continued abuses.
The first meeting allowed for anyone present to offer comments, evidence, or opinionated testimony regarding the DOI's proposed changes and/or adoptions to the current insurance code amendments, in the final stages of committee. Issues under advisement concerned proposed amendments to several claims-handling practices under the Fair Claims Settlement Practices Regulations (Title 10 Chapter 5, Subsection 7.5 Sections 2695.1 - 2695.14) of the California Insurance Code - issues that directly affect the way in which the collision industry and related automotive industries will operate.
Only one national collision repair organization - the Coalition for Collision Repair Excellence (theCCRE) - took the time and expense of having three sponsor- members and staff give testimony on behalf of California CCRE sponsor-members and those in other states that may adopt similar regulations. Time was allotted for final comments, testimony, and admission of pertinent material to be considered before the DOI adopts the proposed changes and new provisions that would allow or require insurers to make certain that the information and data that they utilize in the course of their business practices remains accurate. The perspective of theCCRE is that the business of insurance is strictly to pay claims; insurers have no business setting limits on what they will pay, which the revisions to the California codes would ultimately allow
Proposed changes ranged from data accuracy, data collection, violations relative to claims, reimbursement, and determining penalties. (See sidebar for detailed breakdown.)
Throughout the amendments, the words "reasonable" and "unreasonable" appear again and again, but those words themselves are undefined and subject to the same ambiguities that these amendments are supposed to clarify.
By whose authority?
The issues herein being considered by the California DOI would appear to be an attempt to protect consumers in California. But looking closer, the real purpose may very well be to open one more door to a presently undecorated, empty room… a room that would allow insurers free, legal reign to fill and design to their advantage at some near-future date, without reprimand for any abuse or inaccuracies.
At those hearings theCCRE presented pertinent comments justifying their position on the issues, and concluded by asking the California DOI, "…by what authority they have been granted permission to regulate other private industries?" This question prompted a response from one DOI representative, who went on record as stating that such was "not the intent of the DOI."
But collision repair-related industries, along with many thousands of consumers, know all too well that DOIs do indeed regularly interfere on a regular basis in the affairs of independent collision repairers. Too many repair-related entities have allowed insurers to interfere, so much so that it has greatly harmed the majority of these, as well as the consuming public that we all serve.
Adoption of regulations that would allow insurers to verify all repair-related information or data to be accurate (as these California DOI-proposed amendments would imply) would be a great disservice to the repair industry and to the consuming public. For whatever reason, insurer representatives present at the meeting seemed to agree with CCRE testimony that the proposed changes would not be a good move for California consumers.
Such legislation, in practical application, could potentially allow insurers to claim that they have performed their own independent time studies and have thus established that all or most of the times presently represented in crash estimating guides to be inaccurately high. Consider this: If these proposed legislation changes were implemented, and were eventually also implemented by DOI's of other states, by what authority would insurers be checked or audited, when so many present regulations go unchallenged/unpunished?
CCRE representation at this Califor-nia DOI meeting brought to their attention the fact that - although the practice of deducting for "betterment" is illegal in practice in the state of California, it is allowed and written into repairs, cheating consumers out of many millions of dollars. Yet, insurers have not been held responsible or liable for this disparity, or made to cease the practice.
Though the California DOI will reply in the next three to six months on its decision concerning the proposed changes, it is unthinkable how this California legislation could have ended up if left unchallenged by collision repair professionals, and this Coalition of shops that truly represents their members.
The medical profession has been paying the price for patients' lack of quality care due to doctors' trying to stay within the skimpiest of insurer-generated guidelines and payment structures. They got into this pickle by trusting the flowery promises of the insurance industry, while not paying attention to insurer-generated "end run" legislation passed behind their backs. From the lack of shop "repair professional" input in at least these two California DOI Code-amendment meetings, it is obvious the collision industry is poised for the same fall, created by a mythical belief that things have to get better because they certainly can't get worse. But things will get worse without active participation in making it better. Missing from these meetings was SCRS and ASA national industry representation.
The choice of whether or not you will have a future in collision repair will require you insist on true collision repair representation from those you have entrusted with it. Better yet, show your support in defending your industry by visiting CCRE at www.theccre.com/, calling 877-700-7743 (toll-free), and joining or contributing to this cause. The CCRE is always looking for a few more good men and women.
Dick Strom, Modern Collision Rebuild, 9270 Miller Road, NE, Bainbridge Island, Washington 98110; (206) 842-3621; e- mail: firstname.lastname@example.org.