Consumer Group Warns Against Insurance Industry Bill to Allow 'Hard Sell' for Insurer-Controlled Auto Body Shops

Group Urges California Assemblywoman Hayashi To Protect 2003 Anti-Steering Law

SANTA MONICA, Calif., July 17, 2009; Consumer Watchdog is urging Assemblywoman Mary Hayashi (D-Hayward) to amend her proposal (AB 1200) that seeks to undo a current California law prohibiting insurance companies from pushing, or "steering," customers to auto body shops under contract with the insurer.

In a letter sent to Assemblywoman Hayashi today, the group explained that a recent amendment to AB 1200 "effectively guts the prohibition on steering and now allows insurers to 'hard sell' a policyholder on the insurer-controlled repair shop, even after the policyholder chooses an independent repair shop." A copy of the letter is available at: http://www.consumerwatchdog.org/resources/071709AB1200.pdf.

California's anti-steering law was enacted in 2003 (SB 551 -- Speier) and prohibits insurance companies from forcing customers to get cars repaired at a particular body shop. The law also prohibits insurers from "suggesting or recommending" body shops once the person has chosen a repair shop. AB 1200 would allow insurers to, at any time during the claims process, badger customers with reasons to use the insurer-preferred shop.

According to consumer advocates, steering can lead to shoddy workmanship and endanger drivers' safety. So-called "direct repair contracts" between insurance companies and body shops encourage auto repair shops to cut corners in order to save the insurer money and earn a spot on their "preferred provider" list, Consumer Watchdog said.

"California legislators were right to stop this kind of anti-consumer steering six years ago, and nothing has changed that would make the relationships between insurers and body shops any better for consumers," said Consumer Watchdog staff attorney Todd Foreman. "If anything, lawmakers should be adding consumer protections to the anti-steering law, not gutting the existing rules."

A copy of the group's letter to Assemblywoman Hayashi is available at: http://www.consumerwatchdog.org/resources/071709AB1200.pdf.

Consumer Watchdog, formerly The Foundation for Taxpayer and Consumer Rights, is a nonpartisan, nonprofit organization.