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Monday, 19 February 2018 19:56

Hawaii Bill Addresses Consumer Safety, Use of OEM/Aftermarket Prices

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A group of body shop owners and managers in the state of Hawaii have come together with a common goal: to protect consumer safety by introducing new legislation that addresses the use of OEM and aftermarket parts and who ultimately pays the price.

Currently in Hawaii, aftermarket parts are permitted or required as part of a collision claim. Per Hawaii state law, insurers are allowed to ‘charge’ insureds and claimants the price difference if they prefer to use OEM parts for any reason.


§431:10C-313.6 Original equipment manufacturers and like-kind and quality parts. (a) An insurer shall make available a choice to the insured of authorizing a repair provider to utilize a like kind and quality part of an equal or better quality than the original equipment manufacturer part if such part is available or an original equipment manufacturer part for motor vehicle body repair work. If the insured or claimant chooses the use of an original equipment manufacturer part, the insured or claimant shall pay the additional cost of the original equipment manufacturer part that is in excess of the equivalent like kind and quality part, unless original equipment parts are required by the vehicle manufacturer's warranty.


House Bill 1620 was introduced earlier this year by House representatives Roy Takumi and Linda Ichiyama, along with companion Senate Bill 2243, introduced by Senators Kidani, Galuteria, Inouye, Baker, S. Chang, Dela Cruz, K. Kahele, Nishihara, Shimabukuro and Wakai. The bill would prohibit motor vehicle insurers from charging insureds an additional fee for repairs made with original equipment manufacturer parts if the vehicle manufacturer recommends them.


Van Takemoto, owner of Island Fender in Honolulu, Hawaii, has been working closely with other body shops that are part of the Automotive Body & Painting Association of Hawaii to lay out the strategy and arguments required to help pass the bill.

“What we’re saying is that there shouldn’t be a law in the state that requires insureds and claimants to pay the difference,” said Takemoto. “If the bill passes, then insurers cannot pass that cost on to them.”


The original law was enacted in the late 1990s. At that time, Takemoto said vehicle parts were mainly cosmetic.


“Today, the car is a safety system. If you replace one component in that safety system, the safety system is no longer the same,” he explained. “If you are going to use an aftermarket part in that safety system, somebody has to guarantee that it will perform exactly the same as the original equipment part; not look and fit the same.”


He said that supporters of the bill are trying to communicate to the opposition that there is no way of really knowing what that part is truly made out of.


“Basically, it’s a safety issue,” he said.


An Intrastate Commerce (IAC) committee hearing was held Jan. 31, headed by Chairman Takashi Ohno, D-Honolulu. Following testimony from insurance companies, body shops and other stakeholders, HB 1620 passed favorably with amendments. When Autobody News went to press, HB 1620 was amended in the IAC to create a taskforce.


Takemoto said if the bill does not pass in the House, there is still a chance it will be passed in the Senate.


He explained that any piece of legislation has to pass in both houses.


“If there is a disagreement between the two, it goes to a conference committee. If they don’t agree, then the bill is dead,” he said.


A hearing date had not been set in either the House or Senate as of mid-February.


“The insurance companies and national insurance organizations are saying that this is an aftermarket parts bill to kill the use of aftermarket parts and that it will allow the OEMs to increase their prices, and therefore increase the premiums,” said Takemoto. “They are trying to protect their profits.”


He said in reality, the bill will stop an insurer and claimant from having to pay the cost difference between an aftermarket and OEM part.


“The law should not shift the costs from the insurer to the claimant,” said Takemoto. “The claimant had nothing to do with it.”


During the hearing, Commissioner Gordon Ito testified on behalf of the Department of Commerce and Consumer Affairs why the department opposes the bill.


“The proposed change lacks an obvious benefit to consumers,” Commissioner Gordon said. “Insureds will pay higher insurance premiums since accidents routinely involve damage to motor vehicle parts and original body parts and cost more than aftermarket parts. Further, changing the statutory requirement from manufacturer-‘required’ parts to manufacturer-‘recommended’ parts would mean the insurer could cover the cost of all original parts since it is likely all manufacturers would recommend the use of higher-priced original equipment as replacements… finally, these higher costs will likely result in a higher number of vehicles deemed a total loss simply because insurers will [determine] it’s cheaper to total a vehicle rather than repair it with original equipment parts.”


Supporters of the bill say this section of the law and the bill only relate to crash parts and do not have any effect on mechanical or consumable parts.

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