The California State Senate convened on Tuesday to consider a bill that would, without constitutional authority or sound reason, ban an insurance company from owning or investing in auto body repair shops.
“It is not within the Legislature’s constitutional jurisdiction to arbitrarily expel legitimate business people from ownership of a business,” said Sam Sorich, general counsel and senior vice president of the National Association of Independent Insurers (NAII). “Insurance companies and body shops are entitled to engage in free enterprise. No good reason exists to draw a line against only insurer investments in repair shops.
“Senate Bill 1648 would prohibit investment of new capital, contradicting basic concepts of equal protection as well as due process rights to engage in and invest in business and acquire property.”
Under the measure, insurers that currently invest in auto body repair shops would be required to divest their interests within three years of the effective date of SB 1648. The bill would prohibit any new insurer investments in auto body repair shops.
Whether an insurer may have an ownership interest in a repair shop does nothing to diminish existing consumer protections, Sorich said. Some insurance companies see the merit of making investments in auto body repair shops because they want to provide their customers with prompt, high quality and economical repairs.
“Insurers invest in repair shops because they want to make sure that there are shops in the marketplace that are modern, well-equipped, and contain highly-trained staff to deliver customer satisfaction,” Sorich said. “Since most auto body repairs are paid for by insurance companies, it only makes sense that insurers want to make sure that repair shops have the capital needed to establish and maintain first-rate facilities and expert personnel.”
California also has strong anti-steering laws against forcing consumers to take their cars to a particular shop, Sorich added.
“The insurance industry wants those consumer protection laws to remain in effect,” he said.
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