The Rhode Island legislature is considering a new bill that would give the state the power to revoke or deny the license of a body shop that offers customers rebates or discounts to offset their insurance policy deductibles.

House Bill 7994, introduced by Rep. Timothy Williamson (D-Coventry, West Warwick) in February, adds language to Section 5-38-10 of the state’s General Laws that establishes criteria for denying, suspending or revoking body repair shop licenses.

The new language would permit the state to revoke a license “For rebating or offering to rebate the customer’s insurance policy deductible as an inducement to the customer to have the vehicle repaired at the licensee’s automobile body repair shop.”

Existing grounds for suspending or revoking a license include defrauding customers, dismantling vehicles with the written consent of the owner, failure to perform contracted work, and failure to comply with industry safety standards.

The Rhode Island House Corporations Committee held a hearing on the bill March 19 and recommended that the measure be held for further study. The Auto Body Association of Rhode Island (ABARI) presented testimony in opposition to the bill at the hearing. The insurance industry appears to support the bill, and representatives from the American Insurance Association and the Property Casualty Insurers Association of America attended the hearing as well.

While the national insurance industry associations were present for the proceedings, a group calling itself the Rhode Island Auto Insurers Coalition sponsored the bill. The group does not appear to have a Web site.

“We argue that the true intent of this bill is for steering,” says Jina Petrarca-Karampetsos, an attorney speaking on behalf of ABARI. “Insurance companies provide discounts on their deductibles all the time. This bill is intended to take away repairers ability to pay a cost to get customers in the door, so that the insurance companies can use those discounting tools exclusively.”

Collision repair shops often offer rebates and discounts in order to attract business, sometimes passing parts discounts on to customers. Some insurance companies, depending on the policy terms, will discount or even waive a deductible if, for instance, the customer takes their vehicle to a repair shop in the insurer’s direct repair program.

According to Petrarca-Karampetsos, who attended the March 19 hearing, the insurance industry lobbyist that testified in support of the bill indicated that such discounts were being subsidized by other policyholders.

“That is completely inaccurate,” Petrarca-Karampetsos says. “The money belongs to the policy holder. In Rhode Island, customers have to be compensated to repair the vehicle to pre-accident condition, regardless of whether they actually get the vehicle repaired. There is no evidence that other policyholders are subsidizing these discounts. The shop has a right to pass their discounts on to customers, or even take a loss on the job if they want to.”

ABARI is urging its members to contact their state representatives and voice their opposition to the bill.