Are Cheap Auto Repairs Part of an Insurance Scheme?

You were in an auto accident; you are fine, but your car is a different story. The auto accident is bad enough, but what happens when fate crashes down again – repairing your vehicle that ends in shoddy work, junkyard parts, and insurance-company influence?

Many auto repair shops are saying auto insurance companies are coercing them to use cheap and shoddy parts and sometimes dangerous practices to repair vehicles after an accident. According to a recent CNN report, these shops are pushed into using rusty parts, covering bent rims with hub caps, and using broken headlights held together by glue. The same facilities claim that insurance companies “steer” policyholders toward body shops that follow the insurers’ rules. If a shop refuses to make the suggested repairs because of quality issues, the insurers steer the claimant elsewhere.

What is “steering”? Steering is the act of directing a claimant to or away from any specific repair shop or requiring that repairs be made by a specific shop or individual. While insurance companies are not supposed to force you to use their chosen shop, most keep a list of approved shops that they’ve worked with in the past; you still have the right to choose your own. If you are told that choosing your own shop will take longer for the repairs or cost you more money, BEWARE – you are probably being steered.

Such claims are nothing new. In 1999, Consumer Reports conducted a study and found replacement bumpers that crumpled with little resistance, poorly fitting fenders prone to rust, and hoods with faulty latches that allow them to open at high speeds. Consumers Union, a nonprofit group that publishes the magazine, even went as far as asking Congress and states to regulate the industry and require vehicle owners’ consent before imitation parts are used. The group also wanted the NHTSA to require labeling that would allow authorities to track parts for recalls and to determine legal liability, and for states to require insurers to disclose how much they’re saving with imitation parts.

Now, a multi-state investigation is underway including a lawsuit filed by more than 500 repair shops in 36 states accuses insurance companies of “steering” customers to stores based on cheap price rather than quality of parts and services. Additionally, states like Louisiana, Mississippi and Oklahoma are getting involved. The Louisiana’s attorney general office filed a lawsuit last August against State Farm, alleging Louisiana’s largest auto insurer is illegally steering customers involved in car accidents to repair shops that use junkyard parts and choose cheap fixes over safety. Mississippi’s attorney general says it is preparing a lawsuit of its own, while Oklahoma’s attorney general has issued a warning to insurers on its website raising the same concerns. Even U.S. Senator Richard Blumenthal has asked the U.S. Department of Justice to investigate. “Contrary to what consumers may be led to believe by their insurers, repair shops preferred by insurers do not necessarily equate with quality repairs,” said Blumenthal. “Unfortunately, many consumers are also being misled into thinking that they are required to have their car repaired at one of these shops. This has the harmful effect of limiting consumer choice, creating a serious safety risk, and suppressing competition in the auto repair industry.”

Insurance companies have denied this practice, including State Farm who said: “Our customers choose where their vehicles are going to be repaired. We provide information about our Select Service program while at the same time making it clear they can select which shop will do the work. A benefit of the Select Service program is that customers get repairs done quickly.”

While you can pick your own repair shop, you may be given incentives for choosing the insurance company’s preferred shop, as well as faster service. The problem is that referral repair shops work for the insurance company. The insurance company sets the rules; the repair shop simply follows them to keep the insurance company’s costs down. Make no mistake – shops on the preferred lists work for the insurance companies and want to keep their business, not yours.

No insurance company can legally refer you to or away from any specific repair shop or require that repairs be made by a specific shop or individual. Independent repair facilities work for you, the claimant. They are looking out for your best interest and negotiate directly with the insurance company for the proper repairs. They are not steered by an insurance company putting profits ahead of safety and neither should you. Don’t be fooled into believing that insurance companies work for their policyholders. Your best protection is to know your repair shop’s reputation before you make a commitment for repairs.

Mark Bello is the CEO and General Counsel of Lawsuit Financial Corporation, a pro-justice lawsuit funding company.