Connecticut AG Calls for Federal Investigation of Insurer Steering - BodyShop Business
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Connecticut AG Calls for Federal Investigation of Insurer Steering


In response to a nationwide petition circulated by the Auto Body Association of Connecticut (ABAC), Connecticut Attorney General Richard Blumenthal this week urged U.S. Attorney General Eric H. Holder, Jr., to uphold federal consumer protection laws against "deceptive referrals" by insurers and other similar unlawful activities that Blumenthal claims violate consumer rights.

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Blumenthal also asked that attorneys general nationwide join his efforts.

The ABAC petition cited the 1963 consent decree, which the Department of Justice and several associations representing property-casualty insurers signed in order to prevent unfair treatment of consumers by insurers. Blumenthal called for the federal government to uphold the decree and for “an immediate review and remedy to stop coercive and deceptive tactics” by insurers.

Specifically, the consent decree says insurers must not:

• Sponsor any appraiser; 

• Direct, advise or otherwise suggest that any person or firm do business with any independent or dealer-franchised automotive repair shop; 

• Exercise control over the activities of any appraiser; and 

• Fix or otherwise control the prices charged by automotive repair shops for the repair of damage to the vehicle or for labor in connection therewith, by use of a flat rate.


“In 1963, then-Attorney General Robert F. Kennedy issued a federal decree to prevent what was rampant, nationwide trampling on consumer rights by automobile insurance companies," said ABAC President Bob Skrip. "Today, the collision repair industry is plagued with the same problems it suffered in 1963 at the hands of insurers. Millions of consumers have fallen prey to the deceptive practices of insurance companies, and the laws to protect these consumers are not being enacted."

Blumenthal has long sought legislative and administrative action against insurers’ alleged deceptive practices within Connecticut.

"This outpouring of complaints shows that problematic practices plague this industry, despite a 1963 consent decree and current law," Blumenthal said. "Auto repairers and consumers are victims of the very same misconduct today: insurer control of appraisers, insurer financial incentives to consumers for their patronage of preferred auto facilities and the establishment of set labor rates that repair facilities must use."


Members of the insurance industry took offense to Blumenthal’s allegations.

Paul Magaril, regional manager for the Property Casualty Insurers Association of America (PCI), said Blumenthal was "motivated by a lobbying campaign by disgruntled auto body shops who are only concerned about their own bottom lines, and not about consumers." PCI says it flatly denies Blumenthal’s allegations.

"They are patently false and are being ginned up by a special interest group using the Attorney General to line their own pockets at the expense of hard-working consumers seeking to get their vehicles repaired after an accident," Magaril said. "It is puzzling that Attorney General Blumenthal is promoting action that suppresses competition. This will hurt, not help, consumers."


Insurance Information Institute spokesman Michael Barry told that customers aren’t forced to use shops chosen by insurers.

"American consumers are in every state allowed to take
their damaged vehicles wherever they choose," said Barry. "The auto insurance industry is a very competitive
one. And a consumer who feels as though they have been given
poor advice, whether sought or unsought, from their insurance
provider can very easily switch companies."

The ABAC petition, circulated to sister organizations nationwide, was signed by 48 of the 50 states (ABAC noted that two states do not have auto body associations or repair shops leading the industry in their areas). The petition called on Holder to enforce federal antitrust laws and protect consumers from auto insurance company anticompetitive practices.


The bottom line, Skrip says, is that "consumers should not be coerced into using an insurance company’s ‘preferred shop.’"

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