House Bill 4948 would "regulate the use of preferred repair facilities by insurers through direct repair programs, prohibit insurer from owning or having an ownership interest in a repair facility and would require any insurer that currently has an interest in a repair facility to divest itself of ownership not later than two years after the effective date of this proposed legislation." (Office of Financial and Insurance Regulation) Furthermore, the legislation would prohibit insurers from developing such lists of preferred repair facilities unless the insurer met very specific criteria. The legislation also allows an individual or a repair shop to bring an injunction or other necessary action against the insurer.
This legislation has both pros and cons.
This Bill may be helpful for the insurance companies because they usually refer their clients to repair shops that they either own or have some sort of interest in. If insurance companies are allowed to stipulate very specific regulations they will satisfy many insurance companies. It may be helpful to repair shops because they are guaranteed business. "Some auto repair shops that do not participate in insurer direct repair programs have experienced difficulty convincing the customers of some insurance companies to patronize their businesses." (Office of Financial and Insurance Regulation) Additionally, the legislation would allow repair facilities to bring action against insurers that tried to be exclusive.
Michigan collision coverage is one of the most expensive in the nation (National Association of Insurance Commissioners), and as a result of high insurance, many argue that insurers should be able to choose the best quality and lowest priced auto repair. If auto repair companies are always guaranteed customers and money by insurance companies, they may not provide proper service. Also, many times insurance companies regulate the methods of repair and materials the repair shops use; this clearly is a conflict as the insurance company is solely trying to save money and may not have in mind the customers safety. This also puts the repair shop in a position where they may have to choose to satisfy the needs and requirements of the insurance company or their customer. Finally, if insurers are allowed to demand very specific criteria, this may leave out many auto repair shops.
What is missing from this legislation and both arguments, is what type of criteria the insurers will demand from the repair shops they use.