Is Your Auto Insurance Company Putting Repair Costs Over Safety?


NEW YORK (MainStreet) — Are insurance companies authorizing vehicle repairs using "junk yard parts" and cheap "foreign knock-off" parts to save money at the risk of safety? One state official believes so, and has filed suit to prove it.

Louisiana attorney general Buddy Caldwell filed a lawsuit this week against State Farm Insurance claiming the insurer has "created a culture of unsafe business practices in which consumer vehicle repairs are performed with cost-savings as the primary goal rather than safety and reliability."

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The suit alleges State Farm pressures repair shops to forego repairs to vehicle components that are "visually imperceptible" but which a prudent repair facility would deem necessary. The insurer also forced shops to perform vehicle repairs cheaply and quickly, rather than in accordance with consumer safety and vehicle manufacturer performance standards, according to the claim.

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Many insurance companies keep a list of "preferred repair providers" that are recommended to consumers. These repair shops agree to pricing structures that are dictated by the insurance company, limiting parts and labor rates. Interestingly, in at least one case -- repairs authorized by State Farm insurance -- replacement parts are obtained using an automated locator service developed and funded by the insurance company itself.

"The use of the Parts Trader software platform removes the ability of the repair facility to freely select replacement parts that are most appropriate for a specific repair," the complaint says. "State Farm adjusters have become increasingly involved in the everyday tasks performed by repair facilities, including but not limited to locating specific replacement parts and mandating that repair facilities use the specific parts identified by the adjuster, even when the repair shop believes that such use is neither safe nor appropriate."

The lawsuit says the insurance company, not the repair shop, determines all aspects of vehicle repairs, including what repairs are required, how long they will take to complete and the replacement parts to be used.

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"In some cases, we've found that these parts are nothing more than used junk yard parts," Caldwell said in a release. "In others, we've found them to be foreign knock-off parts of questionable quality. Auto repair is not an industry where you can cut corners to save a little money. It could be a matter of life and death."

State Farm collected $1 billion in premiums in Louisiana alone in 2012, accounting for one third of all auto insurance policies written in the state.

A State Farm spokesman told the Associated Press, "The description in this lawsuit is not in line with State Farm's mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety."

--Written by Hal M. Bundrick for MainStreet

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