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Letter to the Editor

ASA Supports California Senate Bill Opposing Insurer Owned Repair Facilities

The Automotive Service Association (ASA) supports California Senate Bill 1648 introduced by State Sen. Jackie Speier, D-San Francisco. By a 5-0 vote, the bill passed the Senate Insurance Committee, chaired by Speier, on May 1.

Bob Redding, ASA's Washington, D.C., representative, sent a letter to Speier in support of her bill. Redding said, "ASA supports Senate Bill 1648 and looks forward to working with you as the bill makes progress in the legislature. As small business owners, we believe the rights of our customers have to be protected. Your legislation provides this protection."

Earlier this year, the ASA board of directors approved the following related policy:

ASA opposes insurance companies having a controlling ownership interest in automotive repair facilities and views such ownership as being in direct conflict with the consumers' right to choose. ASA has historically supported the consumers' absolute, unequivocal right to choose a repair facility for a collision or mechanical repair.

Senate Bill 1648 opposes insurance companies having a financial interest in auto body repair facilities. If the legislation is enacted, any insurance company that has a controlling interest in an auto body repair facility will have three years to divest itself of its interest. It also makes it illegal for insurance companies to offer an incentive program for referring an insured to a shop owned by the insurer.

The bill analysis written by the Insurance Committee states, "There is an inherent conflict of interest that imperils consumer protections when an insurer that pays for the repair of a vehicle has that repair work done at a facility from which it derives income as an investor."

Speier contends insurer ownership in repair facilities could lead to the sanctioning of non-OEM parts. California law requires a repair facility to disclose when non-OEM parts are being used in the repair of a vehicle.

Speier said, "The anti-steering regulations (in California) are weak and provide no deterrence to an insurer coaxing insured's to shops that have a DRP [direct repair program] relationship with the insurer."

In addition, she said, "Insurer ownership would only serve as a greater incentive to steer insured [motorists] to shops owned by the insurer."

There is a precedent in California to limit ownership. Hospitals are not allowed to hire physicians, but instead have contractual agreements with them. Physicians are also not allowed to refer patients to labs they own or in which they have a controlling interest.

The Automotive Service Association, headquartered in Bedford, Texas, is the largest not-for-profit trade association of its kind, internationally serving more than 12,000 businesses and approximately 65,000 professionals from all segments of the automotive service industry.

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