Blumenthal Seeks U.S. Investigation of Car Insurers
Date: 09/01/09
Connecticut Attorney General Richard Blumenthal said car insurers are steering customers to preferred repair shops in a “scourge” that the U.S. should investigate.
Blumenthal Seeks U.S. Investigation of Car Insurers
Bloomberg Business News
By Andrew Frye
Sept. 1 (Bloomberg) -- Connecticut Attorney General Richard Blumenthal said car insurers are steering customers to preferred repair shops in a “scourge” that the U.S. should investigate.
“Problematic practices persist,” Blumenthal said today in an e-mailed statement. “We’re asking the federal government for an immediate review and remedy to stop coercive and deceptive tactics.” Blumenthal didn’t name any companies.
State Farm Mutual Automobile Insurance Co., Allstate Corp. and Warren Buffett’sBerkshire Hathaway Inc. are among the leaders of an automobile-coverage industry that’s been squeezed by rising medical costs and a decline in the value of fixed- income investments. Drivers and repair shops are “victims” as carriers seek to limit the rates mechanics can charge and guide consumers to certain repair shops, Blumenthal said.
“It’s a prevalent industry practice,” Blumenthal said in an interview. Connecticut has collected petitions from auto repair shops in 48 states that “really send a very powerful message that this problem is pervasive across the country.”
Allstate fell $1.21, or 4.1 percent, to $28.18 at 4:15 p.m. in New York Stock Exchange composite trading. Omaha, Nebraska- based Berkshire, which sells car insurance through its Geico Corp. unit, slipped $2,250, or 2.2 percent, to $98,600. State Farm of Bloomington, Illinois is owned by policyholders and isn’t publicly traded.
Investigation Requested
Blumenthal said he sent a letter to U.S. Attorney General Eric Holder today, requesting a probe. He is also reaching out to other state attorneys general.
“American consumers are in every state allowed to take their damaged vehicles wherever they choose,” said Michael Barry, a spokesman at industry-supported Insurance Information Institute. “The auto insurance industry is a very competitive one. And a consumer who feels as though they have been given poor advice, whether sought or unsought, from their insurance provider can very easily switch companies.”
Barry pointed to a review conducted by the New York Insurance Department this year, which concluded that carriers hadn’t “systematically” violated rules designed to protect a consumer’s right to choose where vehicles are repaired.
“This very thorough investigation is reassuring in that it shows auto insurers are largely complying with the laws that preserve consumer choice,” Eric Dinallo, then superintendent of the New York regulator, said in a Jan. 21 statement. “But it does raise some issues which the Department is addressing directly with certain individual insurance companies.”
Consumers Have Choice
“Consumers always have the right to take their vehicles to the shops they choose,” Paul Magaril, regional manager for the Property Casualty Insurers Association of America, said today in an e-mailed statement. “Direct repair programs simply offer consumers additional options.” The group represents more than 1,000 insurers.
Insurance is regulated by the individual U.S. states.
State Farm, the biggest U.S. home insurer, allows its customers to choose a shop from outside the company’s “direct repair program,” said Dick Luedke, a spokesman.
Rich Halberg, a spokesman for Allstate, didn’t return a call seeking comment. A message left at Geico’s offices also wasn’t returned.
