I recently received my copy of the May 2001 BSB and read your editorial regarding aftermarket parts [“One Billion Reasons to Be Honest,” Editor’s Notes, pg. 4] First, I want to commend your stance on the issue – namely, that consumers first be informed as to the pros and cons of aftermarket parts usage and, subsequently, decide for themselves whether to utilize those parts on their vehicles. This is the position we’ve advocated since the inception of the Ohio Board of Motor Vehicle Collision Repair Registration and one we firmly believe should be the case without exception.
Second, I wanted to comment upon the statements/position you attributed to insurers that conveys an image of the entire collision repair industry being comprised of those who, if given an option, would write for OEM but would then substitute aftermarket parts to enjoy even greater profits than otherwise obtainable. Aside from failing to acknowledge that the majority of collision repair facilities conduct their businesses in a legal, ethical and professional manner, these types of statements are not only unconscionable and reprehensible, they also totally fail to recognize and/or acknowledge the existence of legal avenues through which fraudulent activity can be curtailed or eliminated. Thus, the dire circumstances – i.e. OEM monopolies, premium increases, etc. – predicted could be avoided largely or entirely through the use of legal remedies if acted upon.
Yes, one of the central issues in any discussion regarding aftermarket parts use is money. Money is also central to any discussion about business. For with it or without it, businesses either enjoy profits or realize losses. In both the insurance and collision repair industries, profit means survival, and both industries seek – as do all others – to maximize those profits.
Seemingly lost in the shuffle of all discussions, positions and motives regarding the use of aftermarket parts, however, is the most critical issue of all: the impact of their use upon consumers. Since consumers are the customers of both industries, their best interests ought to be held as sacrosanct in each and every instance. Despite this, evidence abounds and regularly demonstrates that in many instances, the customer’s well-being is sacrificed in the name of profit by both the collision and insurance industries. Were this not true, one would presume that repairs equal OEM specifications in all instances, or conversely, insurance groups would’ve conclusively proven by now that aftermarket parts are equal to OEM parts in each and every respect.
We have yet to see or be made aware of any truly independent and verifiable documentation that conclusively demonstrates aftermarket parts use results in premium savings. Likewise, no conclusive independent documentation has ever been proffered that demonstrates aftermarket parts are identical to OEM in each and every respect. Until such time as this sort of information becomes available, insurance industry pronouncements of the dire consequences and/or purported benefits of aftermarket parts use or lack thereof is nothing more than self-serving propaganda.
On the other hand, and though it occurs within only a small portion of the repair industry, OEM-aftermarket parts substitution continues to happen. Moreover, based on numerous conversations and articles, we’ve been led to believe that in the past, OEM-aftermarket parts substitution was a somewhat regular and perhaps widespread occurrence. Assuming the above is true, then to a certain degree, the collision repair industry must assume some measure of responsibility for the distrust present in insurer remarks such as these. Consequently, this recurring problem absolutely needs to be addressed and resolved by the repair industry or, lacking that, then by others.
The original findings and subsequent appellate affirmation in Snyder vs. State Farm substantiates the regular and widespread use and application of deception practices in this case on the part of State Farm upon their insureds. And they’ll be paying a steep price for those practices. Were repair shops to be prosecuted by insurers, consumers or State’s Attorney Generals for fraudulent practices, those shops would likewise pay a steep price for their indiscretions. The truly sad fact of the matter is the customer ultimately bears the financial burden in both instances, either in the form of now more-expensive premiums or by absorbing the actual or perceived loss of vehicle value due to the presence of aftermarket parts and/or paying for something they didn’t receive.
Given the long-standing existence and use of aftermarket parts, we recommend the following steps be taken by both the insurance and repair industries:
1. Require full and complete disclosure and discussion of (a) the existence of aftermarket parts, (b) the benefits and drawbacks of aftermarket parts in regard to safety, fit, cost and long-term financial impact of their utilization, and (c) allow the consumer to ultimately decide for or against their use. Disclosure would be mandatory on the part of the insurance company at the time of sale of their policy and, in the case of repair shops, at the time of repairs.
2. Create a two-tier insurance policy structure – one that provides an “OEM-only” type of coverage, the other being an “aftermarket only” coverage, both priced according to the true and verifiable costs and benefits attendant with each option.
3. Revise repair estimating guidelines to accurately reflect the time typically necessary for the installation of aftermarket parts vs. OEM, since present time studies are predicated on OEM parts use exclusively.
4. Allow repair shops the ability to reap mark-ups on aftermarket parts that are equal to OEM mark-ups.
5. Most importantly, both industries must actively seek to eliminate fraud. In so doing, monies that are typically lost due to fraudulent claims and claims handling practices and/or fraudulent repair practices are freed up to be applied toward the bottom line of insurer, repairer and consumer alike.
We hear both industries claiming to be victims of the other’s tactics, influence, power or lack of it, ad infinitum. When all is said and done, however, one truth remains: You need to do right by your customer each and every time. If you’ve unduly profited by passing along a product that’s less than what it was represented or thought to be, you’re nothing more than a snake oil salesman and charlatan, regardless of your stated profession. The recommendations provided here can be readily implemented and to the benefit of all concerned. Moreover, they put a lid on the seemingly endless cycle of accusations, distrust and now-costly litigation that surrounds the issue. After 20-some odd years of this, isn’t it about time we resolved the matter and moved on?
Jack Lundberg, executive director
Ohio Board of Motor Vehicle Collision Repair Registration