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U.S. Senator Urges Attorney General to Investigate Auto Insurance Scheme

Richard Blumenthal (D-Conn.) says steering has the “harmful effect of limiting consumer choice, creating a serious safety risk and suppressing competition in the auto repair industry.”

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Following a CNN investigation uncovering new evidence that auto insurance companies may be directing repair shops to use cheaper and possibly more dangerous parts, U.S. Senator Richard Blumenthal (D-Conn.) sent a letter to Attorney General Eric Holder, urging the Department of Justice (DOJ) to investigate. Blumenthal wrote that auto insurers may be pressuring consumers to repair their vehicles at their preferred repair shops, which have agreed to use cheaper parts in order to save the insurance company money. In the letter, Blumenthal requested the DOJ investigate auto insurance practices that are not only possibly illegal, but that may also seriously compromise the rights of consumers and put the safety of roads, motorists and passengers at risk.

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“Contrary to what consumers may be led to believe by their insurers, repair shops preferred by insurers do not necessarily equate with quality repairs,” Blumenthal wrote. “It seems to be common knowledge among auto repair shops that the best way to land a coveted spot on an insurer’s preferred list is not necessarily by delivering consistent, quality service, but by agreeing to charge below-market labor rates and use cheaper, salvaged, used or even counterfeit parts of questionable quality and safety.

“Unfortunately, many consumers are also being misled into thinking that they are required to have their car repaired at one of these shops. This has the harmful effect of limiting consumer choice, creating a serious safety risk and suppressing competition in the auto repair industry.”

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Over five decades ago, the DOJ issued a consent decree to stop auto insurers and repair shops from corroborating and deceiving consumers. In the letter, Blumenthal requested the DOJ determine whether insurers are in violation of the 1963 consent decree or any other federal laws.

Here is the full text of Senator Blumenthal’s letter to Attorney General Holder:

The Honorable Eric Holder

Attorney General of the United States

Robert F. Kennedy Building

950 Pennsylvania Avenue NW

Washington, DC 20530

Dear Attorney General Holder:

As a longtime advocate of consumer choice, I write to bring to your attention to troubling new evidence that our nation’s top auto insurers continue to engage in anticompetitive and possibly illegal tactics to pressure consumers into repairing their vehicles at insurer-preferred repair shops. As uncovered in a special investigation featured on Anderson Cooper 360 Wednesday evening, insurance steering not only undermines a basic consumer right, but can also compromise the safety of vehicles on our nation’s roads – endangering motorists and their passengers.

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I urge the Department of Justice (DOJ) to immediately investigate such practices by the auto insurance industry and act swiftly to protect the safety of consumers and preserve competition in the auto repair industry.

As junkyard, remanufactured and used parts of substandard quality become increasingly widely available, auto insurers are adopting alarming new ways to save money at the expense of consumer safety. Contrary to what consumers may be led to believe by their insurers, repair shops preferred by insurers do not necessarily equate with quality repairs. It seems to be common knowledge among auto repair shops that the best way to land a coveted spot on an insurer’s preferred list is not necessarily by delivering consistent, quality service, but by agreeing to charge below-market labor rates and use cheaper, salvaged, used or even counterfeit parts of questionable quality and safety. Unfortunately, many consumers are also being misled into thinking that they are required to have their car repaired at one of these shops. This has the harmful effect of limiting consumer choice, creating a serious safety risk and suppressing competition in the auto repair industry.

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According to a 1963 consent decree with the DOJ, a number of insurers were ordered to stop: “sponsoring any appraiser; directing, advising or otherwise suggesting any person or firm do business with any independent or dealer-franchised automotive repair shop; exercising control over the activities of any appraiser; and fixing or otherwise controlling the prices charged by automotive repair shops for the repair of damage to the vehicle or for labor in connection therewith, by use of a flat rate.” Over 50 years have since passed, and consumers and auto repairers possibly remain victims of the very same misconduct insurers were directed to stop doing decades ago.

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I urge the DOJ to investigate and make a determination as to whether such practices violate the 1963 consent order or any other current federal laws. As you investigate this matter, I urge you to use your authority to investigate the contents of contracts between insurance companies and facilities listed in their direct repair programs or preferred lists. I would also like to request an update regarding DOJ’s understanding of the current signatories of the 1963 consent decree and whether they continue to be bound by the consent decree in light of business transactions in the years since the decree was signed.

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Thank you in advance for your prompt attention to this important matter harming consumers and the auto repair industry, and compromising vehicle safety.

Sincerely,

Richard Blumenthal

United States Senator

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