Changes in insurance industry regulation. Look for insurers to see a Trump presidency and Republican-controlled Congress as an opportunity to scale back federal regulation of the insurance industry.
The National Association of Professional Insurance Agents (PIA), for example, has already urged that the Federal Insurance Office (FIO), established following the Great Recession, be scrapped.
“With Congress poised to significantly roll back key provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we ask that they repeal the FIO,” Jon Gentile, PIA's vice president of government relations, said. “Doing so would reaffirm that regulation of insurance should continue to be the responsibility of the states.”
But Matthew Josefowicz, president of a Boston-based insurance technology consulting firm, cautioned that such reductions in federal oversight of insurers could embolden some state attorneys general and insurance commissioners, resulting in insurers “dealing with aggressive state regulators.”
That could be good news for collision repairers. Perhaps in 2017 more state insurance commissioners will follow the lead of their counterpart in Illinois, who this past year conducted a market conduct survey that lead USAA to end the use of caps on paint materials in that state. Montana’s Insurance Commissioner this past year issued a reminder to insurers that a lower estimate from a shop in the same market does not define market price.
In California, Insurance Commissioner Dave Jones also just finalized new rules for how insurers conduct collision repair labor rate surveys in that state, which could well impact what shops there get paid in 2017. But he also said shops don’t have to wait for those new regulations to go into effect if they have a concern about what they are being paid by an insurer.
“If you believe that you’re being presented with a reimbursement based on a labor rate survey that you suspect is not accurately capturing what the labor rate is in your market, you can complain to us now,” Jones said. “We have pursued those complaints. We ask the insurer [for] their labor rate survey. We take a look to see whether in fact it’s designed in a way to provide a fair result. In some cases, we have concluded that it hasn’t been, and have gotten corrections.”
More automaker involvement in collision repair. Certainly the six automakers (General Motors, Nissan, Honda, Toyota, Fiat Chrysler) that issued position statements this past year on pre- and post-repair scanning of collision-damaged vehicles are not the last to do so. The industry likely will see more such statements in 2017, along with continued debate and friction between shops and insurers in terms of what those procedures mean for claims.
While scanning is perhaps the most talked-about subject involving automakers and collision repairers, there was also plenty in 2016 to indicate more OEM involvement in the industry in others ways is coming in 2017.
Vehicle telematics, for example, could increasingly be used by either automakers or insurers to get immediate notice of an accident and potential early influence on where that wrecked vehicle is taken for repairs.
“Our experience in Europe has shown that our partners have…been able to reduce cycle time and actually drive down the costs of claims, seeing a noticeable difference in their loss ratios, attributable to the use of telematics,” John Kramer, a former Nationwide Insurance executive now with Octo Telematics, said last year on automakers’ use of data from the vehicle as part of the claims process. “When there is a crash, there is a ‘first notice of loss’ that is provided to the insurance company within minutes of the observance of the [vehicle] behavior.”
Other automakers may begin certifying collision repair shops in 2017 as well. “We are now moving into the research stage and development of a certification program for all General Motors vehicles,” GM’s John Eck said last summer.
Legal battles over parts, steering will continue. Several lawsuits in the industry reached conclusions this past year, but there are plenty of courtroom battles ahead in the coming year.
Four lawsuits pitting Ford Motor Company against the non-OEM parts industry, for example, continue to inch along in federal courts. All of the suits involve Ford’s design patents on crash parts, which limit the production and sale of non-OEM versions of those patented parts. The Automotive Body Parts Association (ABPA), which represents non-OEM parts manufacturers and distributors, is asking a U.S. District Court to invalidate those patents. The ABPA argues that the parts are functional rather than ornamental, and that other courts have invalidated design patents (on items such as toner cartridges) when the design is found to be primarily functional.
The other patent-related lawsuits involve Ford and a Texas-based aftermarket parts distributor New World International and two affiliated companies; Ford alleges those companies sold non-OEM crash parts that infringe on the automaker’s design patents, while New World has also sued to have Ford’s design patents invalidated.
Also still pending in various degrees of appeals are some of the two dozen lawsuits brought by shops around the country suing insurers for allegedly conspiring to manipulate shop labor rates and compensation. There’s been little in the court decisions in this past year that indicate much hope for the suits still surviving a year from now. Virtually all have been dismissed, though some of those dismissals are under appeal; some such appeals, however, were dismissed this past year because of failure by the shops’ attorneys to meet appeals court deadlines.
Perhaps most troubling about the lawsuits is if additional court rulings in 2017 will echo those issued last year by U.S. District Court Judge Gregory Presnell in the suit brought by shops in Tennessee. In dismissing the suit, Judge Presnell ruled that he saw nothing wrong in one of the instances of steering cited in the lawsuit, one in which State Farm "required the vehicle be taken to its DRP shop.” Presnell ruled, in fact, that "Tennessee law allows an insurer to require that an insured take his or her vehicle to a particular shop for repair." He reached this conclusion by pointing to Tennessee's Unfair Trade Practices and Unfair Claims Act, which states in part that if an insurer "requires a repairer to be used," the insurer must establish standards to "assure the repairs are performed in a workmanlike manner."
“The necessary implication of this language is that insurers can legally require that their insured patronize a preferred repair shop,” Judge Presnell wrote.
Similar rulings like that in any of the other lawsuits could change the face of “steering” by insurers in 2017 and moving forward.
John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network bulletin (www.CrashNetwork.com). He can be contacted by email at john@CrashNetwork.com.