Oregon state regulators say insurance carriers are too often using photo estimates as a means of making low-ball settlement offers to policyholders without a thorough investigation.
Insurance Commissioner Andrew Stolfi on Oct. 21 released a proposed draft of a bulletin that would remind carriers that they cannot require policyholders to use a mobile application to submit claims and that they have a duty to conduct timely and adequate investigations.
Agency spokesman Brad Hilliard said the Division of Financial Regulation has received about a dozen complaints from consumers who said they were required to file claims using a mobile app and then received proposed settlements of far less than the actual cost of repairs. Some consumers said they were told the claim payment would be delayed if they did not consent to a photo estimate.
“You’re looking at offers around $1,000 and then it comes back that the car is totaled or it turns out that they are needing several thousands of dollars in repairs,” Hilliard said.
Hilliard said the proposed bulletin would just be a reminder that existing Oregon statutes require insurers to do an in-person inspection when asked and they shouldn’t make a settlement offer unless they are confident that it accurately represents the amount of the loss.
“You shouldn’t regularly see dramatic difference from the initial estimate to the supplement,” Hilliard said. “Insurers should not be relying on the supplemental process to accurately assess the damage to the vehicle.”
Hilliard said if the bulletin doesn’t change insurers’ behavior, the division may conduct market conduct examinations and levy administrative penalties to enforce state law. At the very least, the insurance department will make another data call if it continues receiving complaints from consumers.
Such complaints persuaded lawmakers in one state to bar the use of photo estimates for high-dollar claims. On July 2, Rhode Island Gov. Gina Raimondo signed into law Senate Bill 849 by Maryellen Goodwin, D-Providence. The bill requires insurers to use licensed appraisers to physically inspect damages and prohibits estimates based on pictures for claims where losses exceed $2,500.
A similar bill was introduced in April by Louisiana state Rep. Kirk Talbot, R-River Ridge, but died in committee.
Kenton Brine, president of the Northwest Insurance Council, said he’s not surprised that if any state were to ban photo estimates, it would be Rhode Island. He said he knows from his experience research regulatory issues that the auto repair industry has strong influence over the Rhode Island Legislature.
Brine said he hasn’t yet polled members to determine the association’s stand on the proposed bulletin, but he did receive some responses from some member carriers after the insurance commissioner notified the group that he had received complaints. He said the insurers said that photo estimates benefit consumers by allowing claims to be quickly resolved, but they are not appropriate in all circumstances.
Brine said he doubts insurers will have any objections to a bulletin on the subject as long as it doesn’t go beyond the strong consumer protections that are only written in Oregon statute books.
“There’s no harm in reminding them that there are laws on the books,” he said. “I don’t think there’s a widespread problem, but it may serve to remind consumers of what their rights are and insurers what their obligations are.”
Some in the auto-body repair industry are hoping for more than a bulletin that restates state law. Ron Reichen, president of Precision Body & Paint in Beaverton, Oregon, said photo estimates should be banned altogether.
Reichen said research done by the Society of Collision Repair Specialists showed that 37% of photo estimates are accepted by consumers. He said he knows from his own experience running an auto-body repair shop that photo estimates typically amount to only 30% to 40% of the true repair cost.
Reichen said the technology in automobiles becomes more sophisticated every year. For example, auto seats now have weight sensors in them to switch the air-bags off if a child is in the front seat. Any damage there would be missed in a photograph. Reichen said damage to an automobile’s frame would also be missed in photographs. The vehicle has to be lifted and examined from below by taking precise measurements, he said.
Reichen said consumers are often ignorant about the damages that can be missed without a thorough inspection.
“They are driving these cars, wearing out the tires, with dangerous equipment,”he said. “Basically they are fat and happy because they don’t know what’s going on.”
The Oregon Division of Financial Regulation is taking comments on the proposed bulletin through Nov. 15. Comments should go to DFR.Bulletins@oregon.gov.
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