Bray’s Report

California State Assembly Bill 2825 had an amendment added yesterday that would also require auto repairs shops to provide the vehicle owner with copies of the parts invoices. 

                                                                AB 2825
                                                                  Page  1

          ASSEMBLY THIRD READING
          AB 2825 (Carter)
          As Amended May 27, 2008
          Majority vote 

           BUSINESS & PROFESSIONS             8-0
          APPROPRIATIONS      11-1

          
          SUMMARY  :  Requires an automotive repair dealer (dealer) to
          provide written certification that the crash parts identified on
          the written estimate, prior to the completion of the repairs and
          on the attached invoices, are the same crash parts installed on
          the vehicle.  Specifically,  this bill  :   

          1)Requires both the invoice and the prior written estimate to
            disclose whether new, used, rebuilt, reconditioned or
            remanufactured parts were or are going to be supplied.

          2)Requires dealers to provide a notice to a consumer, as
            specified, that the substitution of parts without prior
            approval from the customer is unlawful, and the consumer may
            contact the Bureau of Automotive Repair (BAR) for more
            information.

          3)Requires dealers to provide copies of invoices from the
            distributor, dealer or manufacturer for all crash parts
            installed in excess of $50.  

          4)Requires dealers to provide, as specified, written
            certification that the crash parts identified on the written
            estimate, prior to the completion of the repairs and on the
            attached invoices, are the same crash parts installed on the
            vehicle.  

                                                                  AB 2825
                                                                  Page  2

          5)Specifies the form and content of the written certification to
            be made by a dealer to consumers.

          6)Becomes operative on January 1, 2010.

          7)Makes legislative findings and declarations.

This bill introduced by California state senator D-Carole Migden in January failed yesterday (May 22nd) in the California State Senate 18-19. The bill would require insurance companies to specifically notify the vehicle owner if aftermarket parts being utilized in the repairs if the vehicle is 3 years old or newer.

Click Here to see bill.

The state of Tennessee recently passed state senate bill SB 4208 is will likely be signed by the governor very shortly.  For more information on the new updated bill, Click Here.

In a recent article in Claims Magazine, a report of a study done by Celent indicated that only 13% of U.S. insurers had plans on investing in new claims systems this year. Much of this may be due to the economic downturn globally and the fact that claims departments are usually the last to receive any upgrades in technology. It appears a majority of insurance carriers will work with their current legacy claims systems for the time being. The study also touched on the topic of outsourcing claims adjusting operations. 91% of of the carriers in the United States indicated they would not outsource their claims procedures but in Europe 12% of the carriers are open to outsourcing at least some portion of the operations.

Additionally the study indicated that U.S. insurers largest pressures were focused on growing business in a soft market while also keeping an eye on expenses. European insurance carriers are much more willing to utilize outsourced contractors compared to their U.S. counterparts in order to reduce expenses.

The question remains for U.S. insurance carriers. Will they move to more claims outsourcing for specific portions of the process,( ie. auto damage appraising, adjusting.) or maintain a higher LAE with full time staff to handle all adjusting procedures? Much may be determined by the length of the economic downturn and financial position of each specific carrier.

Source: Claims Magazine and Celent.com

In Georgia effective January 1st, 2009, when an insurer pays a claim to a third party on behalf of the insured, the third party’s lienholder must be included on the settlement draft. Additionally the estimate must have printed on it the following…  ”‘Failure to use the insurance proceeds in accordance with a security agreement between you and a lienholder, if any, may be a violation of Code Section 16-8-4 of the O.C.G.A. If you have any questions, contact your lending institution.”

Click here for the link to the bill.

Data provided form the Federal Bureau of Labor and Statistics shows some interesting trends in regards to the CPI over the past 8 years. These comparison charts show 1. Overall CPI, 2. Auto Insurance Rates, 3. Auto Body Repair. 

While the overall CPI is all over the chart,  auto insurance rates appear to be on a slight rise after about a 3 year decline. Auto body repair on the other hand peak at the first part of 2006 and has been on the decline for awhile. 

Source: www.bls.gov

As of May 15th, this is the current labor rate averages nationwide in 2008.  The national paint and materials average is at $26.87.

Some key cities of note:

Atlanta   $41 body/paint  $59 frame  $67 mechanical   

Dallas     $38 body/paint  $39 frame  $72 mechanical

 Data source:  © 2008, AutoClaims Direct, DirectLink

In the Wall Street Journal Article ( Click Here ) it states 2008 is looking to be a tough year for auto insurance carriers. According to the article, the author believes claims may run higher due to the economic downturn with vehicle owners turning in claims they normally would have paid out of pocket for. The question remains if this will fully play out. Many owners may not turn in claims due to their inability to pay their deductible, therefore reducing claim volume. 

Progressive Insurance, one of the largest auto insurance carriers nationwide saw a fall in profits of 20% in April. The combined ratio grew 2.9 points. Click here for the detailed story.

Here’s the brief summary of the bill that was passed by the state senate last week and is being sent to the governor…