California Assembly Bill 1200, which would have made it easier for insurers to steer customers into their preferred shops, fell two votes short of being approved by the Senate this week in a 19-17 vote. The bill might be reintroduced, perhaps as early as next week.

Meanwhile, Consumer Watchdog, a California-based consumer advocacy group that has opposed AB 1200, has published several insurance company documents that they say illustrate that anti-consumer practices of insurance companies and their direct repair programs (DRPs).

One document, a contract between Mercury Insurance Co., and its prospective network body shops, pressures the auto body shop to keep costs low or risk termination without notice. Doug Heller, executive director of Consumer Watchdog, said these contracts create “reverse competition,” where body shops don’t compete for customers based on quality repairs, but instead compete with other network body shops for the insurer’s referrals based on the shop’s ability to cut its rates. “Cut rate prices lead to cut rate work,” Heller told the California Progress Report, which published the documents.

The second document is correspondence from AIG to a body shop in which the claims officer chastises the shop for using too many factory parts instead of aftermarket parts. The AIG document outlines a reimbursement plan that provides incentive to use aftermarket parts while discouraging the use of OEM parts.

To read the entire California Progress Report article, click here.