Colleyville, Texas -- September 18, 2013 -- The Automotive Service Association (ASA) is one of the latest U.S.-based collision repair associations to issue a position statement that takes a stand against insurer mandates. This comes on the heels of State Farm's recent national rollout of the PartsTrader program across the U.S.
In a letter released to its affiliates on Sept. 13, 2013, ASA outlined its position against State Farm Insurance's requirement for shops in some states to use the PartsTrader online marketplace to purchase parts.
"ASA is taking a firm stance against insurance company mandates that limit a repairer's right to choose their vendors, distributors and suppliers. Listed are some of the reasons a repair facility would consider when selecting a supplier: service, financial terms, discount, delivery, part quality, return process and policy, e-commerce. Price is not always the most important factor," says ASA president Dan Risley in an ASA position statement. "Anything that negatively impacts a collision repairer's cycle time and efficiency should be avoided for several reasons. As cycle time decreases, customer service scores improve for both the collision repair facility and insurance company. Increasing cycle time results in increased rental costs. In fact, State Farm has often been quoted as stating that one additional day of rental costs State Farm in excess of $43-million."
"Restrictions placed on shops that preclude them from using their preferred parts vendors creates a layer of unpredictability and inefficiency that will negatively impact cycle time and their profitability."
Risley believes insurance company mandates place repair shops at a disadvantage, adding that shops need to be able to freely choose where they get their parts in order to complete repair orders. Although shops are free to remove themselves from such programs, such a decision could potentially harm their businesses.
Despite their contention with State Farm's national rollout its partnership with PartsTrader, Risley and ASA understand State Farm's need to control repair costs, however he argues that the same result can be accomplished without having to place new burdens on collision repairers
"ASA would welcome the opportunity to discuss this further, as a PartsTrader mandate should not remain the only option," he says in ASA's open letter. "Hopefully, our suggestions are viewed as a sincere outreach to devise a solution that is amicable and beneficial to all industry stakeholders."
ASA's letter follows the announcement of support for the Mississippi Collision Repair Association's lawsuit against State Farm from the Alliance of Automotive Service Providers of New Jersey (AASP/NJ).
AASP/NJ's executive director Charles Bryant says the collision industry has rejected PartsTrader as the sole source of parts, while State Farm has been insistent on making the online parts marketplace a mandatory source to buy parts from for shops.
Bryant further questions the motivations behind the move, believing this is more about State Farm looking to improve their own interests rather than helping the collision industry itself, noting that if the collision industry has remained unconvinced of PartsTrader's worth so far that the industry's opinion is unlikely to change.
New York bills aim to make parts mandates illegal
Following the MSCRA lawsuit against State Farm, the state of New York has introduced two bills before the legislature that would bar insurance companies from mandating the use of specific vendors or processes for the purpose of parts and materials procurement.
The respective bills--Bill A7234 and Senate Bill S5786--propose to amend a subsection of New York State's insurance laws that would make it illegal for an insurer to require shops to use a specific provider.
The subsection in question currently states:
"Whenever a motor vehicle collision or comprehensive loss shall have been suffered by an insured, no insurer providing collision or comprehensive coverage therefor shall require that repairs be made to such vehicle in a particular place or shop or by a particular concern."
If the amendment is passed, the subsection will be revised to include:
"...nor require a repair facility to use a specific vendor or process for the procurement of parts or other materials necessary for the repair of a motor vehicle."
Ed Kizenberger, executive director of the New York State Automotive Collision Technicians (NYSACT), believes the bills will help address the perceived illegality of insurance companies requiring the use of specific vendors. He believes requiring repair facilities to use an online marketplace to purchase parts and materials based on the lowest prices could force businesses to relocate outside New York State. He believes repairers should above all be able to source parts from vendors they know and trust in the interest of consumers to avoid having costumers pay any additional costs.
The respective bills have been referred to the Assembly and Senate's insurance comittees for further analysis.
For more information, please read "Mississippi association, shops file lawsuit against State Farm" on collisionrepairmag.com.
For more information on State Farm, please visit statefarm.com.