A NAMIC column in Property Casualty 360 extolling the virtues of direct repair program shops implies non-DRP collision repairers and their policyholder customers might commit insurance fraud.
And while that might be the most egregious part of the opinion piece, it’s not the only questionable one.
First, let’s get this out of the way:
There’s nothing wrong with direct repair shops. It’s a perfectly legitimate business decision for a shop owner to trade lower revenues on individual claims for the prospect of more volume through insurance referrals. And there’s nothing wrong with an insurer referring a quality DRP shop to a customer who legitimately has no idea whom to patronize.
But when the shop puts the insurer’s interests over that of a customer and OEM procedures for a safe and pre-loss repair, that’s a problem. When the insurer attempts to impose DRP-type concessions on an unaffiliated shop without granting any of the benefits, that’s a problem. When an insurer misrepresents non-DRP shops and complicates the process for their own policyholders, that’s a problem.
None of these concepts alleged in litigation, shown in media reports and described by the California Department of Insurance, made it into the Wednesday column by National Association of Mutual Insurance Companies public policy Vice President Robert Detlefsen.
So it’s important that insurers, customers and body shops realize that these are pitfalls in the current DRP structure, and also get the full story on Detlefsen’s claims.
As for what did make it into the column, let’s go through the whole thing point by point:
If you’re not on a DRP, you’re just one willing customer away from running a scam, if you haven’t already. That’s what seems to be implied here. Show us some data or anecdotes that connect these fairly egregious dots.
And if we’re talking potentially systemic flaws, the DRP structure by its nature and according to Detlefsen’s praise encourages cost-cutting and speed.
Questioning if those specific elements could lead to improper or incomplete repairs is logically appropriate given some of our examples above. Implying that anyone who isn’t directly an insurer’s business partner might cheat them is hugely inappropriate.
Finally, there’s three parties in an insured repair. Assuming nobody’s out to cheat each other, shouldn’t body shops be aligned with the customer before the insurer, and vice versa?
Laws affecting DRPs can and do differ across states. The main issues addressed by such laws concern the ability of insurers to require policyholders to seek repairs at a particular shop and the amount and type of information that is allowed (or required) to be communicated to the policyholder.
Despite the benefits they provide to consumers, DRPs have been the subject of protectionist legislation aimed at preventing insurers from effectively operating these programs. Some states have enacted or are considering laws that require insurers to obtain independent appraisals that needlessly extend DRP shop repair times and increase claim costs.
Considering that insurers seek independent appraisals for non-DRP shops to check their work, why shouldn’t the reverse be done?
Other states have enacted or are considering laws that restrict the ability of insurers to provide information to policyholders regarding DRPs. Courts in several jurisdictions have struck down these so-called “anti-steering” laws on constitutional grounds, implicitly recognizing the benefits consumers derive from DRPs.
Fortunately, some states have pursued a more consumer-friendly approach by allowing insurers to recommend that repairs be made at a shop selected by the insurer, while prohibiting the insurer from requiring or coercing claimants to use the insurer’s preferred shop.
The last of these is actually the case in many states. If all insurers followed that rule, then nobody would be seeking to modify it, California wouldn’t be demanding insurers back up their claims, and shops probably wouldn’t be suing insurers for tortious interference.
There’s definitely shops which certainly need to get their repair quality act together or quit taking newer-model (or any) vehicles, and there’s no excuse for fraud. But there’s plenty of collision repairers who don’t want to cede as much influence to insurers as a DRP shop but match or surpass DRP repair quality.
Disparaging them does them and insurers’ customers an injustice — particularly as insurers reportedly look to shed shops from DRPs.
“Insurers’ direct repair programs enhance consumer welfare”
Robert Detlefsen, NAMIC, in PropertyCasualty360.com, May 18, 2016
Featured image: A NAMIC column in Property Casualty 360 extolling the virtues of direct repair program shops implies non-DRP collision repairers and their policyholder customers might commit insurance fraud. (Screenshot from www.PropertyCasualty360.com)