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Auto insurance companies in New York have not “systematically violated” the state law that gives consumers the right to choose where they want their vehicles repaired after a collision. Some did, however, provide improper or inaccurate information to consumers that “could be considered violations” of state insurance law.
“This very thorough investigation is reassuring in that it shows auto insurers are largely complying with the laws that preserve consumer choice,” Insurance Superintendent Eric Dinallo says. “But it does raise some issues which the department is addressing directly with certain individual insurance companies. Consumers have the right to choose where they want their cars repaired after an accident. Companies are allowed to discuss the benefits of their programs, but they are not allowed to use the claims process to lead or mislead consumers into making a particular choice at what is usually a stressful time.”
His comments were based on a comprehensive investigation by the New York State Insurance Department (DOI), which was launched after it received complaints in 1997 from the New York State Auto Collision Technician’s Association (NYSACTA) that insurance companies were illegally steering customers to designated collision repair shops.
In addition to forbidding insurance companies from requiring consumers to repair their cars at a specific shop, Section 2610 of the insurance law also prohibits companies from recommending or suggesting to their insureds that repairs be done at a particular place or shop unless their insured expressly asks for a recommendation. That means a company cannot make a referral to its direct repair shop during the claims process unless and until their insured asks for one.
While most companies were found to comply fully with the insurance law and related regulations, the DOI found isolated instances of noncompliance, including where a company or its representative:
• required of some customers that a damaged vehicle be inspected at that company’s drive-through facility, in apparent violation of a regulation requiring this inspection to take place at a time and place “reasonably convenient to the insured”;
• set a goal of having 45 percent to 60 percent of repairable vehicles repaired at network shops; and
• told an insured to bring his car to a network shop for inspection, and stated that the repairs could be done there, while another claim representative said repairs could be done at the network shop in half the time an out-of-network body shop would take.
“We felt the sheer numbers and frequency of complaints and calls we were receiving from consumers and shops especially with certain companies, caused us to act,” says Mike Orso, president and CEO of Nick Orso’s Body Shop and president of the NYSACTA. “Lets say our alert level was raised to red.”
He said the association was glad that the DOI conducted an exhaustive investigation and the results speak for themselves.
“The full report confirmed what we suspected,” Orso says. “Certain companies are constant violators of some regulations. Those companies were abusing their power by twisting the procedures and rules with consumers who were not well informed. It takes quite a bit of cloud formation before the DOI will act on one company. Shops have to follow the rules and we are asking that insurers follow the rules too.”
"We supplied hundreds of pages of documentation to the department says, Ed Kizenberger, NYSACTA executive director. “This report reflects the fine line of how a consumer complaint factors into a statistic the department might look at. Some attempts at steering go unrecognized because savvy consumers are informed enough to make their own choice or may just not file a complaint.”
The DOI’s investigation began in May 2007 and was conducted by its Consumer Services Bureau, headed by Deputy Superintendent Steven Nachman and Assistant Deputy Superintendent Mitchel Gennaoui. It included a review of controls that insurers put in place to ensure compliance with the applicable laws, and of insurer tapes and file notes. It also included an onsite review of randomly sampled tapes and file notes from insurers, and of all complaints filed with the department related to alleged violations of the relevant laws.
Dinallo said there are some basic rights that consumers should know. While an insurance company may discuss the benefits of its direct repair program, it cannot make consumers choose its auto repair shop. That choice belongs to consumers. Except for window glass repair, an insurance company cannot recommend a particular shop unless consumers ask for a recommendation. An insurance company cannot tell consumers to go to its shop to get their damaged car inspected. The insurer must meet the insured at a reasonably convenient place and time. An insurance company cannot tell consumers that they have to repair their vehicle in order to get paid. If the insured’s car is damaged, the insurer must pay the cost of repairing that damage, whether or not the insured chooses to repair the vehicle.
“It is and will always be our goal to make sure a level playing field is preserved,” Orso says. “There may be pockets where violations occur and there is a reason for diligence. We recommend consumers and body shops stay vigilant and file a complaint as they see fit. We have an insurance department willing to assist us. They can't help us without knowledge of what is going on in the field everyday. We'll be watching.”
The New York DOI’s Web site is www.ins.state.ny.us.
