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Tuesday, 01 May 2007 15:03

CRA presents plan to Calif insurance commissioner to reduce insurer friction

    The Collision Repair Association of California (CRA) has presented state Insurance Commissioner Steve Poizner with a six-point plan to protect consumers and restore fairness to the business of collision repair. The plan, detailed in a letter sent April 12, is in response to CRA’s March meeting with the Commissioner where he asked the association for solutions to reduce the friction between insurers and repairers.
    The letter, signed by CRA Executive Director Allen Wood, said that the Commissioner must increase his efforts to protect “the value of policyholder premiums paid for collision coverage.” By adopting the six actions proposed by the CRA, Wood wrote, the commissioner will improve the legal understanding of “the reasonable cost of repairing a vehicle while increasing protections for the policyholder.”
    The six proposals are as follows:
1.        Send an advisory letter to insurers to warn them that a pattern and practice of “compelling insured’s to institute litigation” to recover losses that insurers refuse to pay is illegal and subject to enforcement. The CRA presented the commissioner with scores of small claims court awards where insurers were ordered to pay policyholders for the cost of collision repairs initially rejected by insurers.
        Commenting on the letter, CRA President Gene Crozat said,“The mountain of small claims court awards in favor of policyholders is proof that some insurers are engaged in unfair trade practices.”
2. Insurance Code Section 12921.1 requires the Insurance Commissioner to investigate complaints and to establish criteria to determine which violations should be pursued through enforcement action. The CRA would like to know the criteria that serve to direct department investigations. The complaint process would be better directed if all concerned parties had a clear understanding of what insurer actions merit a department investigation. The CRA wants the criteria sent to insurers and repairers.
3.        Much of the dispute over the reasonable cost of repair revolves around the undiscounted labor rate charged by the repairer versus what the insurer will pay for non-DRP work. The CRA asks the commissioner to support legislation to require the Bureau of Automotive Repair (BAR) to collect the undiscounted labor rate of all licensed repairers as part of the licensing process and to require the BAR to share this data with the department. Additionally, the legislation should require each licensed repairer to clearly post its undiscounted labor rate for consumers and insurers to view. The CRA asked the commissioner to sponsor legislation, if needed, to empower him to reference the envisioned labor rate data from the BAR when it reviews a pattern and practice by insurers to underpay the reasonable cost of repairs.
4.        In 1995 a department letter clearly stated, in part, that it was illegal for insurers to set a cap on the cost allowed for paint and materials. The CRA estimated that as much as $50 million is lost annually in sales tax revenues to the state because insurers flatly refuse to pay the value of paint and materials used in the repair of a vehicle. The CRA asked the commissioner to issue an advisory letter regarding the illegality of price capping on paint materials used in the repair of a vehicle. {mospagebreak}
5.        Steering of policyholders away from collision repair facilities they have selected is illegal. Steering is the first weapon of choice for some, but not all, insurers who want to limit a policyholder’s rights in directing how his or her vehicle is to be repaired.
        The CRA requested the department to publicly announce regulations that clarify that once a policyholder has selected a repairer, the insurer must cease any and all rhetoric intended to redirect the policyholder’s decision. An insurer has the right to offer a policy that limits a policyholder’s rights to select a repairer for a reduced premium, but it has no right to act in this manner if the written policy requires a damaged vehicle to be returned to pre-loss condition without restrictions on where the vehicle may be repaired.
        We ask that the department investigate and take appropriate action when a policyholder reports that he or she was pressured not go to a specific repairer. Adoption of Proposal 2 will also help. The CRA requests full enforcement Section 758.5(c) of the Insurance Code.
6.    The CRA asked the commissioner to act with due diligence in reviewing any proposed public policy that seeks to limit the rights of policyholders to be directly involved in the vehicle repair decision, or that would enable the insurer to control the repair contract between the vehicle owner and the repairer by requiring the repairer to disclose to the customer whether or not the insurer approved the type of part used in the repair. While this disclosure sounds fine at first glance, it gives the customer the impression that insurer approval means the “best” part was used in the repair. One of the core arguments that we have made in this letter is that repairers, in defending customers, fight insurers over the right to use the best parts for purposes of fit and safety—these parts are often original factory equipment, used or new, which some insurers oppose because they may cost more than imitation parts.
    Crozat concluded, “We are looking forward to a positive response from the commissioner and his staff. We already know that our customers appreciate our efforts to protect the value of the collision premiums that they have paid.”
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