Vermont Department of Health seeks comments on insurance practices and replacement parts

The Vermont Department of Financial Regulation (DFR) held a meeting for consumers Tuesday to gather information for a study of the business practices of auto insurance companies in the state.

The study is the result of a Vermont law passed in 2023 that requires the department to study and make recommendations on auto insurance in the state. A final report is due to the House Committee on Commerce and Economic Development and the Senate Committees on Finance and Judicary by Nov. 15.

However, Emily Brown, DFR deputy commissioner, said during Tuesday’s meeting that the department would likely ask for an extension until February 2025. She said the department was still in the fact-gathering and analysis phase.

The next meeting for consumers will likely be in October, Brown said. Repair shops in the state will also be given a survey to fill out in the coming months. That could include follow-up interviews with some repair shops.

Brown said Tuesday’s meeting was held to hear consumer feedback. But the Times Argus advert by DFR did not specifically mention that the meeting was for consumers. No consumers spoke during the hybrid meeting, which was attended by 23 people via webcast and two people in the audience.

The new law requires DFR to focus on whether the state should establish a minimum work-related reimbursement. It also requires DFR to examine:

• • If insurance companies and independent property appraisers take into account the interests of insurance companies, car repair shops and consumers equally;
  • To what extent do insurance companies control or influence the bodywork and paintwork repairs chosen by the consumer and how should this affect the liability of the insurance company, in particular with regard to the quality and safety of repairs;
  • The use of Direct Repair Programs (DRP) and their impact on the automotive repair industry and consumers;
  • Information provided to consumers and whether they are adequately informed about the potential financial risks arising under the policy, including in relation to labour rates, materials rates, hours and loss of use differences;
  • Whether insurance regulation should be updated to respond to changes in the market or business practices that may impede the prompt, fair and equitable resolution of claims where liability has become reasonably clear;
  • Whether carrier pricing methods and improvement practices used are legal and fair to consumers;
  • The potential cost savings from using spare or recycled parts in repairs and the issue of whether spare parts should be certified, whether and to what extent the carrier should be liable for incidental costs associated with the use of spare or recycled parts, and the issue of notifying consumers about the use of spare or recycled parts;
  • Number and type of complaints received by the Department of Financial Regulation and the Consumer Assistance Program in relation to motor vehicle insurance policies and bodywork repairs;
  • If additional regulatory measures are necessary to prevent anti-competitive behaviour and ensure the interests and protection of all parties, especially consumers;
  • How car repair costs affect the price and availability of car insurance, and whether a minimum wage rate could affect price and availability.

Two repair shop owners and representatives of the American Property Casualty Insurance Association (APCIA) and CAPA Certified Auto Parts spoke during the meeting.

Mike Parker, owner of Parker’s Classic Auto Works, said it would be difficult to understand this complex issue in two meetings.

“If you’re not careful, you’re going to create more chaos,” Parker said. “If you set a minimum wage for a body shop, that becomes the maximum wage. That’s the end of it.”

Parker also expressed concerns about replacement parts, including CAPA-certified parts.

In 2016, Parker questioned CAPA-certified high-strength steel components after its hardness tests showed the parts had 100% failure rate for “like type and quality” matching OEM parts, as required by insurance companies.

Parker conducted his tests on Subaru aftermarket radiator connecting rod, and later, on an aftermarket Nissan rear bumper. CAPA subsequently decertified at least one of its parts and called on the shops to submit any complaints about CAPA certified parts. Parker tests on Nissan bumper prompted the NSF to ask Diamond Standard renew part.

IN 2019, NSF stopped selling replacement parts certificates of companies dealing with car body repair and collision repair.

Parker also addressed the issue of low insurance payouts and the constant pressure insurance companies put on repair shops to cut costs, which has led some to make unsafe repairs.

“They (insurance companies) tell the shops what they’ll pay, and there’s no negotiation,” Parker said. “A good policy says they’ll cover the cost of repairs.”

Parker also explained that repair shops have contracts with consumers, not insurance companies. He said repair shops should not negotiate prices with insurance companies on behalf of the consumer.

Terry Fortner, executive director of CAPA, said the association was formed in 1987 to oversee a testing program to ensure the quality of automotive replacement parts.

“Independent, impartial, nonprofit, completely transparent and disinterested, CAPA has since become the recognized automotive industry authority on the quality and safety of collision repair parts,” Fortner said. “Our comprehensive testing program is a valuable public service that provides consumers, auto repair shops, parts distributors and insurance adjusters with the reliable, objective means they need to identify quality and replacement parts.”

Fortner said CAPA parts will fit, work efficiently and be durable.

“We believe in competition, and competition is good for the consumer and the collision repair industry,” Fortner said.

Jamie Feehan, a representative for APCIA, noted that car insurers are facing higher costs for assessing underwriting due to a number of factors, including inflation, supply chain disruptions, poorer driving and increased carelessness while driving.

The average cost of repairs continues to rise, Feehan said, as do medical rates, which are 17% higher than the Consumer Price Index.

Feehan said premium rates are trying to catch up but are still lower than the costs of the price increases.

“APCIA strongly supports the use of aftermarket parts in automotive repairs for a number of reasons, including the fact that they help reduce repair costs, which translates into lower insurance claim costs, which helps control premiums,” Feehan said.

Feehan said parts competition keeps the cost of producing auto parts low. He added that restricting the use of auto parts increases premiums.

Pictures

Photo courtesy of wellesenterprises/iStock

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