Windshield bill would raise car insurance premiums, critics say

A bill aimed at giving consumers more options and preventing what its sponsor says is an unfair trade practice could end up raising car insurance premiums, according to the insurance industry. 

Sen. Jake Knotts, R-West Columbia, is the main sponsor of the bill (http://www.scstatehouse.gov/sess119_2011-2012/bills/807.htm), which deals with car windshield replacements. 

Car insurance companies have networks of preferred repair shops that they send customers to, just like HMOs have certain doctors they approve. The repair shops have agreed to discounted rates, paid by the insurance companies, in exchange for the insurance companies sending them business. 

To speed up the claims process and paperwork, one of the windshield replacement companies, Safelite AutoGlass, set up Safelite Solutions, which acts as a third-party administrator. With some insurance companies, like AllState and Nationwide, when a policyholder calls a toll-free number to get his windshield replaced, it's Safelite Solutions that answers, not the insurance company. Safelite recommends glass companies that can do the work and submits the paperwork to the insurance companies. 

Sen. Knotts says that's where the problem comes in. He says Safelite Solutions steers customers to its own glass business, Safelite AutoGlass. His bill would make it an unfair trade practice for a glass repair business that administers insurance claims to refer customers to itself. 

"Now if I don't have a glass company in mind and I just call my insurance company and say, 'Where can I take it?' That's fine. They can steer me where they want to. But I think it's my right as a customer to choose my local glass person that I want to do it," he says. His bill "knocks out the monopoly that they're trying to build." 

Lonnie Sheppard has owned Sheppard Glass in West Columbia for 44 years. His shop is on the preferred providers list of the insurance companies, but he says Safelite still sometimes steers customers away from him and to itself. If Sen. Knotts' bill were to become law, he says, "It would mean we would be on an equal playing field." 

But Bob Herlong, a consultant who represents the insurance industry, says opening the market to repair shops that are not on the preferred providers list would mean those repair businesses would charge more, because they haven't agreed to the discounted rates. 

"Ultimately, it will increase the cost of repairing or replacing windshields, which will be borne by the consumer in higher insurance rates," he says. "We have data that's very credible that shows, in states that have these restrictive type laws, the cost of repair is 20 percent higher in those states than it is in states like South Carolina now, where the insurance community is allowed to use preferred providers." 

He also says the insurance companies couldn't guarantee the quality of those companies' work. 

But Sheppard says the threat of higher insurance premiums is just a scare tactic, because insurance companies dictate what they will pay for a repair. 

The bill is now in the state Senate.