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Legislative Lowdown

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Federal – The Property Casualty Insurers Association of America (PCI) met with the Certified Automotive Parts Association (CAPA) and other insurance industry participants on Nov. 20 in Washington, D.C., to discuss preserving the availability of aftermarket crash parts.

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PCI, along with the Quality Parts Coalition (QPC) and other groups, are concerned about a growing number of OEM crash part design patents that they feel are a threat to the generic crash parts business.
Some collision repairers argue that aftermarket parts solely exist to save insurance companies money, complaining that they’re of poor quality and fit. Other repairers argue that they keep the parts market competitive and offer consumers a more economical choice if they choose to pay out-of-pocket. These pro-aftermarket parts repairers also say that the quality and fit of these parts has improved greatly since they were first introduced to the market.

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PCI’s own analysis has found that aftermarket crash parts save approximately $2.8 billion in insurance costs per year that it claims consumers would pay if these parts weren’t available. PCI also claims that OEM parts typically cost about 60 percent more than competitive parts and thus draws the conclusion that a 6 percent increase in loss costs for vehicle repairs could be expected per insured vehicle, for an overall auto insurance premium increase of about 3.5 percent more per insured vehicle. PCI says its analysis only includes insured losses and doesn’t quantify the impact on those consumers who don’t carry comprehensive or collision coverage and must pay for repairs themselves. Therefore, it claims that the full impact on consumers would be far greater.

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The QPC believes that the impact of the economic downturn on repairers and their customers will worsen if the number of design patents granted to car companies for crash parts continues to grow. According to the QPC, that number has grown to about 20 to 25 percent of the total U.S. patents awarded to those manufacturers. The QPC also says that crash parts account for 50 to 98 percent of the U.S. design patents awarded to major automobile manufacturers.

The QPC contends that after losing their attempt at a supposed “monopoly” in Congress in the 1990s, the car companies shifted their strategy to the forum of the International Trade Commission (ITC), where the QPC believes they’re looking to eliminate competition by solidifying 14-year design patents.
A recent investigative report by a Columbus, Ohio, TV station quoted one repairer as questioning aftermarket crash parts’ structural integrity, which a parts association head refuted.

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Michigan – Michigan’s insurer-owned repair shop legislation (H.B. 4778) has passed the House of Representatives. The bill, introduced in May 2007, would ban insurance companies from owning repair facilities in Michigan. The legislation would also prohibit insurers from developing a list of preferred shops or in any other way conveying to an insured information regarding which repair facility the insured should use for repairs.

“Michigan legislators have heard the concerns of collision shop owners,” said Automotive Service Association (ASA) spokesman Bob Redding. “Insurer-owned shop legislation has been tested all the way to the U.S. Supreme Court with the Texas insurer-owned shop law. This bill is good for consumers, small businesses and jobs in local communities.”

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ASA is encouraging its members to contact Michigan state senators to push for the bill’s passage.

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