Lansing (November 1, 2011) – The Michigan chapter of the National Federation of Independent Business today urged lawmakers to adopt a bill preventing third-party claims administrators from skirting a law that is supposed to ensure competition in the auto repair business.
At issue is whether a contractor hired by an insurance company to handle glass repair and replacement claims can steer the business to its own repair and replacement facilities.
“The issue for small business is unfair competition by exclusive contracting,” said NFIB State Director Charlie Owens. “The vast majority of auto glass replacement and repair is paid for by auto insurance companies. When a single entity or group of entities has significant control over a market and uses that position to skew the market, the result is unfair competition.”
Owens asked members of the Senate Insurance Committee this afternoon to approve SB-306, which would amend current law to require third-party claims administrators that also provide repair services to observe certain practices. They would have to honor requests by customers, for example, to use their own preferred service provider as long it’s approved by the insurer. They would also have to provide customers with a choice of multiple companies that can do the work.
"Whenever we have an entity that basically controls the market, it is the duty of the legislature to be sure that fair play, consumer choice and competition are preserved," said Owens. "In this case the insurance industry controls the market for auto glass repair by virtue of the fact that almost all claims for damage flow through them and are paid by them. They have the power to determine who stays in business and who doesn't and this must be held in check to prevent unfair competition that ultimately will narrow consumer choice and drive smaller companies out of business."
Owens reminded lawmakers and monopolies often promise discounted rates for consumers, but that the advantages are often short-lived.”
“For a short time prices for repair services may appear competitive, however, over the long term as smaller independent operators are forced out of business, prices rise and consumer choice is diminished,” said Owens.