Vermont Department of Financial Regulations (DFR) held a meeting Tuesday for consumers to gather information for a study into the business practices of auto insurance companies in the state. 

The study is the result of a Vermont law passed in 2023 that requires the department to investigate and make recommendations regarding auto insurance in the state. A final report is due to the House Committee on Commerce and Economic Development and the Senate Committees on Finance and Judiciary by Nov. 15. 

However, Director of Insurance Regulation Mary Block, said during Tuesday’s meeting that the department will likely ask for an extension until February 2025. She said the department is still in the fact-gathering and analysis mode. 

Another meeting for consumers will likely be held in October, Block said. Repair shops in the state also will receive a survey to fill out in the upcoming months. This could include follow-up interviews with some repair shops. 

Block said Tuesday’s meeting was being held to hear from consumers. Yet, a notice placed in the Times Argus by DFR does not specifically note the meeting was for consumers. No consumers spoke during the hybrid meeting that was attended by 23 people via a webcast and two people in the room. 

The new law requires DFR to focus on whether a minimum labor reimbursement should be established in the state. It also is required to study: 

• • If auto insurance carrier and independent appraiser practices equally consider the interests of insurance companies, auto body shops, and consumers;
  • How much insurance carriers control or influence auto body shop repair work chosen by the consumer and how that should affect carrier liability, particularly regarding the quality and safety of repairs;
  • Use of direct repair programs (DRPs) and their impact on the automobile repair industry and consumers;
  • Disclosures made to consumers and whether they’re adequately informed of potential financial exposure under a policy including in regard to any labor rate, material rate, hour, and differentials for loss of use;
  • Whether insurance regulation should be updated to match market changes or business practices that might impede the prompt, fair, and equitable settlement of claims in which liability has become reasonably clear;
  • Whether carrier valuation methods and betterment practices used are legitimate and fair to consumers;
  • Potential cost savings from using aftermarket or recycled parts in repairs and if aftermarket parts should be certified, if and to what extent a carrier should be liable for incidental costs related to the use of aftermarket or recycled parts, and the notification that should be provided to consumers about the use of aftermarket or recycled parts;
  • Number and type of complaints received by the Department of Financial Regulation and the Consumer Assistance Program about automobile insurance policies and auto body repair work;
  • If additional regulatory measures are necessary to prevent anticompetitive behavior and ensure the interests and protection of all parties, especially consumers; and
  • How auto repair costs contribute to the price and availability of automobile insurance and if a minimum labor rate could impact the price and availability.

Two collision repair shop owners spoke during the meeting as well as representatives for the American Property Casualty Insurance Association (APCIA) and CAPA Certified Auto Parts. 

Mike Parker, owner of Parker’s Classic Auto Works, said it would be difficult to understand the complex issue within two meetings. 

“If you are not careful, you will cause more chaos,” Parker said. “If you set a minimum labor rate for the body shop that will become a maximum pay rate. It will be the end-all.” 

Parker also shared concerns with aftermarket parts, including parts certified by CAPA. 

In 2016, Parker called into question CAPA-certified high-strength steel components after hardness tests he completed revealed the parts had a 100% failure rate in matching “like kind and quality” of OEM parts, as required by insurance companies.

Parker conducted his tests on an aftermarket Subaru radiator tie bar, and later, on an aftermarket Nissan rear bumper. CAPA then decertified at least one of its parts and urged shops to submit any complaints about CAPA-certified parts. Parker’s testing on the Nissan bumper led NSF to ask Diamond Standard to revamp the part.

In 2019, NSF ceased aftermarket auto body repair parts and collision-related company certifications.

Short payments from insurance companies was another topic Parker touched on along with continued pressure repair shops get from insurance companies to cut costs, leading some shops to complete unsafe repairs. 

“They [insurance companies] tell the shops what they are going to pay and there is no negotiating,” Parker said. “A good policy says they will pay the cost of the repair.” 

Parker also explained how repair shops have contracts with the consumers, not insurance companies. He said repair shops should not negotiate prices with insurance companies on behalf of the consumer. 

Terry Fortner, CAPA executive director, said the association was set up to oversee a testing program to ensure the quality of automotive replacement parts in 1987. 

“Independent, unbiased, nonprofit, fully transparent and with no vested interest in the outcome, CAPA has since become the auto industry’s recognized authority on the quality and safety of parts used for collision repairs,” Fortner said. “Our comprehensive testing program is a valuable public service that provides consumers, auto body shops, parts distributors, and insurance adjusters with a reliable objective means they need to identify quality and replacement parts.” 

Fortner said CAPA parts will fit, perform, and last. 

“We do believe in competition and competition is good for the consumer and collision repair,” Fortner said. 

Jamie Feehan, representing APCIA, noted that auto insurers experience higher underwriting costs because of numerous factors including inflation, supply chain disruptions, worse driving, and increased reckless driving. 

The average cost of repairs continues to increase along with medical rates, which is 17% higher than the Consumer Price Index, Feehan said. 

Premium rates are playing catchup but still fall below the costs of price increases, Feehan said.

“APCIA strongly supports the use of aftermarket parts in the repair of automobiles for a number of reasons including they contribute to lower repair costs, which results in lower insurance claim costs, which helps control premiums, Feehan said. 

Feehan said parts competition keeps the cost of car manufacture parts lower. He added that restricting the use of car parts raises premiums. 

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