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Insurers slam new repair regulations proposed by California DOI

Monday, August 13, 2012 - 21:16
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New auto body repair regulations proposed by the California Department of Insurance are biased and could result in less consumer choice and higher repair bills, according to the Association of California Insurance Companies (ACIC), a subsidiary of the Property Casualty Insurers Association of America.

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Here is the unedited press release from ACIC:

New regulations proposed by the California Department of Insurance could severely damage automobile insurers’ ability to contain auto body repair costs by removing checks and balances from the system. Consumers will pay the price for these biased regulations that favor body shops and original equipment manufacturers through more expensive auto repair costs that could eventually increase premiums, said the Association of California Insurance Companies (ACIC).  ACIC testified in opposition to the regulations REG-2011-00024 during a hearing today at the California Department of Insurance (Department) in Sacramento.

“These regulations essentially allow the auto body repair shops to “name their own price,” charging whatever they want for auto repairs and insurers will be required by these regulations to pay,” said Armand Feliciano, ACIC vice president.  “Insurers pay for approximately 90 percent of the auto body repairs in the nation. The current free market system provides checks and balances by allowing the parties to work together to determine prices for auto repairs and parts – these regulations will undermine insurers’ ability to manage costs and basically provide auto body shops  a blank check.  These regulations completely ignore the fact that auto body shops are vendors with a financial stake in the system, not consumers.  It is not the role of the insurance commissioner to interfere in the free market system and propose regulations that will financially benefit one party – auto body shops – at the expense of policyholders.”

A 2011 study by Vincent J. Romans of The Romans Group used 2010 data and reported there are 20,000,000 auto accidents annually. 73 percent of accidents are covered by insurance. The total paid by insurers for auto accidents was $50.8 billion. The total paid by consumers was $2.7 billion. The total paid for auto repair was $31 billion. Insurers paid 90 percent of those repair costs.

Of equal concern are the provisions concerning aftermarket parts, ““Commissioner Jones is effectively preventing the use of after-market parts which provide an affordable alternative to original equipment manufacturer (OEM) parts. These regulations erroneously require insurers to perform duties that should be handled by the manufacturers or distributors of aftermarket parts,” said Feliciano.

“The Property Casualty Insurers Association of America (PCI) estimates that OEM parts are 60 percent more expensive than aftermarket parts and if these regulations take effect and aftermarket parts are not used in California the cost of auto repair could increase by $379.9 million per year.

If original auto parts are allowed to dominate the market, each Californian with auto insurance could see their premiums rise by $26.00. Given the fragile economy why mandate certain parts that will increase costs to consumers? It is a fact that aftermarket parts provide competition to original auto parts, which helps keep the cost of repairs reasonable.

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