Auto insurers vs. auto repairers

From USA Today:

Auto repair shops are stepping up their efforts against insurance companies, which they argue are controlling their prices by steering customers toward preferred businesses that do their bidding. Auto body trade groups are promoting bills in state legislatures from Massachusetts to Iowa to try to change the rules of the game.

At issue is who gets to decide prices for auto body repair — shops or insurance companies. Laws and prices vary by state, but repair shops say if they don’t charge what insurance companies decide are fair prices, they lose business, sometimes to shops that use substandard parts.

I’ll steer past the charged language — “steering customers toward preferred businesses that do their bidding” — to point out that insurers are attempting to operate in classic free-market fashion. Negotiating with vendors and awarding business to the ones that provide the best combination of price and service.

The body shops want legislators to prefer one party – the body shop – over others. That might be appropriate for public policy reasons – the article cites a single customer out $25 – but I think it’s important to say what’s happening.

Last year, my family had to wrangle with this, after a neighbor’s car backed into ours. The insurer wasn’t much of a problem. Our struggle was with the neighbor, who wanted to handle the claim without an insurance claim. Once it became clear that wasn’t happening, things went smoothly.

(BTW, we had no issue with “substandard parts.”)

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