Airbag Fraud, Aftermarket Parts Debated at NCOIL Meeting

Model legislation concerning airbag fraud and the use of aftermarket parts was debated by members of the collision repair, insurance and aftermarket parts industries at a recent National Conference of Insurance Legislators (NCOIL) Property-Casualty (P-C) Committee meeting in Philadelphia.

The model legislation was debated for nearly two hours at the meeting, with an emphasis on the importance of using "good quality" crash parts, P-C Committee Chair Rep. Charles Curtiss, who sponsored the crash parts legislation, said.

"The challenge lies in knowing which parts are safe," Curtiss said. "A crash part can come from various sources, and not all of them are good quality. We need to sort through the controversy and zero in on how best to protect consumers."

NCOIL’s Model Act Regarding Motor Vehicle Crash Parts and Repair addresses insurer crash parts mandates and steering, according to its authors. It would require notice and approval before crash part repair or replacement and would establish conditions in which insurers may require use of aftermarket crash parts through policies. Insurers would also have to warrant that aftermarket crash parts used are "at least equal to" the OEM parts being replaced. It would also mandate "permanent, transparent" identification of crash parts through invoicing and records-keeping. Finally, the legislation would ensure that consumers can choose where to have their vehicles repaired.

Steering

Society of Collision Repair Specialists (SCRS) Executive Director Aaron Schulenburg voiced the organization’s strong opposition to steering and suggested that NCOIL legislators stiffen penalties for insurance companies that engage in the practice.

Steve Behrndt of the Coalition of Collision Repair Excellence (CCRE) and Pennsylvania Collision Trades Guild (PCTG) distributed information about the 1963 Consent Decree and said that due to its existence, it wasn’t necessary for NCOIL to address steering.

“I highly recommend you read what I have distributed and realize the course NCOIL is considering has been previously addressed by our federal government and resolved through the antitrust compliance,” he said. “Prior to 1963, the United State Justice Department investigated and found that segments of the insurance industry had conspired with preferential repair shops (co-conspirators) to set labor rates, prices of goods and service, thus controlling the collision repair marketplace.”

Aftermarket Parts

Speaking on behalf of the Automotive Service Association (ASA), Harry Moppert – owner of the multi-store Moppert Brothers Collision Services Group in Morton, Pa. – said the crash parts model legislation doesn’t adequately protect repairers or consumers because the safety and quality of non-OEM parts can’t truly be warranted.

"Aftermarket crash parts, certified or not, do not assure consumers or repairers that they are equal to OEM," he said. "The quality and safety requirements, particularly for offshore parts, may or may not be evident for certified aftermarket parts."

ASA suggested the legislation’s scope be limited to requiring a formal consumer notice and written consent process applicable to any parts used in repairs, whether they’re OEM, aftermarket, certified aftermarket or salvage.

The Property Casualty Insurers Association of America (PCI) voiced its opposition to the legislation, saying that the availability of quality aftermarket parts benefits consumers and the legislation is overly restrictive.

“We support the availability of aftermarket parts because they not only provide lower-priced, quality alternatives to car company replacement parts, but also keep the prices of car company parts lower, meaning tremendous direct and indirect savings to consumers,” said Lynn Knauf, senior director of personal lines for PCI.

Replacement Airbags

A second piece of NCOIL model legislation titled "Model Act Regarding Auto Airbag Fraud" would combat various forms of airbag fraud by: requiring body shops to show an airbag bill of sale before insurer reimbursement, adding a place on accident reports to note whether an airbag deployed, and establishing the theft and black-market purchase or installation of a faulty or fake airbag as a misdemeanor or felony. The model legislation specifically requires those who install or sell airbags to keep detailed records of the purchase, sale or installation of an airbag for at least five years.

Legislation author Rep. Brian Kennedy said the discussion surrounding the legislation moved beyond concerns about fraud and into debate over aftermarket and recycled airbags.

"It became clear that only through more detailed discussion and review of airbag issues by members of the P-C Committee and interested parties could we develop a model law with which we would feel comfortable and that addresses a potential dangerous practice," he said.

In his testimony on airbag legislation, Moppert noted that ASA discourages the use of salvage airbags and that NCOIL’s model legislation failed to address the use of them.

"Is this the time to put cost analysis before the protection against  injury or even death in that one-thousandth of a second when vehicle occupants rely on the integrity of airbag design?" Moppert asked the committee. "Automotive airbags cannot be compromised in any way without additional risk to the consumer."

Schulenburg echoed Moppert’s sentiment, emphasizing the considerable liability a shop faces by using salvage airbags.

In his effort to show the potential problems with the use of salvage airbags, Curtiss made the analogy to an old box of ammunition and its efficacy, questionable storage and feasibility for use in a firearm. In doing so, he raised concerns over the possibility of water damage to an airbag in a salvage yard.

“I can’t help but wonder what the effects of submerging an airbag are,” he said.

Eileen Sottile, speaking on behalf of LKQ – the world’s largest supplier of aftermarket body parts and a salvage yard consolidator – assured Curtiss that recyclers ensure that salvage airbags are safe for use.

“There is a certain protocol for recyclers to use to check [the quality] of an airbag,” she said.

Prior to the meeting, the New York State Auto Collision Technicians Association (NYSACTA) released its own analysis of the legislation (click HERE for more).
 
NCOIL plans to develop revised drafts of the two pieces of model legislation for its next meeting in November. Once agreed upon, NCOIL uses model legislation as the basis for bills proposed in legislatures throughout the U.S.

For more information, visit www.ncoil.org.