Tuesday, 25 March 2008 06:59

Steffen --- Steering Wars

Written by Richard Steffen

Insurers, including their lobbyists, excel at steering. Insurance agents send claimants to DRPs while insurer lobbyists direct “neutral parties” (legislators and staff) to points of law that have nothing to do with the harm caused by steering. For example, I recently spoke to a consultant for a state legislator who asked me why the CRA would sponsor a bill (SB 1167) that was unconstitutional. When I asked her how she arrived at her legal opinion, she cited a United States Fifth Circuit Court of Appeals decision that struck down a Texas law that she was told was similar to SB 1167. Her source of information was an insurance lobbyist. She’d been steered by one of the best.

It’s taken years to educate legislators and staff about the dynamics of auto body steering. Unfortunately, the exercise will never be over given the high turnover in the Capitol caused by term limits and the seemingly unlimited resources that insurers have to throw at the truth. I now see a new policy mindset: steering occurs but you really can’t do much about it because it’s free speech, First Amendment, etc.

The insurers are circulating highly edited accounts of this Texas decision. They don’t mention that the court rejected Allstate’s challenge to strike down the main provision of the law than bans insurers from owning auto body shops. But the judge did rule that it was no go on a very convoluted section of the ban that said, if an insurer owns a shop and refers a claimant to that shop, the insurer also has to recommend one other DRP within the insurer’s network. Does that make sense for claimants? The CRA would have opposed a bill that required insurers to recommend multiple DRPs to claimants. Fortunately, this provision was struck down—it just didn’t make sense. Regardless, the ruling allows California insurers to say the court sided with Allstate by calling the referral language too restrictive.

Insurer lobbyists are letting it be known that if SB 1167 becomes law, they will sue, I assume, the Department of Insurance.. Another way to stop a law is to put a referendum on the state ballot where you ask voters for their approval to not enact the law. I like this approach the best. GEICO and Progressive can use some of their ad money to pay for a political campaign in support of steering.

If insurers want to sue over SB 1167, they should sue to halt current law, Section 758.5 of the Insurance Code. This law says once a claimant selects a repairer, the insurer may not recommend or suggest another repairer. All that SB 1167 does is add that an insurer must ask the claimant if a repairer has been chosen when an accident is first reported.

Now back to my opening point. Supporters of SB 1167 are being forced to explain to uninformed lawmakers why the “unconstitutionality” arguments raised by insurers are bogus. We should be leading with the claimant who was called eight times by an agent after she said she was going to a non-DRP shop. These calls were usually made in the evening and each time there was a new threat, ranging from “you’ll have to pay more” to “your rates are going up.” Bottom line: insurers want the freedom to harass, to shade the truth and, in some cases, to outwardly lie.

I would remind all the insurer representatives who read this column that legislative politics is one small part of the equation. Yes, the CRA will continue to fight steering in an aggressive and fair manner. And to those insurers who charge that the CRA wants “to keep consumers in the dark,” I say, show us your DRPs, meaning, please disclose to policyholders all the hammers in a DRP: the required use of aftermarket parts, used and salvage parts; the “try and see” approach; the cost of rental cars on jobs not finished by a set deadline; no payment for “fixtures”; no payment for tint and blend, etc. Freedom of speech includes the right not say anything, although that is more the Fifth than the First Amendment in this case.

When the CRA board members initially discussed finding an author for what is now SB 1167, they knew the risks. By sponsoring a bill some might say we were giving up on the current contents of Sec. 758.5 of the Insurance Code. Even though the Department has not enforced the law, it did convene a working group of insurer and collision lobbyists last year who spent four months to reach this stalemate: insurers believe they have the right to explain the benefits of DRPs to claimants who have already selected a repairer while repairers say once a claimant selects, the talking game is over. The CRA chose to sponsor a bill because it believed it was critical to put debate on 758.5 in the public arena. Clearly, in voicing their opposition insurers have shown us their special interest interpretation of current law. Regardless of what happens to SB 1167, the CRA is confident that the Insurance Commissioner will take notice of the steering debate and, in particular, the fact that consumer groups who represent consumers strongly support SB 1167. The CRAs’ objective is to have the law enforced. Passage of SB 1167 might make enforcement easier, but the CRA argues that the current statute is strong enough to stop insurers who love to remind claimants that if they don’t go to a DRP shop, they will be “liable” for additional charges. The insurers needed to be reminded by the Commissioner that if a claimant selects a non-DRP repairer, the insurer may not limit or discount payment; i.e., pay a DRP rate for non-DRP work.

Many of you know I routinely deliver steering complaints to Bill Gausewitz, counsel for Insurance Commissioner Steve Poizner. Please keep me busy. We have to keep taking our battle to the Department of Insurance, the Legislature, the State Attorney General and, if needed, the courts.