On March 13 this year, Mississippi Attorney General Jim Hood wrote to the US Attorney General Eric Holder asking him to investigate
State Farm’s ‘Parts Trader’ program. He told the press that “Body shops have reported to my office that they are pressured into accepting bid from Parts Trader for after-market or re-manufactured parts that are unsafe and far below the quality of the original equipment manufacturer.” Hood also told Holder “there are also allegations that the insurance companies are artificially fixing auto body labor rates to reduce the cost of repair.”
Hood contends that a consent decree reached in 1963 between the Department of Justice and the Association of Casualty and Surety Cos. prohibits such practices – and, if the allegations are accurate, they are a breach of the Sherman Antitrust Act.
On July 9, 12 other carriers were sent letters by the Mississippi AG’s department inviting them to respond to him on allegations of “steering” policyholders to body shops that might make insurance repairs using remanufactured or inferior parts to reduce costs for the carriers involved. Alfa Insurance,
Allstate, Direct General, CT Corporation System of Mississippi, Mississippi Farm Bureau,
Nationwide, Progressive, Safeco, Shelter,
Travelers and USAA were all told, “I will assume your company is not interested in reaching an agreement and will proceed accordingly,” by the AG.
The U.S. Attorney General’s Office has not yet committed to an investigation but has replied to Hood, saying it “will continue to consider complaints it may receive and determine whether the facts warrant further investigation.”
Although this investigation may have some way still to run, it re-emphasizes how shopping by price alone may well leave consumers buying coverage that they later are unhappy with – and why an insurance broker who understands all the coverages available is always the best bet.
