North Dakota recently passed a law that allows insurance companies to offer premium discounts in exchange for consumers waiving their rights to choose repair businesses and/or their right to a jury trial. 

The bill, SB2374, was introduced in January and passed the Senate 45-2 in February. An amended version passed the House 76-17 and then again in the Senate 46-1 in April. It was signed by the governor and filed with the secretary of state earlier this month. 

“A property insurance policy may be issued or delivered in this state with a managed repair program provision offering premium incentives for managed repair program participation,” the act says. “As used in this section, managed repair program means an insurance policy providing a program with a specified reduction in premium or other specified incentive for participation in a program restricting an insured’s choice of repair vendors or contractors for covered repairs.”

The section does not apply to direct repair programs or contract referrals.

 It must specify any premium benefits for program participation and include a separate disclosure form that explains the restrictions on vendor selection including: the process for repairs under the program, the insured’s right and responsibilities and any warranty or guarantee provided for the repairs. 

The act also gives insurance companies the ability to use mandatory arbitration provisions in exchange for a premium discount. 

Insurers would be required to clearly state the rights being waived in exchange for the premium discount, such as the right to a trial by jury, according to the act. 

The companies are required to use the following statements on forms signed by the insured: 

“By signing this form, I agree to resolve all covered property insurance claims through mandatory binding arbitration.  I understand that by agreeing to mandatory binding arbitration:

“I am giving up my right to have disputes resolved in court.

“I am giving up my right to a jury trial.

“I am accepting these terms in exchange for a premium discount of [dollar amount or percentage of premium amount].

“This agreement is binding on all insureds under the policy and remains effective upon policy renewal, replacement, or reinstatement.” 

North Dakota Insurance Commissioner Jon Godfread told the Senate Industry and Business Committee that the bill stems from a study on the property insurance market that his office commissioned.

Godfread, who assumed the role of president of the National Association of Insurance Commissioners in January, noted that some stakeholders could have concerns with the rebate sections in the bill. 

“This exemption in the bill would only apply to large commercial risks, these are sophisticated businesses that negotiate multi-million dollar insurance contracts, not necessarily everyday consumers,” Godfread told the committee. “Insurance brokers and agents need to remain competitive in their pricing and services in these high value complex transactions. The ability to adjust commission structures, discount fees, provide other financial incentives can be the difference for securing coverage for the business in North Dakota than in another state. This is a highly competitive, highly mobile market and these policyholders can easily shift their business to other jurisdictions.” 

While Godfread mentions that the rebates would be for large commercial contracts, the specific rebate sections of the act don’t clarify this or note the exemption of personal line insurance. 

Repairer Driven News reached out to Godfread’s office for clarity on the bill. His office did not reply by the time of publishing. 

No one representing the collision repair industry spoke during multiple hearings held on the bill. However, multiple representatives from the insurance industry attended and spoke against the bill. 

Levi Andrist, with the American Property Casualty Insurance Assocation (APCIA), spoke against the bill stating multiple concerns including wording in the mandatory arbitration rebate section. He said disclosures required in the section are not typical with surplus line policies. He also stated concerns that the act does not require arbitration in another state.

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