Cover Story
TDI Asleep at the Wheel:
ABAT Issues Challenge to Protect Consumers from Under-Indemnification The Texas Department of Insurance (TDI) is responsible for regulating the state’s insurance industry and protecting consumers, yet insurance companies’ abuses run rampant in the Lone Star State. Since ABAT was founded in 2014, association leadership has frequently contacted TDI to discuss how those abuses impact Texas consumers in hopes of correcting the situation. “TDI’s job is to protect Texas consumers, but they’re not doing that as far as I can see,” says ABAT President Burl Richards. “TDI continues to say they have no authority while they sit back and allow insurance companies to under-indemnify consumers.” “Insurers have manipulated consumer protection laws,” ABAT Lobbyist Jacob Smith contributes. “The only avenue that shops and consumers have is TDI, which does nothing because they claim they don’t have the authority to do much.” Fair and proper indemnification of insured and claimants has been one of the largest sources of contention. ABAT believes that proper indemnification includes all necessary repair processes, operations and rates, which collectively ensure that the consumer receives a safe and proper repair. “Texas families need to know auto repairs are done the right way when their vehicle is returned to them,” explains Ware Wendell, executive director of consumer advocacy group Texas Watch. “Prevailing rate is where the rubber meets the road because it determines whether professionals can get paid enough to do the repair the right way. Can shops afford to train their personnel? Buy the proper equipment? Spend the time necessary to follow all safety procedures in making the repair? These are the questions that matter for protecting lives on the road. “Insurance carriers need to properly investigate claims and then pay policy benefits,” Wendell continues. “Enough with the games. They shouldn’t be able to strong arm folks and essentially steer them to preferred shops with suppressed rates where corners may be cut.” When these issues are raised, the opposition often focuses
exclusively on the Labor Rate portion of the conversation, neglecting to acknowledge that ABAT’s primary focus lies in the need to elevate prevailing processes and procedures, ensuring that the customer’s vehicle is safe to drive. Collision repair facilities that follow the instructions of the vehicle manufacturer to ensure the vehicle has been restored to its pre-accident condition and that all components, including safety features, operate as intended are often told, “We don’t pay for that” by insurers. “This is about so much more than my paycheck,” Richards emphasizes. “This is mostly about processes and procedures. Due to the lack of proper indemnification, corners are routinely cut during the repair process, and this is directly related to the fact that insurers are allowed to write policies/contracts on behalf of Texas consumers with seemingly no oversight or accountability. “In a conversation with ABAT, TDI admitted that of approximately 1,100 TDI employees, NOT ONE individual understands what constitutes a safe and proper repair!” Richards adds, “When insurers refuse to recognize safe and proper repair processes and procedures, the consumer suffers harm – financially due to the depreciation of their vehicle, but even worse, they face possible physical harm in the event of a subsequent accident. And the harm the customer faces is directly related to the underindemnification of the loss which is permitted per the policy language.” On numerous occasions, ABAT representatives have met with TDI to explore how prevailing rates are established. Although TDI claims that body shops set their own Labor Rates, insurers are only required to pay what’s “fair and reasonable,” which is determined by a “finder of fact” (which means the court system). “As I’ve been told repeatedly, both in writing and verbally, TDI doesn’t determine what’s fair and reasonable, but the agency permits policy language which indicates that the insurer determines rates,” Richards points out. “TDI is allowing State Farm and other
14 DECEMBER 2021 Texas Automotive
