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PCI RI Auto Body Report

PCI RI Auto Body Report

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Published by PolitiFactRI
The Property Casualty Insurers Association of America contends that auto body shops have used legislation to drive up the cost of collision repairs in Rhode Island compared to the rest of the United States.
The Property Casualty Insurers Association of America contends that auto body shops have used legislation to drive up the cost of collision repairs in Rhode Island compared to the rest of the United States.

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Published by: PolitiFactRI on Jul 17, 2012
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 © 2012, Property Casualty Insurers Association of America
PCISPECIAL REPORT
 
May 8, 2012
 
Rhode Island Auto Body Repair: Back for More
Since 2003, sixteen (16) pieces of legislation favorable to and promoted by the Auto BodyAssociation of Rhode Island (ABARI) have become law in Rhode Island. All of them havebeen geared at either increasing the amount paid for auto body repairs, or limiting the role ofauto insurers in the claims process, reducing the insurers’ ability to provide “checks andbalances” on behalf of their customers.In 2012, ABARI is again back for more with Senate Bill 2686. This bill consolidates legislationpassed in previous years, but adds new concepts like a private right of action for body shops,that could mean higher costs for consumers that already burdened with some of the highestcosts for auto body repair and auto insurance in the nation.This special report will provide background on the issue and look in more detail at theprovisions in the new bill.
Rhode Island’s High Cost of Auto Repair and Auto Insurance 
Rhode Island continues to be one of the most expensive states in the nation for auto bodyrepairs. Average collision claim costs (severity) continue to increase; the average claim costaccelerated 12.1% from 2006 to 2010; overall through 2011(3), the cost has grown 8.6%. Incontrast, the countrywide average has been very flat, decreasing 0.3% overall
1
.
Rhode
 
Island
 
Collision
 
Claim
 
SeverityContinues
 
to
 
Grow
4
2024681012142006 2007 2008 2009 2010 2011(3)Rhode
 
Island CountrywideNote:
 
Claim
 
severity
 
is
 
the
 
average
 
claim
 
costSource:
 
Fast
 
Track
 
Monitoring
 
System
 
 @
 
3
rd
Qtr.
 
2011
%
 
Growth
 
Since
 
2006
 
1
Fast Track Monitoring System @3
rd
Qtr. 2011, a publicly available report of auto loss trends prepared by IndependentStatistical Service, Insurance Services Office, Inc. and National Independent Statistical Service.
 
 
 © 2012, Property Casualty Insurers Association of America Page 2
Given Rhode Island’s rapidly rising costs, it is no surprise that drivers in this state pay the 6
th
 highest collision insurance premium in the nation.
2
 
Rhode
 
Island’s
 
Average
 
Annual
 
Collision
 
Premiumis
 
6
th
Highest
 
in
 
the
 
Nation
0100200300400Rhode
 
Island Countrywide
$356$294
Source:
 
National
 
Association
 
of 
 
Insurance
 
Commissioners
$
 
Back for More: A New Year, a New Bill That Will Harm Consumers 
In 2012, in the midst of a struggling economy, not satisfied with having the most restrictivelaws or some of the fastest increasing costs in the country, ABARI brings forward a billdesigned to insulate auto body shops from competition with each other, potentially risk thesafety of their own customers by encouraging more repairs on severely damaged cars, andfurther limit the insurer’s ability to manage costs and quality of repairs with more restrictiverequirements. And as the icing on the cake, the bill provides for the ability to file lawsuitsagainst insurers for alleged violations and is designed to discourage any attempts by insurersto do right by their customers under the threat of protracted and expensive litigation.
S. 2686 Motor Vehicle Property Damage Claims Settlement Act 
S. 2686 moves existing laws on rental vehicles, steering, procedure pages and appraisalsthat have played a significant role in making Rhode Island one of the most expensive statesin the nation to repair or insure a car are moved into the new chapter. Moreover, they arecompounded with several new concepts aimed at preventing auto insurers from making anyattempt to do right by their customers under threat of protracted and expensive litigation. Bylooking at the historical results, we have seen what the existing laws have done to repair andinsurance costs, let’s look at the new provisions.
Total Loss Vehicles: Section 4-6 
The language in this section is identical to legislation filed (and later withdrawn pursuant to anagreement between the parties) in 2011 and seeks to limit when an insurer can declare avehicle a total loss by amending the law governing the conduct of appraisers to state that noappraiser may deem a vehicle a total loss unless the cost to restore the motor vehicle to pre-
 
2
National Association of Insurance Commissioners, Auto Insurance Database Report, 2008/2009 (2011 Edition)
 
 
 © 2012, Property Casualty Insurers Association of America Page 3
accident condition is more than 75% of the “fair market value” of the vehicle based on anationally recognized source of such values.This measure would severely limit the ability of an insurer to declare any vehicle a total loss.Just because a vehicle can be repaired doesn’t mean that it should be or that it’s in the bestinterest of the owner that the car be repaired.
Why we oppose this provision: 
This provision is focused only on the initial estimate of the cost to repair the vehicleand does not consider other factors that drive both the decision and overall loss costs:
o
In most cases, the initial estimate prepared by a shop or insurer does not reflectthe ultimate cost to repair the vehicle. It is often the second estimate or“supplement” that is prepared after the car has been partially disassembled(and damage that is not visible at the initial inspection can be seen) that leadsto a vehicle being declared a total loss.
o
The decision to “total” a vehicle is based on other factors than just the cost ofthe repairs, for example:
When it is likely that additional damage will be found when thevehicle is disassembled.
When the nature of the damage indicates that the vehicle shouldnot be repaired, even though it may be “possible” to repair, forsafety reasons, the likelihood of future problems or serving thebest interest of the customer.
The more severe the damage, the longer the repairs will take, sorental costs (paid by insurance or the owner out of pocket) are akey consideration. The longer the repair takes, the less likely theconsumer is going to be satisfied with the experience and themore likely that there could be problems after the repair.
The vehicle may have significant salvage value that could lowerthe overall cost of the claim and contribute to lower loss costs inthe long run.
Both insurers and body shops accurately claim that they have the right or obligation toprotect their customers’ interests. The relationship between repair shops and autoinsurer provides “checks and balances” that benefit consumers; this bill wouldsignificantly impair that function.
o
This bill and others that have preceded it seek to remove those checks andbalances, and push the insurer further out of the repair process.

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