End of Session Attack on Auto Insurance Regulations

September 1 Update: The California legislature has adjourned for the year. Our coalition blocked insurance industry efforts to introduce a last minute bill weakening regulations that protect consumers against imitation aftermarket crash parts. We thank everyone who contacted your lawmakers.

See video of the press conference condemning last-minute legislation here.

As the clock at the state Capitol winds down to adjournment at midnight on Friday August 31, the Consumer Federation of California is on alert for last minute amendments that might be snuck into a bill that would stop Insurance Commissioner Dave Jones from adopting vital consumer protections for motorists.  Insurance lobbyists are floating legislative language that would gut the Fair Claims Settlement Practices Regulations that have been in existence for 20 years and that hold insurers accountable for any unsafe or inferior aftermarket crash parts that are used in insured motor vehicle repair.

Some insurers cut corners and save money by insisting that repair shops substitute aftermarket parts for original equipment manufacturer (OEM) parts in insured repairs. Far too often, imitation aftermarket crash parts are inferior in safety, performance or fit to a motor vehicle’s original equipment manufacturer replacement parts. California requires an insurer that substitutes an aftermarket crash part to warranty that the part is equal to the OEM replacement part in terms of kind, quality, safety, fit, and performance.  The insurance industry has a long-standing goal of legitimizing aftermarket parts through various means, including establishing legal recognition to parts ‘certification’ by insurance or aftermarket industry-dominated ‘certifying entities.’

The practice of eleventh hour bill amendments, known as ‘gut and amend’ is used by wealthy campaign donors to propel legislation that would wither in the light of day, with no time for deliberation, public scrutiny or hearings that are not a sham.

Two bill proposals surfaced this week. One proposal would shift the principal responsibility to warranty replacement parts from the insurer to the parts distributor. Distributors supply parts to body shops, and have no direct business relationship with the motorist. Permitting this language would get insurance companies off the hook for any junk parts they require in repairs, and would put enforcement in limbo, since the Insurance Commissioner does not regulate parts distributors or suppliers.

The other bill proposal is more deceptive. It would create a presumption in law that a ‘certified’ aftermarket part is equivalent to an original equipment manufacturer part.  Several ‘certification entities’ conduct some level of testing or inspection of aftermarket parts before they receive a certification. These entities are created and funded by the insurance industry and/or the aftermarket part industry. The California Bureau of Automotive Repair’s study of certified parts found that most of the parts it examined were inferior to OEM parts. The state agency concluded that ‘certification has no value to the customer; if there are problems with the certified product the certifying entity does not stand behind their own certification process.’

The Department of Insurance is in the process of adopting new amendments that strengthen the regulation of aftermarket parts. At a Department of Insurance hearing on August 9, representatives of the insurance industry made it clear that they oppose Commissioner Jones’ proposed amendments, and signaled that they will fight him in court. The end of session bill shopping is designed to preempt the regulatory process and strip the Insurance Commissioner of the authority to protect consumers from these inferior parts.

Dave Jones has fought back against end of session shenanigans. At a press conference on Wednesday August 29, he stated, ‘These bills would significantly reduce consumer protections related to the use of aftermarket automobile parts, and this is simply unacceptable. Since I was sworn in as Insurance Commissioner, I have emphasized time and again that job number one at the California Department of Insurance is to ensure that consumers are treated fairly and their rights protected fully. And, in this case, consumers simply deserve better.’

A coalition of consumer groups and labor union in the automotive sector has rallied behind Commissioner Dave Jones. In a letter distributed to lawmakers the coalition denounced the attempt at a gut and amend, stating ‘the closing days of a legislative session is not the time to introduce a fundamentally flawed aftermarket parts measure that would harm consumers and benefit only the insurance industry.’

The letter was signed by:

Consumer Federation of California
Consumers for Auto Reliability and Safety (CARS)
Consumers Union
CalPIRG
United Policyholders
Consumer Action
California Teamsters Public Affairs Council
California Conference of Machinists
Communications Workers of America District 9
United Auto Workers
California Alliance for Retired Americans
Congress of California Seniors

To read our coalition letter, click here.

The Consumer Federation of California’s position is:

‘    CFC opposes any end of session legislation that interferes with the Department of Insurance regulatory proceeding.

‘    CFC opposes any legislation that would reduce the existing requirement that insurers warrant that aftermarket crash parts are at least equal to the OEM replacement parts in terms of kind, quality, safety, fit, and performance.

‘    CFC opposes any legislation that recognizes any non-governmental aftermarket parts ‘certification entity’ or ‘certification process’.

‘    CFC opposes any legislation that shifts the warranty of coverage for these aftermarket parts from the insurer to a supplier or distributor of these aftermarket parts. This would be a fundamental change in the current 20-year consumer protection standard that has held insurers directly accountable in standing by their own warranties.