The New Hampshire Insurance Department (NHID) held a webinar Thursday titled “Understanding Aftermarket Parts in the Repair Process” during which frustration was evoked by collision repair participants in attendance.

The webinar was intended to focus on the use of aftermarket parts in vehicle repairs including their impact on cost, quality, and consumer choice. A presentation was given on the key aspects of RSA 407-D such as definitions, limitations, and disclosure requirements for insurers and repair shops.

Many of the repairer frustrations centered on the quality of aftermarket part materials and insurance company practices.

“Ultimately, it’s the consumer’s choice of what goes on the car,” said Douglas Rees, NHID property and casualty market regulation chief examiner. “You may pay out of pocket for some of those parts or you can work with your shop to determine what’s best for you. I’ve seen many shops or dealers price match for, or discount for, an OEM [part] if they know an aftermarket part is out there. Sometimes the shops will work with you on a price but they’re not obligated to do so.”

Rees said the department has found the availability of aftermarket parts can alleviate longer repair cycle times due to avoiding OEM supply chain shortages, and can also prevent some total losses because they are typically cheaper than OEM parts.

He also said aftermarket parts keep OEM part prices and insurance premiums down.

“While they [aftermarket parts] may not have a use on every repair, it’s not uncommon for a vehicle to be declared a total loss using OEM parts, but using aftermarket parts or like kind and quality parts in many cases can keep that vehicle on the road if you’re not in the financial position to replace it,” Rees said.

New Hampshire law defines “non-original manufacturer” as “any manufacturer other than the original manufacturer of the part” and “after market part” as “sheet metal or plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels.”

Rees said that would include bumper covers, reinforcements, absorbers, fenders, hoods, grilles, and headlights. It does not apply to glass, he added.

“Like kind and quality” is defined under the law as aftermarket parts that are “at least equal in like kind and quality to the original part in terms of fit, quality, and performance.”

That includes used or recycled OEM parts, Rees said.

Issues often arise from insurance companies insisting on shops using aftermarket parts, he said. Rees and James Fox, NHID’s Property and Casualty Division director, said if an aftermarket part requires modification to be properly installed, or if the part fails or doesn’t fit, the insurer is responsible for paying the difference for an OEM part.

For example, Rees said if a shop receives an aftermarket bumper cover without holes drilled in it for forward-looking radar collision avoidance or rear-facing collision avoidance and decides to drill the holes, as long as it’s done properly, then the insurer bears the cost of modifying that part.

“If on the other side, the part comes in and it fails — it goes on the car, it’s fitted, it’s painted, and then everybody says, ‘You know what? This does not fit. It’s not like kind and quality’ then the insurance company is now responsible for the cost to remove that part and replace it with an OEM part or another part,” Rees said.

“This was specifically written so that consumers are not caught in the middle of the insurance company pushing them towards a warranty issue on the bumper cover, and the shop trying to go to the insurance company to get their time… it puts the burden on the insurance company to make the repair correctly.”

A disclosure is required on every estimate that includes aftermarket parts.

“The insurance company will write for aftermarket parts because that’s simply what the contract says — like kind and quality, provided the car is over two years [old] and 30,000 [or fewer] miles. Some companies do offer an OEM endorsement. I think there’s about a half a dozen. Consumers that really feel like they need OEM parts can seek those companies out.”

Another complaint NHID often receives is about part quality.

New Hampshire does not require a CAPA-certified part, Rees said, but consumers can specifically ask for them during the repair process “to give them a little more confidence or comfort level.”

“Many people want to go to the appraisal clause for a dispute over aftermarket,” Rees said. “We do not believe the appraisal clause applies to challenge aftermarket parts because it’s in the contract, it’s just not the price. The price is the price, so to speak.

“We recommend you read your policy, see what your policy covers, talk to your agent, and do your own research before you have a loss. Talk to your body shop, get their opinion on them, go to CAPAcertified[.org], and talk to your agent and see what their opinion is on these parts. If you have a loss, work with your shop to determine what’s best for you and your budget and how the car is going to be repaired.”

Dan Bennett, with the National Automobile Dealers Association (NADA), asked what NHID’s rebuttal process is for disputes regarding like kind and quality, including who has the burden of proof and who makes the final decision.

Fox said in those cases, the department gathers information to determine whether the part is or isn’t of like kind and quality, such as photos and an explanation from the body shop about why the part is or isn’t suitable. He noted that whether an OEM part is necessary for a repair is a different issue.

“Then we would take a look at it and if we don’t think it is then that is our power to tell the insurance company that, in our opinion, it isn’t of like kind and quality,” Fox said. “[T]he insurance company’s responsibility is for the cost of an aftermarket part… then the balance to get to the OEM level would be borne by the insured, or claimant.”

However, that would only apply to vehicles that aren’t “newer,” he added.

“This is a little bit of a tricky area because we don’t just have two parties,” Fox said. “We have a tripartite relationship between the insurance company, the repair shop, and the insured and the contract is still between the insurer and the insured. It does not impact what the autobody shop can or can’t do. The autobody shop is autonomous to do what they want to do, and this is just an issue of what the insurance company is going to pay for as part of the agreement they’ve made with the insured.”

Fox did not address the contract between the vehicle owner and the repair facility, typically taking place in the form of a repair authorization.

Webinar attendee Lori Nadeau asked if shops have any options through the NHID if insurance companies pick the cheapest aftermarket parts that aren’t from the shop’s local area and won’t pay the difference for OEM parts.

“My understanding is that all the estimating systems… are tied into vendors and distributors, populate the estimate, and give the appraiser an opportunity to choose that part,” Rees said. “Ultimately, it’s not necessarily about the cheapest; it’s whether the part fits or not and whether it’s like kind and quality.

“You’re free as a shop to source your own part prices. If you don’t have confidence in the distributor that the insurance company is telling you to buy the part from because you’ve never used them, you’ve never heard of them, buy an aftermarket part from your supplier that you’re comfortable with. The same rules apply. You don’t have to get it from the source on the estimate; it’s just that, an estimate.”

If insurance companies won’t pay the difference for an OEM part Fox said the insured gets the usual and customary guarantees regarding quality under the state’s anti-steering law.

“At the end of the day, for aftermarket parts, they have to be equal as to like, kind and quality, which means equal as to fit and performance and then they repeat the word quality,” he said. “That’s the standard we apply.”

The debate over aftermarket parts similarities recently came up during a Q&A session at the November meeting of the Collision Industry Conference (CIC) in Las Vegas.

Wayne Weikel, Alliance for Automotive Innovation (Auto Innovators) vice president of state government affairs, said over the last 10 years he’s talked about aftermarket part issues across the country.

“I’ve been told by aftermarket part manufacturers and distributors that ‘These are the exact same parts. They come off the same assembly line. They just go into different boxes,'” he said. “Stacy, from what I’ve heard you say today, the only parts that really fall into that category are now the Tier 1 parts. Other CAPA-certified parts and other aftermarket parts generally do not fall in the category of ‘they come down the same assembly line. They just go in different boxes.’ Did I hear that correctly?”

Stacy Bartnik, Intertek’s transportation technologies industry relations manager, responded that she didn’t know who had been saying that.

“I would not say that,” she said. “The CAPA-certified is definitely different than Tier 1. It’s made by a different manufacturer, though those manufacturers may make domestic for where they’re OE domestic. But when you’re talking about a CAPA-certified part, it’s not the same line. We are certifying that it’s functionally equivalent to the standard that we have developed with our engineers; that it’s functionally equivalent to that OE service part. I’m not sure who said that it’s the same part, same manufacturer. Certification and verification are two different things.”

Dave Mollner, training and business development director for automotive parts manufacturer Forvia Hella, was part of a panel discussion about aftermarket parts before the Q&A. He said neutralization by Forvia Hella depends on the product. For example, neutralization for lighting products would be done at one of the company’s plants, he said.

“We’re going to make that run and then put in a blank as far as the injection mold so there’s no logo,” he said. “If it’s a radar head, that’s just basically same production line service parts for OE partners over here that just goes off to a different area of production.”

In New Hampshire, NHID webinar attendee Doug Archambault said he’s observed that consumers are told the repair facility is not fair and reasonable when an insurance company won’t pay the difference for OEM parts.

Fox noted that all pre-2000 NHID bulletins aren’t current so repairers should instead refer to this 2018 bulletin that addresses aftermarket parts laws and like kind and quality standards.

“Some insurers have agreed that a part that they have required be used is not of like kind and quality to the original equipment manufacturer part but have, nevertheless, declined to pay the resulting additional costs associated with removing, returning, and replacing the non-compliant part with an RSA 407-D compliant part,” the bulletin states.

“Such a position by an insurer is inconsistent with RSA 407-D’s underlying consumer protection policy and constitutes illegal pressure on New Hampshire consumers to accept non-like kind and quality parts. It is important to keep in mind that non-like kind and quality parts are illegal parts. Any insurer refusing to pay the above-detailed costs consistent with New Hampshire insurance law would be in violation of RSA 407-D and would, as such, be subject to the enforcement provisions provided by RSA 407-D:5.”

The webinar speakers encouraged anyone with questions to email them to communications@ins.nh.gov.

Images

Featured image: Microsoft Teams screenshot of Doug Rees (top) and James Fox.