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No body shops for auto insurers

Published (2/18/2010)
By Nick Busse
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A bill that would ban automobile insurance companies from owning auto body repair shops is headed to the House floor — again.

Sponsored by Rep. Leon Lillie (DFL-North St. Paul), HF978 would make it unlawful for any company that sells auto insurance to acquire ownership interest in a business that repairs the “nonmechanical” exterior or interior parts of automobiles.

The bill was awaiting action on the House floor last year when session ended, forcing it back to the House Commerce and Labor Committee. The committee re-approved the bill Feb. 16 and sent it back to the floor.

According to Lillie, the bill is intended to prevent insurance companies from directing consumers to get their cars fixed at the insurers’ own repair shops. He said the concern is that they might have an unfair advantage over independently owned shops.

Although no insurers currently own repair businesses in Minnesota, Lillie said it’s becoming common in other states.

Joanne LaMettry, co-owner of LaMettry’s Collision, raised another concern: that insurance companies might look to cut costs by having their repair shops do inferior work.

“There have been instances where insurers, even in the current market, have pressured independent repair shops to do repairs that do not meet standard guaranteed repair minimums,” LaMettry said.

Douglas Franzen, a lobbyist representing Allstate Insurance, denied that insurance companies would have an incentive to do shoddy work, noting that the civil liability for doing so would be “astronomical.” Instead, he suggested bill supporters have ulterior motives.

“Quite bluntly, (the bill) fences out competition. It says certain people can’t compete in this market.”

Franzen said the bill would hurt consumers. He argued more competition for independent auto body repair shops would lead to lower prices and better deals. He noted that Minnesota law already forbids “steering” of consumers by insurance companies.

A companion, SF842, sponsored by Sen. Mary Olson (DFL-Bemidji), awaits action by the Senate Commerce and Consumer Protection Committee.

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