October 1999 Editor's Page
Let the Shop Decide What Parts Work

As I write this article, closing arguments in the State Farm non-OE parts lawsuit are still two or three days away. The smart money is saying that State Farm will lose the lawsuit, an opinion that has held firm since the poor performance of State Farm’s CEO under questioning by plaintiffs’ attorneys in the case.

If State Farm loses, what will it mean for the future of non-OE crash parts in the repair industry?

Opponents of non-OE parts hope it signals the elimination of non-OE parts specification by insurers.

That outcome is unlikely.

Though the numerous class-action lawsuits raise the cost of using non-OE parts, the economics of crash parts will always foster some form of non-OE aftermarket alternatives. Insurers will balance their perceived savings from fostering this competition with the cost of defending themselves in lawsuits.

The most likely way insurers will insulate themselves from future lawsuits will be to remove themselves from the OE vs. non-OE debate entirely. How so?

By promoting non-OE parts usage targets, both new and used, to their referral facilities, insurers can promote recycled and aftermarket parts at the repair facility’s and insured’s discretion. If the repairer is the party making the part decision, the insurer is less likely to be the target of a lawsuit.

By setting the alternative parts content targets at a percentage of the repairer’s overall parts usage, the insurance industry will put the decision making process where it belongs- at the shop level. At the same time they will foster both new and used alternatives keeping pressure on OEs to hold the line on parts prices.

Repairers are best able to determine when and where alternatives such as salvage and aftermarket parts can fit into the repair process on any given vehicle. Moving the decision back to the shop level is the most logical step for insurers.