A Washington state legislator plans to file a bill giving consumers the right to invoke an independent appraisal when there’s a disagreement about costs to repair the vehicle.

“It is not only a consumer protection bill to make sure that insurance companies are paying for what they should pay for, but also a road safety bill to make sure that the vehicles, once back on the streets, are safe for the driver and everyone around them,” Rep. Strom Peterson (D-District 21) said Monday.

The bill, if passed, would allow the consumer to make a written demand for a third-party appraiser. The insurance company would have 10 days to start the process.

Peterson said the bill aims to fix customer and repair shop complaints about lengthy claim processes caused by insurance cost disputes.

“I think of all the people out there who don’t have the resources,” Peterson said. “They need their car quickly. People who are forced into making the decision to get their car repaired not to the fullest. They just trust their insurance company. There are a lot of vulnerable people out there or people who just don’t have the time.”

Peterson said his family has personal experience with an insurance company not wanting to pay the cost of the repair after another driver struck his wife’s car while it was parked.

The vehicle needed extensive work because of sensor and camera damage, he said.

A recent study by AAA found that advanced driver assistance systems, such as automatic emergency braking, blind spot monitoring, and lane departure warning, can increase repair costs by up to 37.6 % after a crash.

“Even minor damage to systems such as front radar or distance sensors can result in additional repair expenses ,” the study says. 

“At every point, the insurance company would come back and say we are not paying for that,” Peterson said. “We are only going to pay X, not Y. My wife started talking to the folks at the repair shop, a great family-owned company, and they told her this was much more the norm than the rarity.”

The insurance company approved the shop, Peterson said. Yet, the insurance company argued about the shop’s costs.

Ultimately, the insurer paid for the repair, partly because of his wife’s determination, Peterson said.

“Even if she weren’t married to a legislator, she would have fought this,” Peterson said.

Peterson plans to file the bill in the house in time for the legislative session starting on Jan. 8.

Oregon already has a right to appraisal law. Texas and South Carolina have filed bills for the right to appraisal recently, but both have idled in committees.

The bill is partly in response to concerns Jeff Butler, owner of Haury’s Collision & Vintage, shared with the legislator.

Butler sent a letter and petition to legislators Friday asking for auto insurance reform to protect businesses and the public against “unfair and deceptive practices” he says insurers are using through photo estimating, artificial intelligence (AI), and virtual claim processes.

The National Association of Insurance Commissioners (NAIC) recently approved a model bulletin on the use of AI by insurance companies.

The “Model Bulletin on the Use of Artificial Intelligence Systems by Insurers”  outlines the need for processes and controls to prevent possible AI inaccuracies, discriminating biases, and data vulnerabilities.

Butler said insurance companies are using bad faith claim practices, including undervaluing repair work, drawing out claims processes, and abandoning vehicles at repair facilities and tow yards.

“The industry has to speak up and tell representatives and senators in their districts what is happening and do it in a clear and concise matter,” Butler told Repairer Driven News on Monday. “We have to do these things to combat the dozens of lobbyists that insurance companies have in each state capital.”

Butler said he spent weeks writing and revising the letter to clarify the issue to legislators.

“We have costs in doing business and insurers are trying to take our temperature to see how hard we will push back,” Butler said.

Repair shops are facing higher costs, such as rising labor rates, Butler said. Shops can’t survive at the costs insurance companies are trying to pay, he said.

“In order to provide a living wage job, we have to get paid,” Butler said. “We can’t run our business without compensation for the services we provide.”

In his letter, Butler asks for legislation that gives the Insurance Commission authority to fine/sanction insurers for individual claim violations while defining requirements for claims investigations.

He also asks that insurers be required to pay reasonable costs for the appraisal process and the costs associated with repair work that meets vehicle manufacturers’ required procedures and processes.

“Insurers are flagrantly violating Washington law in the post-COVID-19 marketplace, and their actions are left unchecked by the very regulatory authority that is supposed to oversee the insurance industry and protect consumers and enforce the law,” the letter said.

Since the start of the pandemic in 2020, insurers are opting out of in-person inspections and instead using photo estimating and virtual claims, Butler says in the letter.

In a May 2023 report from the Office of the Insurance Commissioner (OIC) of Washington State, the office also identified that “complaints against property and casualty are at historic level for the Consumer Advocacy Program.”

During a July 2023 OIC workshop, Washington Insurance Commissioner Mike Kreidler commented “I believe we have some serious issues right now. We’ve seen a 63% jump in complaints about claims issues, on average… I know supply chain issues have caused some repair delays but I’m especially concerned with the increase in consumers with complaints about the claims experience that do not involve supply chain problems… Some of the most concerning issues we’re hearing involve the issue of the use of photo that can produce very little repair estimates. Actual human adjusters are not inspecting the damage and insurers are not thoroughly explaining why they disagree with a consumer’s repair estimates.”

Amidst mounting concerns, the National Association of Insurance Commissioners (NAIC) recently approved a model bulletin on the use of AI by insurance companies.

The “Model Bulletin on the Use of Artificial Intelligence Systems by Insurers” outlines the need for processes and controls to prevent possible AI inaccuracies, discriminating biases, and data vulnerabilities.

Butler’s letter said, “This virtual investigation and damage analysis process allows insurers to write massively deficient, lowball repair estimates on collision damaged vehicles and then blame ‘poor quality photos’ as the reason for their lowball settlement offer. Many times, these lowball estimates are sent from no-reply email addresses.”

Insurers then refuse to pay costs identified by expert repair technicians through a damage analysis, the letter said. The insurer also refuses to give a reason for denying the cost.

“This process can go on for weeks or even months in some cases, until finely the insurer acknowledges enough of the damage to declare the vehicle a total loss as outlined in RCW 46.04.514 (Salvage vehicle definition),” the letter said. “So, eventually, insurers realize after weeks or months what used to be discovered in one in-person visit, that the vehicle cannot be repaired in an economic way.”

Insurance companies then refuse to pay costs associated with the delays, claims investigation, and vehicle storage costs, the letter said.

Actions by the insurance companies are breaking existing state law, Butler said. Such as, laws that require companies to act promptly upon communications concerning claims, have prompt investigation of claims, and provide reasonable explanations for denial of a claim.

“Consumers have filed many complaints to the Insurance Commissioner, however, the OIC will not take action on individual circumstance,” the letter said. “What is even more alarming is that I have personally witnessed insurers who misrepresent pertinent facts when responding to the Insurance Commissioner complaints filed by consumers.”

Washington Independent Collision Repairers Association (WICRA) presented a survey of members about the impact of photo estimating on their businesses to the Office of Insurance Commissioner in Washington State in July. The association received 30 responses to its survey.

The 30 independent shops said they see, on average, more than 1,000 photo estimates at their businesses each month. About 93% of auto claims were settled solely on the insurer’s review of photos.

Eighty percent of the shops said none of the photo estimates they reviewed were accurate.

Seventy percent of shops said they had to resubmit information to the insurer multiple times before receiving a response or payment.

Sixty-three percent of respondents said insurers “routinely” said “we can’t see all the damage” in the photos. The same percent of shops said insurers “regularly” denied their repair plans.

On average, the shops surveyed said consumers drove 319 unsafe vehicles to their shop a month after the consumer received a photo estimate from the insurer.

“Thousands of consumers are unknowingly driving collision-damaged vehicles that are unsafe to operate after getting a repair estimate from an insurance company,” the association said in its survey findings. “Vehicles with frame and structural damage and/or deployed air bags and other safety systems that are compromised will not perform as the vehicle manufacturer designed in a subsequent collision, but many insurers are not informing consumers of these safety hazards because either they are not vehicle repair experts and/or are simply trying to save money on towing and rental costs.”

Washington repair shops aren’t alone in their concern about the claim process. The Wisconsin Collision Repair Professionals (WCRP) recently met with insurance officials in their state raising similar alarm bells about insurers’ refusal to cover labor and repair costs.

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