Can Ameriprise Auto & Home Insurance doing business in California offer a $100 discount off an insured’s deductible for using one of their DRP shops? Isn’t that steering?

Question asked by Anna Hyun, Olympic Coachcraft, Santa Monica, Calif.

We sought out answers from two experts with more than 70 years combined experience in the collision repair industry: Hank Nunn, a consultant with H W Nunn and Associates, and Bob Smith with Storm Appraisal & Management Service.

Hank Nunn:

That’s a good question! Sadly, there is not an easy answer.

When was this “discount” offered to the customer? Is anything written? Is this an official insurance policy to drive insureds to their DRP or the actions of an over-enthusiastic adjuster? Did a customer use this as a negotiation tactic to get you to absorb all or part of their deductible?

Since the question is primarily a legal issue, I would refer you to an attorney to investigate. You can submit the question to the California Department of Insurance. You can also check with the California Autobody Association for assistance or clarification. From the limited information supplied with the question, I can only offer an opinion.

Insurers have waived deductibles for different reasons for years. Frequently, if both vehicles involved in an accident are insured by the same insurance company, both deductibles may be waived in what is referred to as a “cross insured” claim. Some insurers waive deductibles in cases of clear liability, such as their insured being rear-ended at a stop light. There are several other instances where deductibles may be waived by the insurer.

Recently, we’ve seen insurers offering to reduce deductibles in cases where the insured has not presented a claim for a number of years. I’m sure you’ve seen ads for “vanishing deductibles” on TV.

From the wording of your question, the exact process of the waiver or discount is not clear. Is this steering? Maybe. Is it illegal steering? You’ll have to check with the legal authorities and provide much more information. But it sounds like a variation of the “vanishing deductible” concept to me.

In dealing with the situation, it’s important to understand that only the insurer may “waive” or change a deductible. The deductible is written into the contract between the insurer and the vehicle owner. Generally, the customer pays the deductible as the initial amount of the claim. Example: You pay the first $500, the insurance company pays the rest.

Many collision repairers will look at the situation and decide to simply “eat” or “absorb” $100 to match the insurer’s program. Be very careful with this…especially in California! To avoid any perception of fraud, be sure that every operation on the estimate is performed and is properly documented on the repair order.  Be sure that all documentation conforms to the “Write it Right” policies of the California Bureau of Automotive Repair (BAR).

A much better alternative is to sell your shop’s service and professionalism. If some pricing concessions are needed, provide value-added services in lieu of “absorbing” all or any part of a deductible. For example, repair an unrelated dent on an adjacent panel or upgrade detail services at no additional charge.

Bob Smith:

Boy, you could write volumes on this short two-liner and still never clear it up. Not having firsthand knowledge of California statutes or being an attorney, I would want to be cautious about listening to my own opinion. Whatever it is will raise questions, but that has seldom kept me from expressing an opinion.

In reality, any opinion expressed will have legitimate points. There could be a strong case made that it’s an unfair enticement to get a vehicle owner to act in a way that they would not normally have. Is that steering or is it marketing? Depending on where you stand, rationalization could be made for either side.

You can circle this question from many different angles from either a positive or negative side depending on your beliefs. I have long been against “covering deductibles” because of what it can lead to. Once you let the camel’s nose in the tent, next is the head. All of a sudden, all types of things are happening that a reputable repairer does not need to have happen. Looked at another way, if a repairer can cover a deductible, it’s like a sale at the department store. He’s telling me as the customer that he was charging too much to start with because no one can operate at a deficiency and stay in business.

I would hope that insurance companies would look at it the same. If you use the deductible as an incentive to get a consumer to act in a certain way, it may start as a mouse in the room but it will very quickly turn into an elephant. People in the field, even those with good intentions, will start using it in a manner that’s questionable. It would appear to then become the same as “covering deductibles” and not something that benefits the consumer.

Everyone is concerned about cost, as well they should be, but if it takes a certain amount to repair a vehicle correctly and the cost is increased by a given amount, it’s only natural that it will be offset by trying to save that amount elsewhere. Once again, things start to snowball and we’re back where something that possibly was intended to help gets out of hand and turns the ugly cheek.

I’m not trying to condone either “discounting deductibles” or “covering deductibles” – both will lead their practitioners down a path which more than likely will be bad sooner or later. If you’re going to use deductibles as a means of reducing cost or attracting business, why not reduce the cost of your product some way that will benefit the consumer and not just those who you wish to attract or sway?

For all parties, play the game straight, do what you say and charge for what you do. Don’t overcharge a consumer and then give savings to a few by reducing what’s contracted – that is self serving.