PCI: Tenn. Auto Parts Regulation Would Make Consumers ‘Double Losers’

June 22, 2004

According to the Property Casualty Insurers Association of America (PCI), a Tennessee Department of Commerce and Insurance proposal requiring written permission from auto policyholders or third-party claimants to use competitive auto replacement parts would make consumers “double losers” by eliminating competitive pricing and possibly having to pay more for parts.

“Consumers would lose the potential savings from competitive pricing and also would have to absorb the price increases that could be freely imposed if carmaker parts were the only choice,” said Robert Hurns, legislative database manager and counsel for the PCI.

In a written statement to the Department, PCI objected to the proposed regulatory change as both an unnecessary inconvenience for policyholders and as a serious compromise to the contract between the policyholder and insurer.

“The clear and unambiguous language of the insurance contract controls how the insured’s vehicle will be repaired, including the type of parts to be used,” Hurns wrote. “If the courts refuse to alter clear and unambiguous contracts, should the Department of Commerce and Insurance presume to do so?”

The proposal is reportedly based on the erroneous premise that competitive repair parts are inferior to the more costly original equipment manufacturer (OEM) parts – an assumption that is untrue, according to Hurns. “Blind tests over the last decade, including tests conducted by the Collision Industry Conference (CIC) have indicated that certified competitive parts perform as warranted, while the OEM parts did not,” he noted.

“Auto insurance buyers share in hundreds of millions of dollars in savings when auto parts price competition is allowed to continue unfettered,” Hurns said. “By imposing anti-competitive measures, the proposed regulation will stifle one segment of that market and bolster the 80 percent market share currently enjoyed by the auto manufacturers. This is a disservice to the consumers of Tennessee and the insurers that compete to serve them.”

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