New York Says Auto Insurers Did Not Violate Law

Auto insurance companies have not systematically violated a section of the State Insurance Law that gives consumers the right to choose where they want their vehicles repaired after a collision, New York Insurance Superintendent Eric Dinallo said.

However, in some isolated instances, representatives of some insurance companies engaged in practices that could be considered violations of the Insurance Law or regulations by providing improper or inaccurate information, Dinallo said. His announcement was based on a comprehensive investigation by the New York State Insurance Department, which was launched after complaints by a statewide trade association for collision repair professionals that insurance companies were illegally “steering” customers to designated collision repair shops.

As with health insurers who have sought to reduce costs by creating networks of providers who agree to reduce individual charges in return for the volume of business provided by insurers, many auto insurers have created networks of repair shops, sometimes called “network,” “participating” or “direct repair” shops. Unlike health insurers, however, auto insurers are not permitted to require customers to choose “in network” providers.

In addition to forbidding insurance companies from requiring consumers to repair their cars at a specific shop, Section 2610 of the Insurance Law also prohibits companies from recommending or suggesting to their insureds that repairs be done at a particular place or shop unless their insured expressly asks for a recommendation. That means a company cannot make a referral – to its preferred program or repair shop, for example – during the claims process unless and until their insured asks for one.

While most companies were found to comply fully with the Insurance Law and related regulations, the Department found isolated instances of noncompliance, including where a company or its representative:

• Required of some customers that a damaged vehicle be inspected at that company’s drive-through facility, in apparent violation of a regulation requiring this inspection to take place at a time and place “reasonably convenient to the insured”;

• Set a “goal” of having 45-60% of repairable vehicles repaired at network shops; and

• Told an insured to bring his car to a network shop for inspection, and stated that the repairs could be done there, while another claim representative said repairs could be done at the network shop in half the time an out-of-network body shop would take.

“Consumers need to know their rights, and know that the Insurance Department stands ready to protect them,” Dinallo said. “If your insurer tells you that you need to get your car inspected or repaired at a particular place, call the Insurance Department at 1-800-342-3736. If, unfortunately, you are in an accident and need to have your car repaired, call the Department to find out your rights, or visit our Web site.”