Should car insurers steer drivers to repair shops?

Mary Lou Jay

If your vehicle has ever needed repairs after an accident, your car insurance company may have recommended that you get the repairs done at a particular body shop. Is this a good deal for you, as a consumer? Insurers say yes, but auto body repair shops say no.

In-network repairs

After you've had an accident, an insurance adjuster or claims representative usually gives you a repair estimate. You then take the car to an auto body shop to determine what it charges for the repair. If the repairs cost more than the insurer allows, you have to pay the difference -- or negotiate with your insurer and repair shop.

Most insurers, however, have a network of “direct repair shops,” which agree to make the repair for the insurer's estimate. Insurance companies often steer motorists to these shops by recommending them or by waiving certain costs (like a portion of the deductible) if their policy holders use these shops.

A good deal?

Insurance companies say that their repair shop networks help ensure that consumers get a quality repair job. Customers who use shops in the network save money, too, because they won't have to pay any additional charges. In addition, recommending a direct repair shop makes the process easier for consumers, because they don't have to find a reputable repair shop on their own.

But representatives of the auto repair industry warn that consumers may not be getting as good a deal as they think. They say that the rates paid by insurers to direct repair shops are too low and that they don't allow a body shop to do a quality repair job. They argue that consumers should be free to choose any shop they want.

Many body shops also dislike insurers' requirements that they use aftermarket parts (which are often less expensive) to fix vehicles. They say that these parts aren't as good as those from the original equipment manufacturer (OEM).

State laws

At the urging of the auto repair industry, several states have passed or are considering anti-steering laws, which severely restrict the ability of insurance companies to recommend certain repair shops. According to the Property and Casualty Insurers Association of America, bills dealing with auto repairs were filed in 40 states in 2011; many involved anti-steering.

Insurers say these laws are unconstitutional. Body shops say anti-steering laws are the only way to make sure that consumers have a choice in deciding where to get their vehicles repaired.

Insurers are challenging some long-standing anti-steering laws in court. Last year, the Property and Casualty Insurers Association of America sued the State of Rhode Island over a 1997 law requiring insurers to give drivers who have had an accident a choice of an auto body repair shop. Once vehicle owners have told the insurer they want to use a certain shop, the insurer is not allowed to recommend any other. The lawsuit claims that this interferes not only with an insurer's rights to talk to its customers, but with customers' rights to hear about all their options.

The discussion over direct repair shops is far from over. The Property and Casualty Insurers Association of America reports that 30 anti-steering laws in 14 states were defeated or stalled in the legislatures during 2011, but representatives of the auto repair industry are vowing to continue the fight to get anti-steering laws passed in the states that don't have them.

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