Calif. AB 1200 Voted Out of Committee; Public Hearing Held Today
July 9, 2009

The California Senate’s Banking, Finance and Insurance Committee voted AB 1200 out of committee this afternoon during a public hearing. The bill will now move to the Senate for a vote.

The hearing, one of many held in the committee today, drew much interest—both from those in favor of and opposed to the bill.

If passed by the Senate, the bill will add the following language to the state’s insurance code:

"Nothing in this section restricts the ability of an insurer to explain benefits the insurer provides as part of the claims process."

Those in favor of the bill argued that the bill provides insurers the chance to inform consumers about their options.

“The consumer will still hear about [his] options,” said Michael Gunning of the Personal Insurance Federation of California. “Steering is still illegal under AB 1200.”

A State Farm representative agreed.

“This bill still prohibits an insurance company from having a claimant repair a car at a particular repair facility,” she said. “This bill allows the insurer to provide basic information to the claimant about the benefits available if the car was repaired at a direct-repair shop or one of the shops on our network.”

She added, “Basically it puts the consumer in the position of making an informed choice and comparing various programs.”

An Allstate representative also spoke in support of the bill.

“This is a benefit that is in our contract for our insureds,” said the Allstate representative. “We believe it to be our right to express the benefits of the program to the insured.”

An American Insurance Association representative concurred.

“We believe this bill is purely allowing the consumer to have the information they need to make an informed choice,” she said.

Brian Moss of the California New Car Dealers Association spoke in opposition to the bill.

“You have to ask yourself, why is a measure sponsored by insurance companies going to be a pro-consumer measure, if the steering law today prevents steering and this bill does nothing to impact steering … why is the bill even necessary?” asked Moss.

He added, “You have to ask yourself why the consumer attorneys and car dealers are sitting next to each other opposing a bill sponsored by insurers.”

Moss also noted the specific concerns he and others have regarding the bill.

“Our concern is that the language in the bill raises doubt about when and what insurance companies can say at the time of extreme stress,” Moss said. “The time of extreme stress is right after an accident.”

Moss proposed trying the bill again, but under a two-year process, so all sectors of the industry could work together to develop other ways to adapt the law.

In response to questions from various committee members who questioned why insurers shouldn’t be able to offer this information, Moss explained, “There’s a difference between having a right to pick your own repair shop—it’s a question of whether you’re going to be influenced or steered away from a particular shop.”

Moss also praised State Farm’s policy, which he said is to ask consumers if they’ve chosen a repair shop.

“Unfortunately we suggested [adding that wording as] amendment to this bill … and in both occasions that amendment was rejected,” he said.

One insurance company representative still advised the company should be able to explain the benefits it has available to the insured, even if a shop has been chosen.

“The issue is, when you buy the policy, the language doesn’t say anything about in-network or out of network,” Moss replied. “It says your car will be reasonably repaired.”

Jack Molodanof of the California Autobody Association also spoke against the bill.

“The customer will say I want to go to so and so’s shop,” he explained. “Well, the insurer will say, ‘That shop didn’t make our preferred list.’ Well, maybe the shop didn’t want to apply to be on that network … but there’s a negative connotation there.”

Molodanof also urged the committee to hold off on the bill, so more time could be spent on it.

“The bill isn’t ready. It’s not cooked yet,” he said. “There’s no urgency to move now.”

Molodanof added, “It’s begging for a fix and we’d like to sit down and craft a solution with consumers, insurers and body shops. We’d respectfully ask the author to step back and make this a two-year bill—don’t jam it through the legislature.”

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