Nigro – The Community-Focused Body Shop
The Auto Repair Insurance Alphabet and What the Consumer Should Know
Just about anyone using health insurance in the past two decades is familiar with the PCP’s and HCP’s of HMO’s and PPO’s. It took a while for many consumers to become familiar with health insurance lingo. Consumers who know the health insurance alphabet make better health care choices, resulting in better, more effective treatment at lower out-of-pocket expense. Knowledge of the Auto Repair Insurance Alphabet will have similar benefits for consumers.
Many auto insurance companies have entered into agreements with auto repair shops similar to health insurers’ preferred provider networks. The auto insurance industry has developed a system in which repair shops agree to certain conditions and the insurer directs policyholders in need of repair services to those shops. After being involved in an auto accident, car owners are directed by insurance companies to DRP’s using OED and LKQ parts.
Fortunately, consumers rarely need to use auto repair shops to remedy accident damages. Unfortunately, this lack of experience can lead to unnecessary problems and expense when an accident occurs.
In auto insurance lingo, shops to which auto insurers direct policyholders are Direct Repair Providers (DRP’s). In theory, the DRP’s and auto insurers negotiate volume rates resulting in savings to the insurer and policyholder; and, they save the policyholder time by eliminating the need for an insurance adjuster to arrange an appointment to report on the damage to the company.
In practice, however, consumers have discovered that using a DRP under the agreements worked out with insurers is, often enough, less than satisfactory. DRP agreements are arranged by insurers, not auto repair shops. They typically include provisions requiring repairers to base estimates on “aftermarket” or salvage parts [also called “like kind and quality” (LKQ) parts] not “original equipment manufacturer” (OEM), i.e. the car manufacturer, parts. LKQ or aftermarket parts are often made outside the US and warranties for parts and performance have been difficult for consumers to enforce. The agreements also usually require the repair shop to shoulder all liability for the repair and to hold the insurance company harmless from any claim, even though the insurance company directs policyholders to the DRP’s and tells policyholders that the company “guarantees” the DRP’s work. Unfortunately, consumers have found that the insurer often “guarantees” only the parts, and then only either the fit of the part or the performance, but not both. The insurer usually does not guarantee the safety or manner of the repair method.
In short, DRP-Insurance arrangements, in practice, have benefited neither the policyholder/consumer nor the repair shop. DRP agreements are written in the insurance company’s interests and are executed accordingly.
The insurance company’s practice of requiring policyholders to use their DRP’s [or not to use other repair shops] is called steering and it is illegal in Pennsylvania. The consumer, however, is probably not aware of this. Under state law, the policyholder seeking auto repair is in a contract with the repair shop, not the insurer. The consumer is a customer of the repair shop, not the insurer.
When it’s necessary to have auto repairs done due to an accident covered by insurance, consumers need to take two simple steps.
First, when the insurer recommends an auto repair shop, ask to see the DRP agreement. Insurers have every right to ask the consumer to use a DRP. Insurers do not have the right to require the consumer to use their DRP’s for the repairs.
Second, the consumer should get an estimate for repairs from any shop with which he/she is familiar. Insurers are required by law to pay any reasonable and customary charges regardless of where the work is performed.
Just as it took time for consumers to become aware of the ABC’s of health insurance coverage, it may take some time for consumers to become aware of the ABC’s of auto repair insurance. Knowledge of the auto repair alphabet will benefit consumers financially – what better reason to know about DRP’s and the rest of the ARIA [auto repair insurance alphabet]?
