Restrictive Illinois Auto Body Shop Bill Would Hit Consumers Hard

February 28, 2005

An Illinois bill that would require auto insurers to pay whatever any given body shop demanded for repairs would result in skyrocketing loss costs for insurers and higher premiums for drivers.

H.B. 2330 is "anti-consumer and anti-competitive," said Greg LaCost, senior counsel and regional manager for the Property Casualty Insurers Association of America, testifying at a Consumer Protection Committee hearing in Springfield. "It would sever the customer service relationship between consumers and insurers, and result in higher costs for everyone."

The bill would prohibit insurers from recommending a body shop unless requested by the policyholder. It would forbid insurers from limiting or discounting repair costs if the policyholder chooses another repair facility and provide civil penalties for violations. And it would make insurers liable to claimants and repair facilities for damages from violations.

"It's common practice to prohibit insurers from requiring that a specific repair be made at a specific repair facility," LaCost said. "But this bill goes further by demanding that insurers pay whatever any given shop demands. The resulting loss costs in Illinois would skyrocket and consumers and insurers would feel the effects."

Under current Illinois law, consumers benefit from the "physical damage repair option," which allows them to choose their own body shop for vehicle repair. If they choose a shop their insurer recognizes as reputable, the insurer generally waives its own estimation process and allows the consumer to go directly to the shop. "If H.B. 2330 becomes law, more internal estimates will be required, which would slow down the repair process," LaCost said.

"Additionally, the bill's restrictions on suggestions and recommendations compromise the contract between insurers and policyholders and appears to violate the insurers' Constitutional right of commercial free speech," he said.

"This bill is woefully out of line with laws in the rest of the country and is not in the best interest of Illinois consumers or businesses," LaCost said. "It would increase potential fraud and decrease competition. PCI hopes that lawmakers will retain Illinois' current competitive insurance environment and reject H.B. 2330."

Rep. Thomas Holbrook (D., 113th Dist.) testified at the hearing that he is willing to work with insurers and the business community to hone the bill's language to avoid these problems. "PCI looks forward to working with Rep. Holbrook in achieving a workable solution to the body shop issue," LaCost said.