Federal The U.S. House of Representatives is considering a bill that would remove the federal antitrust exemption from the insurance industry.
In repealing the exemption, the Insurance Industry Competition Act would give the Department of Justice and the Federal Trade Commission (FTC) the authority to apply antitrust laws to anticompetitive behavior by insurance companies but would not affect the ability of each state to regulate the business of insurance. Insurers have been exempt from anti-trust laws since the passing of the McCarran-Ferguson Act in 1945.
The bill’s sponsors Reps. Gene Taylor, D-Miss., and Peter DeFazio, D-Ore. say insurers’ exemption from anti-trust laws is what allowed American International Group (AIG) to become “too big to fail” and that insurers believe they’re “above the law.”
“The fact that the insurance industry is exempt from federal anti-trust laws is outrageous,” DeFazio said. “Shouldn’t the $170 billion bailout of AIG be the third and final strike to the ‘business as usual’ attitude toward the insurance industry?”
David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI), said the group opposes the Insurance Industry Competition Act, which PCI believes takes advantage of the AIG controversy to punish the entire insurance industry.
“The McCarran-Ferguson Act does not hinder competition among insurers,” Sampson said. “In fact, it promotes competition in the marketplace by putting small and medium-sized companies on a level playing field with much larger competitors, and it creates efficiencies for insurers that mean savings and choice for insurance buyers. These savings are crucial to consumers during an economic downturn, and we call upon Congress to reject this misguided legislation.”
The House is also considering the National Insurance Consumer Protection Act (NICPA), which would establish a national system of regulation and supervision for nationally registered insurers to monitor the systemic risk to the economy from the insurance market. Under the bill, states would maintain responsibility for regulating state-licensed insurers, agencies and producers.
Regulation would be overseen by an Office of National Insurance under the Treasury Department whose commissioner would be appointed by the president. The national office would identify insurers that pose a risk to the U.S. financial system, and those companies would be required to be federally regulated. Companies not considered a risk would have the option to choose between state and federal regulation.
The bill responds in part to AIG’s $187-billion bailout.
“Never before has the federal government been so invested in an industry it has no regulatory authority over,” said Rep. Ed Royce, R-Calif., a co-sponsor of the bill. “Leaving the business of insurance regulation solely to the various state insurance commissioners, while the federal government provides taxpayer-funded assistance is simply irresponsible.”
American Insurance Association (AIA), Allstate and State Farm all support the bill.
“We have long supported the availability of a market-based federal charter for insurers and believe it is the best model for modernizing our insurance regulatory structure,” said AIA President Leigh Ann Pursey. “Any federal regulatory system should focus on true consumer protections like strong financial regulation and market conduct oversight, and we are encouraged to see those protections as the cornerstone of this legislation.”
The Property Casualty Insurers Association of America (PCI) opposes the bill because it singles out large companies within the insurance industry.
“An optional federal charter…falsely presumes that only large companies pose a systemic risk,” PCI President and CEO David Sampson said. “In fact, smaller companies can pose significant systemic risk, and larger companies may pose little or none.”
Finally, the House is again considering a “Cash for Clunkers” bill that would offer assistance for buying new, more fuel-efficient vehicles. Earlier this year, funding for the Cash for Clunkers program was removed from the economic stimulus bill.
H.B. 1550, the Consumer Assistance to Recycle and Save (CARS) Act, was recently introduced by Rep. Betty Sutton, D-Ohio.
The CARS Act would provide $3,000 to $7,500 vouchers to owners of vehicles that are at least eight years old to purchase more fuel-efficient vehicles. The vouchers are based on miles per gallon, and vary depending on where they were built.
Cars built in the U.S. must get at least 27 mpg on the highway, while those built in Canada or Mexico must get at least 30 mpg to qualify for the program.
The Automotive Service Association (ASA) supports the legislation, provided the program includes a vehicle repair option for consumers, state administration of the program, participation tied to vehicle emissions and repair allowances that would address emissions-related repairs.
The Automotive Aftermarket Industry Association (AAIA) opposes bill, which it says threatens jobs in the independent aftermarket industry by removing repair opportunities for vehicles and raising the cost of used cars and parts.
California A bill introduced in the California Assembly would require insurers to disclose in writing to claimants that any damage assessment made by the insurer is not a written estimate of repair costs and that only facilities licensed by the state Board of Autobody Repair can write an estimate.
A.B. 1179 is supported by the California Autobody Association (CAA).
The Assembly is also considering a bill that states insurers can provide claimants with truthful, non-deceptive information about DRP shops at any time while discussing a claim.
The bill adds the following to California Insurance Code Section 758.5, the anti-steering statute:
Nothing in this section prohibits an insurer from providing a claimant with truthful, nondeceptive information regarding the benefits of selecting a specific automotive repair dealer, including, but not limited to, the availability and duration of repair warranties.
A.B. 1200 is sponsored by the Personal Insurance Federation of California, which represents major insurance companies including Allstate, Farmers, State Farm and Progressive, according to the Collision Repair Association of California (CRA).
The CRA says the bill “attempts to rewrite” the proposed anti-steering rules the state’s Department of Insurance is considering, which would prevent an insurer from discussing DRPs or an alternative facility if the claimant informs the insurer that he or she has selected a specific repair facility. The proposed rules would also prevent an insurer from raising questions about the quality of the repair facility selected by the claimant.
The CRA and CAA both oppose the bill.
Kentucky Gov. Steve Beshear signed H.B. 309, which removes the cost of airbag replacement from 75 percent total loss calculations, into law on March 20. The new rule will be effective in October.
The law also stipulates that insurers are bound by terms and conditions of individual policies relating to airbag reinstallation and that vehicle sellers are responsible to disclose damage to vehicles only if they have direct knowledge of it or if the damage occurred while in the hands of the dealer.
Pat J. Gisler, executive director of the Automotive Service Council of Kentucky (ASC-KY) said the new law will help save cars that may have been totaled otherwise and provide more work for shops.
“We’re totaling cars that there actually isn’t that much wrong with because they’re older and airbags are so expensive to replace,” she said. “We’re thinking that this will put some money back into the pockets of shops and consumers.
Missouri The Missouri House of Representatives is considering a bill that would prevent steering by insurance companies.
The bill, H.B. 834, would require that estimates for damage claims written on behalf of an insurer include a written notice that says the following:
Notice under Missouri law, the vehicle owner and/or lessee has the right to choose the repair facility to make repairs to their motor vehicle. No one shall use intimidation or coercive tactics to alter the owner’s choice.
The bill also says insurers cannot require a claimant to present the automobile for loss adjustment or inspection at any facility under the control of the insurer or attempt to “persuade, require, coerce or pressure” a claimant to use a repair facility other than the facility of his or
The bill would also create a board of auto body repair that would establish and regulate licensing systems for shops and physical damage appraisers.
Nevada The Nevada Assembly passed a bill designed to prevent insurance companies from acquiring or opening collision repair facilities and would place restrictions on pre-existing relationships between insurance companies and shops they own interest in, referred to as “tied shops.” The bill is now being considered by the state Senate.
The bill, A.B. 297, would make the relationship between an insurer and tied shop like that of an insurer and a DRP shop and would prohibit insurers from providing a competitive edge to tied shops.
Finally, the bill would require a notice posted in all tied shops that reads:
This body shop is owned in whole or in part by (Name of Insurer). You are hereby notified that you are entitled to seek repairs at any body shop of your choice.
The bill would be effective July 1, 2009, and is supported by the Nevada Collision Industry Association (NCIA).
“By repairing property it also insures at an insurer-owned body shop, an insurer can profit greatly by performing inexpensive, substandard repairs, thus creating a conflict of interest,” Michael Spears, a founding member of the NCIA, said. “In this process, the consumer misses the benefit of the unbiased expertise and opinion of an independent repair facility. Insurer-owned body shops may eliminate checks and balances, compromising consumer protections.”
Allstate Insurance, owner of Sterling Autobody Centers, challenged a similar Texas law in court, and the court up-held the state’s restriction on insurer-owned shops. Sterling has one location in Nevada.
The Nevada Assembly is also considering a bill that would change the definition of total loss vehicle by increasing the damage threshold.
A.B. 447 mandates that repairs to a damaged vehicle would have to cost at least 100 percent of the vehicle’s fair market value at the time of the crash for the vehicle to be deemed a total loss. Currently, a total loss is declared when repairs cost 65 percent of the vehicle’s fair market value.
Per Nevada law, vehicles over 10 years old are exempt from the definition. If passed, the bill would be effective July 1.