“Ditching this disingenuous ad is a victory for consumers — and a better business practice for GEICO. This incident should send a message that higher standards in insurance industry dealings are appropriate and necessary.”
— Connecticut State Attorney General Richard Blumenthal, after GEICO complied with his request to pull a TV ad that features actress Charo and a GEICO consumer, who claims that GEICO “repaired” his car in a few days, “like new.”
The Auto Body Association of Connecticut (ABAC) alerted Blumenthal to the misleading ad — and explained to him how it’s symptomatic of a larger problem in the industry: steering consumers to preferred shops.
Since the advent of DRPs, insurers have a vested interest in steering. And they’ve gotten quite good at it. According to State Farm’s Dick Luedke, 65% of their claims go to shops in their network.
As if to kick themselves when they’re down, repairers have only exacerbated the situation. Since signing on to DRPs, many shops have stopped advertising and marketing their businesses to the community. Instead, they’ve opted to sit back and wait … wait for the insurer to send them work. This laziness has made them even more susceptible to — and reliant on — insurer steering.
But not everyone in this industry is feeling that reckless with their livelihoods. The members of the ABAC have been actively pursuing a relationship with their state attorney general (AG) and, after a lot of work, have his ear.
“Showing the AG what it’s like working with the Department of Insurance (DOI) has set him on a mission to clean up that department,” says John Shortell, a Connecticut shop manager and an ABAC board member. “Every time he tries to investigate an insurance company, the DOI steps in his way — and that piqued his interest. The smell of guilt was in the air. We’ve taken him along for the ride during our journey, and he’s not happy with what he has witnessed.”
The GEICO ad is just the latest incident. When it was brought to his attention, Blumenthal called on the company to immediately cease running the ad, saying it may give consumers the false impression that GEICO actually repairs cars.
After GEICO complied and pulled the ad, Blumenthal held a press conference explaining that, under state law, GEICO is prohibited from steering consumers to, or requiring that consumers use, preferred auto repair shops. Blumenthal also renewed his call on the DOI to “take action to investigate and enforce violations of state insurance law prohibiting insurers from steering.” In addition, he made it clear that Connecticut’s anti-steering laws are vague and need rewritten because insurers are abusing them and confessed his frustration in dealing with Connecticut’s DOI, which was refusing to cooperate with his office during investigations of wrongdoings.
Repairers forget — or maybe never knew to begin with — that anything that relates to repairing vehicles falls under the jurisdiction of the state AG, not the state DOI. The AG is also empowered to protect consumers. “The DOI governs exclusively the ‘business of insurance,’ ” says Erica Eversman, chief counsel for Vehicle Information Services, Inc. “Repairers, however, are governed exclusively by the AG, answer to the AG and have obligations under state consumer-protection statutes.”
Shortell says that developing a relationship with AG Blumenthal is proving invaluable in helping the association combat steering. Shortell also recommends that, individually, shops develop “preferred” lists — of insurers. “For years I’ve been rewarding well-behaved insurance companies by giving them referrals,” he says. (For more information on how to steer, see “Dirty Little Secret No. 3: Shops Can Steer Too.”)
Ironically, while Blumenthal was speaking to reporters about steering, his wife was speaking with the insurance company of the person who had hit their son a few days earlier. Turns out, the insurer of the at-fault driver was GEICO — and, says Shortell, “they were trying their damnedest to convince Mrs. Blumenthal to take their vehicle to one of GEICO’s DRP shops.”
Georgina K. Carson, editor