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Representatives of the National Association of Independent
Insurers (NAII) took a stand for the industry’s position on auto repair issues at the 20th annual International Autobody Congress and Exposition (NACE), held recently in Dallas.
NAII spokesmen John Eager and Bob Hurns presented the industry’s position on controversial issues including diminished value, aftermarket parts, environmental issues, insurers owning body shops, and the rising cost of physical damage.
In the seminar “Insurance and Auto Repair: Issues 2003,” John Eager, NAII’s senior director of claims services, presented an overview of the auto insurance market and some of the trends that are driving the rising cost of physical damages. Based on 2001 NAIC figures and NAII statistics for 1994 to 1996, out of a total of $110.3 billion of auto liability and physical damage direct incurred losses loss adjustment expense, 57 percent is attributable to physical damage. The average physical damage loss per exposure was $345.89 in 2001, compared with $331.43 in 2000, $313.87 in 1999, $304.57 in 1998, and $294.79 in 1997. From 1997 to 2001, the average physical damage loss per exposure rose a little over 17 percent.
Possible reasons for the increase include the impact of air bags on physical damage repair costs, new cars with more technology, and the mix of vehicles in the marketplace such as more sport utility vehicles, minivans and truck-car combinations, Eager added.
NAII Counsel Bob Hurns spoke on diminished value in a panel discussion on the subject, stressing that to make the issue more objective, the industry should look to state law. “When it comes to diminished value, people fall into one of three camps: ‘true believers’ who unconditionally accept the concept, ‘middle of the roaders,’ who rely on state law to define the concept, and ‘absolute disbelievers,’ who don’t accept diminished value in any form,” Hurns said. The NAII falls into the middle category, relying on state law. So far, only
Georgia has case law accepting the diminished value concept, making it an “aberration” compared with other states, Hurns added.
Finally, in a “Town Hall” luncheon discussion, Hurns and a panel of five other experts tackled the topics of insurers owning body shops, aftermarket parts, the use of “black boxes” in rental vehicles, and environmental concerns.
When Texas State Senator John Carona blasted the concept of insurers owning body shops, threatening to introduce legislation prohibiting the practice, Hurns pointed out that the practice was both “ethical and innovative,” and just as ethical as auto dealers owning body shops or auto manufacturers selling insurance.
In response to Sen. Carona’s allegation that insurer-owned shops would cut costs to the detriment of the consumer, Hurns reminded the Senator of the contractual relationship between the insurer and the insured, whereby the insurer is obligated to restore the vehicle to pre-accident condition. “Insurance is just like any other business in that you have to capture and retain customers,” Hurns said. “You don’t accomplish that with a bad repair job.”