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Auto Insurance Claims Settlement Corruption Permitted by Regulators
Auto insurers have for many years, in an effort to control claim costs, put undue pressure on auto repair facilities as well as their own policyholders. Back in 1963, then Attorney General, Bobby Kennedy filed antitrust law violations against over 250 auto insurers (essentially the entire industry) subsequent to over twenty years of investigation and evidence. The result was a Federal Court ruling which became known as the 1963 Consent Decree. At issue was the way the auto insurers flexed their economic muscles in the settlement of auto damage claims.
The 1963 Consent Decree, which is still in full force and effect today, among other things, banned auto insurers from doing ANYTHING that steered claimants either TO or FROM specific auto repair businesses, from using any form of coercion, force or intimidation during the claim settlement process and from anything that would have the effect of controlling or fixing prices to be paid for auto parts and/or labor rates. Without admitting culpability the auto insurers decided to avoid costly litigation and agreed to abide by the Federal Courts' 1963 Consent Decree. However, it seems that the auto insurers have since continued to violate both the terms and the spirit of the 1963 Consent Decree.
Consequently, most, if not all, states have passed laws outlining unfair claim settlement practices as well as guaranteeing policyholders the right to freely choose the auto repair business which performs the repair of their vehicles. Each state has a division headed by a Director or Commissioner tasked with the duty to make sure insurance companies operate within the law. Even so, policyholders and auto repair facilities are continually forced to seek the assistance of regulators and our courts to get the insurers to conform. Unfortunately, it seems that these regulators have been shirking their duties.
It is no more apparent than in the auto glass repair part of the auto repair industry! Some of the tactics used by insurer claims representatives are to ignore claims or at the very least, to delay and/or short pay fair and reasonable invoices for repairs done by certain repair facilities that choose not to participate in networks. Other tactics are to disparage certain repair facilities in an attempt to steer claimants to other repair facilities that may have agreed to lower pricing. The insurers call into question the quality of work and the warranties of the non-network repair shops. These tactics are banned by the 1963 Consent Decree which has been reinforced by the above mentioned state laws. Tactics of this nature put undue pressure on non-network repair facilities to join networks in order to avoid having their business reputations sullied. Auto insurers have schemed with third parties in their settlement of auto glass claims.
Under the guise of saving on costs to administer auto glass claims which is not only permitted but to be commended, auto insurers step from the permitted and into the forbidden when they collude with third parties that illegally agree to help the insurers infringe upon the auto glass industry's right to control the prices for the services provided to consumers/policyholders. The most egregious example is contracting with Safelite Solutions, llc which is nothing more than a member of the Safelite Group which includes auto glass service provider, Safelite AutoGlass. In other words, over 200 auto insurers and fleet owners have been permitted to essentially collude with an actual service provider to not only save on administrative costs, but to also, in practice, illegally steer consumers to a specific service provider as well as away FROM certain service providers and take control of auto glass pricing for auto glass related parts and services. Perhaps the most egregious aspect of this corrupt relationship is the expectation and resultant coercion of non Safelite service providers to have to deal with a direct competitor during the claim settlement process!
Auto insurers have been banned from steering their policyholders TO specific service providers yet state regulators have turned a blind eye to the practice which allows insurers to steer their auto glass damage claimants directly to Safelite! Auto insurers have been banned from steering their auto glass damage claimants away FROM specific service providers yet regulators are complicit when they allow Safelite to administer claims because then policyholders are put in the position of having to deal with a direct competitor of their chosen service provider and deceived into believing that they can't use their chosen service provider but must, instead, use the insurer favored Safelite. Even worse, non Safelite service providers are apparently expected to sit idly by and allow this unfair trade process to occur! The question is, why are state regulators allowed to let this happen? They shouldn’t!
It gets worse. TPA's (third party administrators) can help auto insurers save on administrative costs to settle claims. And auto insurers are supposed to bear the costs of claims administration, however, it is when they have their TPA's also enforce insurer dictated pricing that crosses the line from legal to illegal. The scheme between Bel/Safe and contracted auto insurers actually includes the use of an unconscionable network participation agreement which requires non Safelite service provider participants to agree to let auto insurers dictate prices to be paid for services and parts as a requirement for memberships. So, now you have a scheme that not only blatantly espouses illegal steering, but also one that incorporates illegal price fixing.
Bel/Safe with their powerful attorneys and lobbyists along with the insurers' have hoodwinked the powers that be into believing that network participation is completely voluntary and that it amounts to nothing more than legal procompetitive collaboration. Nothing could be further from the truth!
First of all, why do auto repair service providers even need to collaborate? It can't be to control or fix prices because that would be illegal. It can't be to get referrals (steered policyholders) from auto insurers because that is illegal. It is one thing for Safelite to negotiate prices for the services that they provide but to help auto insurers control prices for the rest of the auto glass repair industry is just flat out wrong! Anyway, according to Federal guidelines regarding procompetitive collaboration, said collaboration is only fair for up to ten years. Safelite has been at it for well over twenty years. So, what has actually taken place over the last twenty plus years is that Safelite and its network of coerced participants have reached monopoly power regarding auto glass service providers and third party auto glass administrators!
In summary, using rules of reason one must conclude that the above business model is corrupt.
According to Safelites own testimony, when an insurer contracts with Safelite Solutions, llc, it is also dealing with the rest of the Safelite Group, Inc which is controlled by the same upper level management.
Insurance companies that contract with Safelite violate the tenet of impartiality, both in the settlement of auto glass claims and in their dealings with service providers. Regulators should not allow such conflicts of interest. At the very least, Safelite Group, Inc. should be forced to spin off Safelite Solutions, LLC and no TPA network should cause any service provider to give up the right to negotiate prices as a requirement for membership.
Contracting with a service provider is outside of the business of insurance i.e. containing the cost of claims has nothing to do with the contract (policy) between the insurer and the insured or with the probability that a loss will even occur.
Contracting with a service provider is a business to business agreement where each business should retain the opportunity to negotiate a position.
For non-Safelite service providers the only way to become a “preferred” service provider for the insurers contracted with Safelite is by applying to Safelite, being approved by Safelite, agreeing to Safelite's one sided network participation agreement including to allow Safelite access to its proprietary business information and permitting Safelite to build its brand at the non-Safelite service provider's expense.
Under these circumstances the only reasons for non-Safelite service providers to participate in such a one-sided contract are either, to avoid insurance company threats to complicate and delay the claims settlement process and threats to steer policyholders (prospective customers) away from their businesses, or to end the harassment, complications, delays and steering actually already taking place. In other words, participation in the Safelite Network is coerced. Why else would a company even apply, let alone participate in, to join its biggest competitor’s network?
Coerced collaboration cannot be considered procompetitive.
Without the forced participation of non-Safelite service providers, Safelite would not be able to truthfully advertise their ability to service such a high percentage of drivers as they do in their nationwide TV and Radio advertising campaigns.
Because of the coerced participation of non-Safelite service providers in the Safelite Network, Safelite has actually reached monopoly power as a service provider because each accepted non-Safelite service provider becomes a Safelite affiliate and most have surpassed the 10 year limit on procompetitive collaboration. In other words, after 10 years of participation mergers are deemed to have taken place.
By the same token, Safelite Solutions, llc has achieved monopoly power in the auto glass claims administration industry.
Since Safelite is a TPA and a service provider, auto glass only claims redirected to Safelite without the required notice to the policyholder that they have the right to choose the glass repair facility which repairs their vehicle are in violation of laws and regulations that require such notice before the policyholder is referred to any service provider.
Instead consumers are deceived into believing that they must use Safelite.
Because the Safelite Empire has been built on coercion and violations of the ethical tenets of impartiality and fair trade, no consideration is deserved in considering the cost to dismantle it.
Necessary actions: First, investigate the contracts between auto insurers and their TPA’s. That is a legitimate function of any state Department of Insurance. Look for things that stifle competition and might promote conflicts of interest.
Next, investigate whether claims handling procedures comply with the Federal 1963 Consent Decree as well as other state laws.
Review the scripts used by TPA’s in their dealings with policyholders and service providers. Look for procedures that skirt the requirement to advise policyholders of their right to freely choose a service provider and the use of deception and high handed tactics and violations of claims settlement practices.
Then investigate agreements between TPA’s and service providers. Look for hidden costs to participate and other evidence of coerced participation. Since TPA's are settling claims, this is also a legitimate and necessary function of any state Department of Insurance.
Finally, reach out to service providers and policyholders who have been through the claims process within the last 12-18 months. There should be recordings of each transaction on file. Look for evidence of intimidation, coercion, deception and improper claims settlement practices.
Have insurers explain how it is reasonable to pay 2018 windshield repair claims at 1995 rates or even less.
Have them explain how it is fair and reasonable to only pay for one rock chip repair and $0 for additional repairs when statistically over 30% of the time claims involve two or more rock chips.
Audit the amounts paid for auto glass claims to determine if there is, in fact, cost savings to insurers.
Audit the average amount paid to Safelite per auto glass claim versus the average amount paid to non-Safelite service providers per auto glass claim to ascertain discrepancies and discrimination.
Declare unlawful, conflicts of interest when settling insurance claims.
Declare unlawful, intentional interference with any contract between a consumer and a service provider during the claims settlement process.
I would only add, other than please put spaces between paragraphs next time for ease of readability, is that you missed two key points.
First, you can't single out one network, nor one network model. It's the network model itself that's the issue at hand, you'll find that clearly stated in the '63 Decree, though they called it "The Plan".
You will not find success from regulators easily on this, but you will find no success if you espouse one network over another. Essentially, you will be standing there stating that "network BAD, if they steer away from you" vs "network OK, IF they steer to you". It will not matter if it's steering, price, consumer preference, ease of interaction, ect ect. It's the entire concept of a third wheel in a two party contract of repair, that's the issue.
Which brings me to the second issue you missed. That is the fact that there IS NO SUCH THING AS INSURANCE WORK, it's a MYTH, always has been, at least in our tenure in the business, back to the '60s. Insurers do NOT contract for the repairs to the car, do not choose the "repair" option under an insurance policy that would allow them to invoke and execute "an interest IN the repairs" and, also cause them the liability FOR those decisions and actions relating to the repairs. Neither did they SELL and HMO/PPO type of policy. In either case, the TPA/Network cannot be, by default, be a third wheel either.
Keeping those two simple facts in mind, drives the points you make home hard and fast, especially if you keep them in the forefront of attention while you make your case above, because ALL of your points become completely inescapable, then.
So far Mark you are the only one who responded even though a lot have read my post. If you go back and read it, you will note that I did address the whole TPA scheme.
It is just that Safelite's model is the only one involving an actual service provider in their model. As long as TPA's don't refer (steer) or interfere with a consumers choice, I don't care if insurers use TPA's. As long as one service provider does not have to deal with a competitor service provider in the process and as long as insurers or their TPA's can't dictate pricing, I am okay with the use of TPA's because insurers have the right to control their "administrative" costs.
With the advent of TPA's came the EDI B.S. That was and is an expense to the service provider.
Service providers shouldn't have to pay anymore than the cost of a fax message or an email to submit their invoices.
Either the insurer or the TPA should have to cover the cost of EDI software, software renewal fees, EDI fees, NAGS books or software etc. (et cetera) because it is for their own convenience. Why shouldn't a service provider simply be able to call a glass provider with the year, make and model etc., mark it up reasonably, add labor plus ROI and mail, fax or email an invoice to the insurer?
While I am on a rant, why does a company that sells software to insurers have any right or say beyond a part numbering system. Where do they get off setting or even suggesting prices?
Regulators need to put insurers on notice that service providers are not parties to the insurance contract and that the following will not be tolerated:
1.) Steering insureds to or from service providers.
2.) Projecting claim administrative costs onto service providers.
3.) Refusal to accept and/or delay in paying legible invoices in any format.
4.) Interference with a business contract between an insured and a service provider.
5.) Telling an insured that they will only pay a certain amount on a claim unless said amount is specifically outlined within the four corners of the policy.
P.S. I wrote the initial post on a word processor and then copied and pasted it into here. Unfortunately, none of the spaces and bullet points in my summary took and I was too lazy (and upset) to make the changes.
I’m guessing many didn’t respond for the same reasons as me. This has been hashed over dozens of times on this forum. Probably more. The simple fact is that there is no way to fight the corruption you outline, because auto glass businesses aren’t willing to form a united front. Some small shop owners refuse to kowtow to big insurance, and bill a fair and reasonable price, using customer assignments to make insurers pay the total invoice. Unfortunately many buy into the network scheme to grab as much volume as possible. The latter will never help the former put an end to the TPA schemes you mention. And let’s face it. No one has deeper pockets than insurance companies. They will spend thousands to defend a $200.00 shortpay. Why? Because they can. It simply doesn’t affect the immense profits they make unscrupulously.
And NAGS? I’m no fan of their “proprietary “ Benchmark pricing, but I set my own pricing so I couldn’t care less what they do. Use a cost plus method and if you want to use the benchmark in the equation. It doesn’t matter, because TPAS will shortpay and a shop either has to go after the shortpay or quit wining.
Remember this. Going after short pays that result from chip repairs is simple. Even the S monster charges for multiple repairs to cash customers and at a rate that fits the 21st century. And their repairs are garbage so it’s eassy to defend your pricing if you do outstanding work.
And as always, thanks Mark for making more sense on this forum than anyone else (including me)
When a business is in a area where the big competitor is not present it is a lot easier to not join the beast. For those of us in a saturated market it is difficult to say that our price can be 30% higher due to competitive pricing. Its not fair I agree and they have a monopoly that I don't understand how it can be legal but that's the problem as it must not be illegal. Its wrong by all means but how to combat it without a alliance is the problem..
Why can we see the problem but have no way to fix something with so much leverage against fair business trade.
Path of least resistance has screwed us all unfortunately.
After more than twenty years of the TPA scheme it doesn't make any difference as to whether a Bel/Safe location is near yours. The shops that have been coerced into belonging to the Bel/Safe network are considered to have merged with Bel/Safe under Federal guidelines of pro-competitive collaboration.
In the process, those coerced network participants have been forced to endorse the Bel/Safe brand over their own and have been forced to divulge proprietary business information to a direct competitor. They have also been coerced into giving up their right to set their own prices.
Coerced because if they did not join the network, their businesses would have been subjected to ignored, delayed and/or short paid invoices. Coerced because if they did not join the network, their businesses would have been subjected to boycotting and attempts to steer customers away from them when a direct competitor would have been allowed to call into question their business practices and warranties thereby negatively affecting their business reputations.
The problem is easy to see and could easily be rectified if regulators did their collective jobs. Unfortunately the "path of least resistance" for them is to turn a blind eye to the situation.
Large international corporations have a lot of money to use toward legal expenses and lobbying. So do domestic auto insurers. They hide behind an American Legal system that requires each side of an issue to pay their own legal expenses and one which has become so convoluted with case law that even judges get so confused that they don't know which way is up.
The auto insurers have colluded with a service provider which, without their network of so called pro-competitive collaborators, represents less than twenty percent of auto glass service providers, in order to control the pricing of the other eighty percent of the auto glass service providers. So far they are getting away with it except for in states like Florida which have passed legislation that makes insurers pay the legal expenses of the plaintiffs when they lose in court. Of course we see how hard they are lobbying the Florida legislature to pass more legislation in their favor.
There are very few law firms in the country willing to go up against the "beast". Bless the ones that do!