I took a look at the bill, AB 1200. As summarized in the State Senate analysis of the bill, AB 1200
Would significantly revise and recast California's auto repair anti-steering law duties, obligations and allowed conduct for insurance companies, relative to consumers and other parties in the claims settlement process, including 1) Eliminating an insurer's duty to provide a specified written notice of a consumers right to select an auto body shop, and 2) Eliminating a prohibition in current law on an insurer suggesting or recommending that the claimant select a different body shop after a consumer has indicated their body shop choice.
The bill is sponsored by State Farm and a host of other auto insurance companies. It has received stiff opposition from consumer groups.
AB 1200 would reverse current California law. California has an anti-steering law authored by then state senator Jackie Speier in Senate Bill 551. The law prohibits insurers from recommending repair shops unless the consumer has requested recommendations, or the insurer has informed the consumer in writing that the consumer has the right to choose a repair shop. A.B. 1200 overturns this prohibition and permits insurers to direct claimants to a list of auto body shops preferred by the insurance company.
What appears to be an expansion of choice for the consumer under AB 1200 is an illusion. What is never disclosed to the customer, and why SB 551 was necessary, is that insurance companies have agreements with the auto shops they refer customers to and which operate to the detriment of the consumer. As now U.S. Representative Speier recently wrote:
In 2003, while serving in the state Senate, I wrote the law that gives consumers the right to select the collision repair facility of their choice. This law was necessary because insurance companies routinely make deals with preferred shops to use cheaper used or "after-market" parts rather than parts made by the vehicle manufacturer. Sometimes the imitation parts work fine, but too often they don't fit the vehicle or are made of inferior metals and plastics. The law made it illegal for insurers to steer policy holders toward specific shops.
Most auto polices require the insurance company to pay for parts of "like kind and quality." However, auto insurance companies, if allowed, will not pay for fixing cars with auto parts produced by the original auto manufacturer. Instead, the insurance companies insist that auto repair shops, in exchange for receiving the referral, use lower priced, and lower quality, parts from third party manufacturers.
Speier added in her commentary:
Let's say that you are able to withstand your insurer's pressure tactics and demand that your body shop use factory parts. You still may not be protected. Because buried in many policies is a provision where the insurer reserves the right to use either factory or aftermarket parts, whichever is cheaper.
Hayashi has defended her bill claiming that "AB1200 has been subject to a disinformation campaign led by those who have a vested interest in not allowing insurers to discuss these options with their claimants."
That is not the case. One of the state's leading consumer organizations, the Consumer Federation of California, is opposed to Hayashi's bill:
California law protects policy holders from receiving what appears to be impartial advice, when they are actually being steered to insurer-preferred auto repair shops. Body shops in the insurer’s preferred network may be contractually obligated to perform an inferior scope of repair services to save the insurer money.
This can lead to costly re-repairs, and even to the voiding of factory warrantees. AB 1200 also contains legislative intent language that would apply the weak consumer protection standards of the bill to cases after January 1, 2010, regardless of the date of the violation of anti-steering law. Far from providing consumers with more information in order to make better informed choices, AB 1200 opens the door for unscrupulous insurers to provide one-sided and manipulative information, even after a policyholder has selected a repair shop, for the purpose of unduly influencing the policyholder to act in the insurer’s financial interest at the policyholder’s expense.
Likewise, California-based Consumer Watch is also opposed to AB 1200:
"California legislators were right to stop this kind of anti-consumer steering six years ago, and nothing has changed that would make the relationships between insurers and body shops any better for consumers," said Consumer Watchdog staff attorney Todd Foreman. "If anything, lawmakers should be adding consumer protections to the anti-steering law, not gutting the existing rules."
What is really at issue is money. The auto insurance companies can significantly boost their profits if they can steer consumers to auto shops that use cheap replacement parts for damaged cars. A hundred or two hundred dollars saved on each repair for every customer in California can amount to millions over the course of the year for State Farm and other auto insurers.
Hayashi's bill easily passed the Assembly. Hopefully, the State Senate will undertake a closer examination and reject the bill.
Below is the vote on in the State Senate on AB 1200 on August 24, 2009. It needed 21 votes to pass and came up 2 votes short. The bulk of the support came from Reps. The progressive Bay Area Dems - Corbett, Hancock, Leno, etc. - all voted against it.
MEASURE: AB 1200
TOPIC: Motor vehicle insurance: direct repair progra
LOCATION: SEN. FLOOR
MOTION: Assembly 3rd Reading AB1200 Hayashi By Calderon
(AYES 19. NOES 17.) (FAIL)
Aanestad Ashburn Benoit Calderon Cedillo Cogdill Correa Cox Denham Dutton Harman Hollingsworth Huff Kehoe Runner Strickland Walters Wyland Yee
Alquist Corbett DeSaulnier Ducheny Florez Hancock Leno Liu Lowenthal Maldonado Negrete McLeod Oropeza Romero Simitian Steinberg Wiggins Wolk
ABSENT, ABSTAINING, OR NOT VOTING
Padilla Pavley Price Wright