Aftermarket Parts Use Increases, CEO Says
By Daniel Hays
NU Online News Service, Dec. 17, 1:18 p.m. EST?Many insurers who stopped using generic parts to repair vehicle crash damage in 1999 have lately changed their policies and are employing them once again, according to the head of a claims servicing firm.
The difference is that that the firms, who halted aftermarket part use after the landmark case against State Farm now disclose up front when consumers buy a policy that the parts in use for repairs will not come from the automaker, explained Eric Seidel.
Mr. Seidel is president and chief executive officer of eAutoclaims, which claims 25 insurers as clientele for a Web-based system that uses a network of 3,000 collision repair shops.
In an interview with National Underwriter, he said that over the past six to eight months he has seen "a definite shift in policy across the industry."
After the 1999 verdict, "what we saw were carriers [who] simply quit using aftermarket parts. What we see now is those that were using them have returned to them, but only after a process to inform the consumer," he said.
In the Avery v. State Farm case, now on appeal, an Illinois jury found State Farm guilty of violating the state's consumer fraud law by deceiving policyholders and repairing damaged vehicles with inferior replacement parts, and failing to advise them that original equipment manufacturer parts were not being used. The panel awarded $1.2 billion in damages.
Since then, Mr. Seidel said, many firms have added riders and have customers sign forms that acknowledge the insurer will make use of aftermarket parts.
He said that he still sees carriers that do not use aftermarket parts, and this practice is reflected in higher premiums.
In the non-standard insurance market, he noted, "that consumer would rather pay lower premiums and use aftermarket parts."
According to the National Association of Independent Insurers, average auto damage physical loss per exposure rose from $313. 87 in 1999 to $345.89 in 2001.
The Des Plaines, Ill.-based organization said reasons for the increase include costly repairs to airbags, computerized equipment and the mix of vehicles in the marketplace such as more sport utility vehicles.
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