NATIONAL FEATURE INTERSECTION BETWEEN DOI DUTIES AND COLLISION REPAIR EXPLORED AT SCRS OPEN BOARD MEETING

Departments of Insurance and the collision repair industry operate in “very different worlds, but there’s an interaction where our worlds collide when dealing with insurance companies,” Virginia Commissioner of Insurance Scott White addressed the room filled with collision professionals during the Society of Collision Repair Specialists’ (SCRS) recent Open Board Meeting in Richmond, VA where he was joined by North Carolina Department of Insurance (DOI) Commissioner Mike Causey as they discussed their departments’ duties – and limitations – and shared their thoughts on what issues exist.

Acknowledging that disputes arise based on insurers’ desire to have vehicles repaired at the lowest cost possible, while consumers and shops seek to have cars repaired at the highest standard, White suggested those issues are “fairly rare,” but since he’s the “typical commissioner who doesn’t deal with this every day,” he asked his team if they receive a lot of complaints involving body shops and found that the department receives less than they did five or 10 years ago. Those complaints are often related to labor rate, aftermarket versus OEM parts, the differences between refinish and blending and issues over diminished value.

“The insurance industry is highly regulated; if you don’t believe us, just ask the insurance companies,” White insisted without a trace of irony in his tone. “Personal line, private auto and homeowners – we spend a lot of time regulating this aspect of our authority because this is where a lot of issues arise. There’s a bigger imbalance between a consumer battling a big insurance company versus someone who has commercial insurance who has more sophistication and resources to fight the company if there’s an issue.”

So, how does the VA Bureau of Insurance (BOI) assist in ensuring that insurance carriers are behaving fairly? White examined the standards his department uses for determining whether a company is acting appropriately. While the BOI does not regulate the cost of insurance, it focuses on ensuring that affordable coverage is available, that claims are paid out according to policy terms and that carriers are behaving fairly, all in the name of regulations designed to protect consumers. In discussing his state’s Unfair Claims Practices Act, he assured attendees that there’s an anti-steering provision in place, a prohibition on capping paint and material costs and a requirement that all carriers include the same provisions which prevents any insurer from removing Right to Appraisal from their policy.

White admitted that he has heard shops raise concerns related to the fact that insurance companies are required to pay no more than the prevailing competitive rates; however, he stressed that the BOI does not have “the authority to adjudicate individual claims or act like a civil court that forces the company to pay a claim it doesn’t believe it owes…It’s not considered a violation unless it’s considered a general business practice.” Moreover, the BOI defines it to be “a general business practice if it occurs seven percent of the time in a sampling of complaints.”

Although White continued by citing a long list of things that the BOI cannot do, he emphasized that his team is “very successful in holding the insurers’ feet to the fire.”

Noting that it’s tough to deal with frustrated consumers, he offered some suggestions on how collision repair facilities can help consumers, beginning with communication, ensuring claims are complete and accurate and helping them understand unfair claims regulations.

Boasting decades of involvement with the auto body industry, Causey explained that his political career began with his attempts to help associations petition for help addressing complaints against insurers’ unfair practices. Noting that his state’s DOI has similar responsibilities and limitations, he acknowledged, “Insurance companies are creative about getting around state statutes.”

Since being elected to his position, Causey has set up task forces to listen to body shop owners’ concerns to change things a little at a time. His team conducts investigations into carriers’ market conduct to find patterns of misbehavior, and he urged shops, “If you have evidence of insurance companies doing things they shouldn’t do, bring it to us, so we can have our market conduct and criminal investigation teams look into it.”

During an open Q&A session with the Board and audience, WMABA Executive Director Jordan Hendler suggested there’s a “gross disparity between what happens in the marketplace at the shop level and what makes it to [the commissioners] when it comes to insurance companies’ practices. Consumers have options they’re unaware of, so there’s lots of room to educate both consumers and shops, so we can do a better job of educating the consumer on proper processes and parts to fix the vehicle properly, and here’s the invoice. And if the consumer can’t get the insurance company to cover that, they’re left in civil court to pursue the difference. It’s important to follow up on these conversations, because we are seeing daily issues, so the fact that you guys aren’t getting complaints is not indicative of the problem we’re seeing in the marketplace.”

Suggesting that an increase in premiums would reduce pressures to protect profit through claims practices, WMABA Board member Barry Dorn (Dorn’s Body & Paint; Mechanicsville, VA) offered the opinion that “the cost of insurance needs to go up due to how technologically advanced vehicles are now. Keep in mind that the consumer wanted these features, and the government is even mandating some of this now. The average cost of a new vehicle is $65,000, so who didn’t think the cost of repairs would also go up? Premiums should increase accordingly.”

Referencing White’s earlier commentary on prevailing rates, WMABA Board member John Shoemaker (BASF) asked how the industry can learn more about the surveys which “insurance companies conduct and then just dictate that these are the ‘prevailing rates,’ but we never see the results of these surveys.” He also suggested that shops’ rates should be based on each individual shop’s actual costs.

“Who’s doing the surveys?” White asked, and SCRS Board Vice Chair Michael Bradshaw (K&M Collision; Hickory, NC) quickly answered, “Nobody is really doing the survey” to the audience’s laughter and applause.

Bradshaw elaborated that State Farm is the only carrier conducting a survey in North Carolina. “They actually send out a survey to shops, but it’s super convoluted, because they take the results of that survey, and then they use some crazy mathematical formula that basically takes out all the shops that are operating on the higher end of the spectrum and just remove their data from the survey so they can get the artificially suppressed data that we all know they’re utilizing.

“Nobody is surveying shops,” he stressed, noting that when he asks estimators and managers up the ladder where the rates come from, “The response we’re given is, ‘Well, we go into shops, and that’s the rate they’ll take.’ That’s not a survey because there’s no statistical data. There’s no minimum requirements for equipment or training; it’s simply

Can the DOI actually help shops and consumers?

BY CHASIDY RAE SISK

the amount some shops accept, and I think that’s the biggest part of the frustration within this industry.”

During the SCRS Open Board Meeting, SCRS also announced the results of the prior day’s election, congratulating incumbent Board member Tony Adams (AkzoNobel) and welcoming two new Board members: Michael Giarrizzo Jr. (DCR Systems) and Andrew Batenhorst (Pacific BMW Collision Center). “We couldn’t have a better Board,” boasted SCRS Executive Director Aaron Schulenburg, urging attendees to “surround yourself with people who fight for you in rooms you aren’t in.”

Schulenburg also shared some changes to the SEMA 2023 agenda, including the decision to start the week with IDEAS Collide, and he praised KECO’s ongoing PDR system donations to schools’ collision repair programs, noting, “When students get to see that the industry is giving back while they’re in school, it changes their perception of what this industry is.”

Bonnie Coleman (OEC) provided a sneak peek at an upcoming update to the Blueprint Optimization Tool’s (BOT) reporting system which will allow for enhanced data exporting and the ability to drill down to the estimate and estimator levels. This will provide users with a greater ability to document return on investment as well as ways to better utilize BOT to its fullest potential.

During Schulenburg’s update on SCRS members programs, Bradshaw provided a testimonial on how the healthcare plan “offers better coverage and gives shops more ability to compete with other industries.” Scott Broaddus (Virginia Asset Management) lauded the benefits of the 401(k) plan, and Danny Gredinberg (Database Enhancement Gateway) shared details on the DEG’s recent revamp (more details were provided in last month’s Hammer & Dolly, available at grecopublishing.com/hammer-and-dolly-may-2023) and emphasized the importance of shops taking advantage of this free resource. “A 0.2 hour change for you today can impact all the shops tomorrow…It’s a change for the entire industry!”

As Schulenburg discussed industry issues, he mentioned a recent discovery that the end user license agreement (EULA) in some diagnostic tools contain some concerns that shops should be aware of, especially as it relates to some states’ privacy laws. Stay tuned for an in-depth exploration of this topic in an upcoming issue of Hammer & Dolly. H&D