Legislative Lowdown - BodyShop Business

Legislative Lowdown

Federal – The U.S. Senate Committee on Banking, Housing and Urban Affairs held a hearing on “The State of the Insurance Industry: Examining the Current Regulatory and Oversight Structure.” U.S. Sen. Tim Johnson (D-South Dakota) addressed the need for modernization of the insurance regulatory structure into an optional federal charter (OFC) to establish the United States as an international competitor in the insurance industry. Further, he pointed out the direct correlation between the lack of a central insurance regulator and the economic risk and trends in financial markets, reiterating his point that the U.S. needs a federally regulated insurance sector.

Some insurance companies and representatives of the American Insurance Association (AIA) have argued in favor of an OFC.

“The reality is that today’s marketplace – both national and international – demands faster and far more dramatic action than the states alone are able to provide,” Alessandro Iuppa, senior vice president of government and industry affairs for Zurich North America, said in his testimony for the July 29 hearing. “As I have mentioned, insurance is no longer the local market it once was. Insurance consumers have exposures across the country and around the globe, so state boundaries no longer match our customers’ national and international business models. And the states – with their differing and sometimes conflicting laws and rules, their sometimes widely varying interpretation of those laws and rules, and their inconsistent and sometimes inflexible implementation – are simply not equipped to handle this increasingly complex and sophisticated marketplace.”

The Automotive Service Association (ASA) has said it supports federal regulation of the insurance industry, but not an OFC. The Consumer Federation of America (CFA) is also leery of the OFC. In attendance at the hearing was CFA’s legislative director Travis B. Plunkett, who said there’s a need for changes in insurance industry regulation.

“I’m sad to say…that the quality of insurance regulation is weak and declining throughout the nation today,” Plunkett said. “We do support legislation that would repeal the McCarran-Ferguson Act’s broad antitrust exemption that insurers enjoy, to end the collusive pricing and other market decisions that are legal today.”

ASA says it also supports repeal of the McCarran-Ferguson Act.

According to Plunkett, if Congress moves to an OFC, it needs to follow a different legislative path than Congress is currently considering. He supports the “Pro-Consumer Approach to National Insurance Regulation: The Insurance Consumer Protection Act of 2003,” which was offered several years ago by Sen. Ernest Hollings of South Carolina and would have adopted a unitary federal regulatory system that would regulate all interstate insurers, leaving states to regulate intrastate insurers.
“The drafters of this legislation…considered the consumer perspective in its design,” Plunkett said.
“The bill’s regulatory structure requires federal prior approval of prices to protect consumers, including some of the approval procedures (such as hearing requirements when prices change significantly) being used so effectively in California,” he added. “It requires annual market conduct exams. It creates an office of consumer protection. It enhances competition by removing the antitrust protection insurers hide behind in rate-making. It improves consumer information and creates a system of consumer feedback.”

To track federal insurance reform efforts, visit ASA’s legislative Web site, www.takingthehill.com.

Federal – The Intellectual Property Owners (IPO) Association sent a letter to U.S. Patent and Trademark Office Director John Dudas indicating that it did not support new legislation that would create an exemption for design patent infringement liability for component parts (also known as a “repair clause”) used to repair automobiles and other articles of manufacture (H.R. 5638).

IPO based its lack of support on what it says are four flaws in the legislation: the undermining of the policy rationale for IP rights; the targeting of only replacement parts; the removal of existing rights; and the creation of an uneven playing field.

Supported by AAIA and introduced by Rep. Zoe Lofgren, D-Calif., H.R. 5638 would leave in place patent protection for the first sale of the vehicle, but would permit the production by aftermarket companies of replacement cosmetic parts that needed to be the same as the OE parts they were replacing. Similar legislation already has been enacted in several countries, such as Australia, and has gained approval in the European Union (EU) Parliament, with action expected soon from the EU Council of Ministers. AAIA has told Congress that failure to enact this legislation will mean that car companies will obtain a monopoly in the sale of replacement collision repair market parts, thus raising repair costs for car owners.

For more information on the repair clause and the legislation, visit www.qualitypartscoalition.com.

California – California Insurance Commissioner Steve Poizner’s legal counsel, Bill Gausewitz, told representatives of insurer and collision repair associations that the commissioner is looking at adopting new rules for the application of insurer labor rate surveys in rate disputes between insurers and repairers, the Collision Repair Association of California (CRA) announced. A group of insurers and repairers have been working to find rules both sides consider fair.

Gausewitz has asked the group to propose rules that would serve as prohibitions. If an insurer conducted a survey that involved a prohibited action, it might be subject to an unfair claims practice violation under Section 790 of the Insurance Code. CRA lobbyist Richard Steffen said an obstacle to rulemaking is that the insurance commissioner doesn’t regulate the collision repair industry.

“The rules have to apply to insurers, and that limits how we craft the prohibitions,” he said. “The CRA doesn’t want surveys used in a way that will create average rates that fail to reflect the ingredients of quality repair work. We think the commissioner understands that not all shops are equal and that averages are not standards.”

Steffen noted that agreement between the two industries could be difficult to reach. The three repair associations contend that discounted rates, including those of DRPs, should not be included in an insurer-conducted survey. The insurers stated the following in a memo to the department and repairers: “The survey should not contain shop labor rates that have not somehow been verified and justified as being reasonable.” The CRA said in its newsletter that this statement is vague and difficult to grasp.

California – The California Senate approved S.B. 1167 (Sen. Pat Wiggins, D-Santa Rosa), an anti-steering bill. The bill now needs to be approved by Gov. Arnold Schwarzenegger.

The Collision Repair Association of California (CRA) originally sponsored the bill until it became obvious that the measure didn’t have enough votes to be passed by the Senate Banking, Finance and Insurance Committee. Wiggins then amended the bill to require that the insurance commissioner form a task force to study issues addressed by Insurance Code Section 758.5 (the anti-steering statute). If the bill gets final approval, the task force must report its findings by Dec. 31, 2009.

The bill would also amend Section 758.5 of the state’s insurance code to require insurers to ask policyholders if they’ve chosen a repair shop prior to suggesting one.

The California Assembly passed the bill on July 15 and then handed it to the Senate. The CRA has worked with Wiggins to determine how the bill might be most effective in reducing unfair and illegal insurer practices.

Massachusetts – Although the Massachusetts legislature ended its formal session July 31, the Right to Repair Bill (H.B. 4892) remains active on the House agenda. The legislation would require car manufacturers to provide independent repair shops equal access to the diagnostic repair information and tools they provide for their dealer mechanics. The bill is supported by the Alliance of Automotive Service Providers of Massachusetts (AASP-MA) and the Coalition for Automotive Repair Equity (CARE), but opposed by the Automotive Service Association (ASA).

Over the course of the recent Massachusetts session, the legislation advanced further than it has in any other state or in Congress, where it has been pending. Also opposed by major auto manufacturers, the bill is backed by the Consumer Protection and Professional Licensure Committee and recently made it to the House floor on the House Calendar Orders of the Day.

Stan Morin, chairman of the Massachusetts Right to Repair Committee, said the bill is an “issue of survival” for independent repairers and consumers. Morin added the practice of selectively releasing repair codes and information as “tantamount to a restriction of free trade” and said that legislators “understand quickly how this hurts consumers.”

ASA has said efforts to pass the legislation are a poor use of industry time and resources, and that “legislation using government agencies and the courts is unnecessary to ensure independent repairers have access to the same service information that’s available to dealers.”

Morin added he believes “the tide will turn nationally” on Right to Repair legislation, starting with Massachusetts.

For ASA’s take on the bill, visit www.takingthehill.org. For the Right to Repair committee’s take, visit www.righttorepair.org and click on “State Right to Repair Legislation.”

Massachusetts – The Massachusetts Auto Body Association (MABA) is encouraging repairers to support anti-steering legislation that now sits before the state’s senate. The Massachusetts House of Representatives unanimously passed the legislation, H.B. 5056, July 31 and sent it to the state Senate. Once passed by the Senate, the bill would need to be signed by Gov. Deval Patrick, who has already signed into law other auto insurance reforms.

The bill’s anti-steering language addresses not only auto body steering but glass company steering and rental car steering issues as well. In addition, the bill would authorize Massachusetts repair shops to send – and insurers to approve – supplement requests via Internet rather than the current personal inspection requirement; make it illegal for insurers to offer to warranty or guarantee repairs; require shops to increase their equipment requirements for licensure; require insurers to distribute one list free of any highlights or asterisks that identify the shops as participants in insurer programs; and require the Commissioner of Insurance to conduct a “Market Conduct” study by the end of this year.

MABA believes H.B. 5056 would establish accountability for insurers and repairers and allow a competitive, free-market system allowing shops to compete fairly and freely against one another for customers.

“Massachusetts recently passed laws promoted by Gov. Patrick to encourage competition in the insurance industry,” said MABA spokesman Stephen Regan. “House Bill 5056 is the final piece of that puzzle and will complement the Governor’s initiative by creating more competition, more products, and better services by collision repairers and other segments of our industry.”

According to MABA, another important aspect of the bill is that it will not increase insurance cost for consumers or insurers, which enabled MABA to obtain support from insurers for the reform bill. MABA expects the bill to reduce the overall cost of repairs by allowing for faster repair times through a more efficient supplement process and requiring repairers to upgrade their equipment.

MABA is encouraging all collision repairers in the state to contact their local state senator to support passage of H.B. 5056. To find out the name of your Massachusetts senator or representative, visit www.wheredoivotema.com/bal/myelectioninfo.php or call MABA at (800) 487-6262.

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