Letter to NY attorney general calls out insurer practices

Jan. 1, 2020
The New York State Auto Collision Technician’s Association (NYSACTA) sent a letter to state Attorney General Andrew M. Cuomo asking that existing laws be enforced that prohibit insurance company steering and price capping.

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The New York State Auto Collision Technician’s Association (NYSACTA) sent a letter to state Attorney General Andrew M. Cuomo asking that existing laws be enforced that prohibit insurance company steering and price capping.

The letter, signed by NYSACTA president Mike Orso, who also is president and chief executive officer of Nick Orso’s Body Shop in Syracuse, congratulated Cuomo’s office for attacking price fixing scams in the health care industry in New York and drew parallels to the auto repair industry.

“Similar to health carriers, some major players in auto insurance in New York artificially control prices by setting labor rates and material allowances for (paint and supplies) at artificially low rates by similar tactics using caps and/or network shops that agree to predatory pricing, price fixing labor rates (below cost),” the letter said.

The letter explained that insurance companies set up direct repair program (DRP) shops that agree to discount their labor and repair rates in exchange for a steady stream of insurer business.

“The hourly rates, parts, repair procedures, paint and supplies are all controlled and all become points of a contract between the chosen shops and the insurer,” the letter said. “At the same time these insurers market these DRP programs to consumers who have a collision as a benefit. Promises are made touting faster service, insurer backed guaranty and seamless service. For the DRP shop a flow of referrals is created. The consumer is often left with a partially repaired vehicle. By contract certain repair needs are not addressed.

“In the market place these insurers suppress the labor rates paid to all auto body shops by their mere size and by using the contract rates of DRP shops to base all payments on the reduced offers. The non-DRP shop has to solicit their own work and often fend off the actions of insurers who make unsolicited referrals or use subtle deliberate goal-orientated word tracks to steer work away from the non-contract shops,” the letter said.

Orso said that insurers have been doing this for several years, but now are reinforcing that policy by refusing to pay non-DRP shops any more than the rate the insurers have contracted with DRP shops. Orso and other independent shop owners in New York have had to take insurance companies to court to recover unpaid balances of bills. His letter to Cuomo said this amounts to price fixing and non-DRP shops that don’t comply with it are blackballed.

“We’d like to meet face-to-face with the attorney general to make sure we are on the same page,” Orso says in an interview. “They are told by insurance companies that DRPs are problem free and keeping repair costs down.”

In New York, claim payments including labor parts and materials are taxed. “If insurance companies are not paying their fair amount, then a lot of tax is not being collected and instead is being shipped to out-of-state insurance companies,” Orso says. “The state is missing out on the economic development that fair settlements would provide.”

No new laws or regulations are required, Orso said.

“Our insurance department must require insurers to follow the current regulations and hold insurers accountable,” the letter said. “Insurers must negotiate all elements of a property claim and not be allowed to set prices by placing caps on labor, labor rates, parts or paint and materials. Not only are the settlement caps a violation of Insurance Regulation 64, but some insurers may be in violation of the General Business Law 349 (deceptive business practices). Their policies are not advertised or sold limiting the amount they will allow for labor or parts and materials.

“Insurers must not be allowed to use contract shop pricing as a price cap when settling claims at non-contract out of network shops. Insurers should be required to inform consumers that network shops repair the damaged vehicle under the insurers control and that the repair may not address all the manufacturer’s recommended repairs. Insurers are not to suggest or recommend a repair shop unless the claimant insured requests a recommendation. Insurers must not be allowed to use crafted word tracts intent on discouraging consumers from choosing their own choice in collision repairer. Insurers must not use biased, secret outdated information to set and control pricing.”

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