Currently, there is one company dominating and running rough shod over the rest of the auto glass repair and replacement industry, as well as, the auto glass claims administration industry. It is Safelite Group Inc. which has an aftermarket auto glass manufacturing division, a wholesale distributor division, a fulfillment (repair and replacement) division, as well as, an auto glass claims administration division. They currently use radio and TV to promote their “Safelite” brand nationwide. They state in their commercials that they are able to service up to 97% of the driving population in the U.S.
What they do not say in their commercials is how the insurance industry helps them get a leg up on all other non-Safelite (independent) auto glass repair facilities. The above mentioned auto glass claims administration division, Safelite Solutions, LLC., has reached a monopoly power status in that particular industry by colluding with over 100 auto insurance companies to administer their claims. Currently, they have 18 or more of the top 25 auto insurers under contract.
In an attempt to control pricing (costs), instead of negotiating pricing with individual auto glass repair and replacement facilities, the insurance industry has colluded primarily with Safelite, but also with other smaller TPA's. Similar to what has taken place in the health insurance industry, the TPA's are allowed to establish networks of “preferred” providers. Except that in the auto glass industry they have gotten away with promoting a huge conflict of interest by contracting with Safelite Solutions LLC, sister company to Safelite Auto Glass, Inc. (a clear conflict of interest.) to administer their auto glass claims. Safelite Solutions, LLC is not only financially affiliated with Safelite Auto Glass, Inc. but, is also controlled by the same parent company. In essence, Safelite is Safelite is Safelite.
In effect, independent (non-Safelite) auto glass repair facilities are forced to join the Safelite network or else have their own brands and identities sullied by being referred to as something less than a “preferred provider”. In other words, non-Safelite facilities must endorse the Safelite brand to keep that competitor from referring to them as less than “preferred”. The “network” participation agreement was written by Safelite attorneys and is heavily slanted in Safelites favor and in favor of Safelites contracted insurance companies because, among other things, the agreement requires each participant to agree to prices set by the insurance companies.(price fixing) It is unknown if Safelite actually gets better pricing than non-Safelite shops but there is some speculation to that effect. So, the insurance companies collude with Safelite all the while knowing that independent auto glass repair facilities must endorse the Safelite brand over their own brands, agree to non-negotiated prices with other competitors (anti-trust violation?) and agree to other non-negotiated criteria heavily slanted in the insurance companies and Safelites favor to simply stay in business and not even get to compete on a level playing field.
First of all, does a TPA even have a right to negotiate auto glass repair and replacement prices when they aren't even interested parties in the repair contract? TPA's are supposed to help reduce “administrative” costs, not to act as price fixers! Even though the TPA has been contracted by the insurance company involved, unless said insurance company is invoking their right to have the repair work done, the TPA should only process the invoices submitted by the repair facility. Rarely does an insurance company invoke that right because they do not want to take on the potential liability for bad repair work not to mention the fact that most states have laws on the books that protect the consumers right to choose what repair facility works on their vehicle. It is because of this right to choose that many states in the last few years have attempted to strengthen the existing laws with new legislation to prevent “steering”. However, in the process, the legislators and enforcement officials such as Attorneys General and Insurance commissioners seem to have forgotten the rights of independent repair facilities and the laws that address fair competition.
Steering is when an insurance company herds the consumer to favored repair facilities. This is bad because of other conflicts of interest. Corporate profits versus policyholder interests now comes into play. Also involved is the sometimes adversarial tendency when getting a claim satisfied. Usually, “favored” means the repair facility has signed a pricing agreement with the insurance company. Last, but not least, policyholders are concerned that their policy may be canceled, premium will increase or their claim will be denied and they may have to spend time in court to get a fair resolution. A subtle form of coercion is now in play.
So when an insurance company or their TPA says that a shop is not “favored”, the policyholder feels they are being told not to use their chosen shop. The question is, does the insurance company have the best interest of the policyholder in mind or the best interest of their stockholders? Repair facilities do not have to sign pricing agreements with insurance companies, but do so only to get on the list of “favored” vendors. Most of the small independent repair facilities do not get to negotiate prices. The insurance company makes their offer and the shop either accepts it or is bad mouthed by the insurance company when a policyholder chooses a shop that has not “signed on the dotted line.”
When it comes to auto glass repair or replacement, the insurance company never invokes their right to contract for the repair seemingly leaving it up to the policyholder and consumer choice. But when the consumer has been bombarded with radio and tv commercials all day long mentioning Safelite this and Safelite that and then ending the ad with a sing song jingle, “Safelite repair, Safelite replace”, calls to their insurance company to report a simple rock chip repair claim, are met with an automated attendant which ascertains that it is a “glass only” claim and the call is rerouted to Safelite!
Most insurance companies require the Safelite CSR to notify their policyholders right away that the call is being answered by “Safelite” Solutions which has been contracted by their insurance company to administer glass claims and that “Safelite” Solutions is financially affiliated with “Safelite” Auto Glass, Inc. which only further establishes the “Safelite” brand and suggests to the policyholder that they need to use Safelite to do their glass work. In actuality, it is a disclaimer made by the insurance company knowing that they are putting their policyholders in an uncomfortable position especially if the policyholder wants to use an independent shop or doesn't want to use Safelite due to a previous bad experience. If the first call to the insurance company is made from an independent repair facility, it is forced to deal with Safelite, a direct competitor, during the claim process. If that isn't a violation of the fair trade laws, what is?
To make matters worse, Safelite CSR's are scripted to advise policyholders that have chosen a repair shop outside of the “approved network”, to use words like, “while you may choose any shop that you wish to provide service to your vehicle, the one you have chosen is not on our list of approved shops that agree to your company’s pricing and you may be responsible for out of pocket expenses and you should also verify what warranty, if any, your shop offers. Do you still want to use that shop?” If that isn't bad mouthing I don't know what is! Even Safelite in its court case testimony suggests that it is aggressive and caddish to do so!
Sometimes the Safelite CSR will even try to steal the customer by offering to schedule the job with one of their technicians at the policyholders home or place of business. If the independent shop owner isn't listening in on an extension, sometimes the customer will tell the shop owner never mind (thinking they are required to use Safelite) and walk right out the front door!
That is a clear example of how one company is allowed to run rough shod over its competitor. Other examples include, denying requests to join the network with a form letter with no other stated reason than Safelite (which controls the network) feels that there is already enough representation in that particular region (Barrier to entry?). In other words, Safelite doesn't want the extra competition. There is absolutely no justification for that kind of abuse of power! Other examples include Safelite telling the customer that they cannot find that particular shop on their list. Another example, is when the Safelite CSR invokes the right to inspect the damage. This is usually done when the customer is already at their chosen shop but the inspection is a delaying tactic that gives Safelite a chance to actually go out and do the inspection and then steal the job. Early this spring, after a particularly bad snow storm in the Northeast, there was a thread on an internet auto glass forum suggesting (NOT CONFIRMED) that policyholders were scheduled up to four weeks out just so Safelite could keep all the business instead of suggesting other independent shops. For the independents in the auto glass business it is a constant battle.
Last summer the state of Connecticut passed legislation that went into effect January 1st, 2014 that was meant to “level the playing field.” Safelite and its battery of attorneys and lobbyists have fought and are continuing to fight the legislation. In the process, Safelite has admitted in their own court testimony and documents that Safelite Solutions is biased toward Safelite Auto Glass. They have introduced into the court record the legislative debate from both the CT House and CT Senate. It was obvious that the legislature knew what was happening in the auto glass industry was inherently wrong but they just couldn't seem to put their fingers on it. Even the CT Insurance Commissioner said there were already laws on the books and that further legislation wasn't needed. The big question is why aren't the laws being enforced? Why are insurance companies permitted to use biased TPA's?
The legislation that was passed and signed into law really only addressed how consumers are affected but the other laws on the books that are being ignored are the Fair Trade laws. It was mentioned that no consumers had actually complained to the CT Dept of Insurance but most of their complaints are leveled at either the TPA or their insurance company, neither of which are going to notify the Dept. of Insurance. Safelite attorneys have the audacity to argue that if Safelite were forced to comply with the new law and mention the name of at least one other licensed non-Safelite shop in the area where the repair is to be made, that the prospective customer might conclude that there is something wrong with Safelite! So, it is fair for insurance companies to force non-Safelite shops to have to deal with their direct competitor, Safelite, during the claims process, but it is not fair for the state of CT to require Safelite (or any biased TPA) to simply mention the name of an optional licensed non-Safelite repair facility!
Consumers are getting the short end of the stick! Currently, the claims process is very confusing and not at all streamlined as suggested. It is only “streamlined” if the consumer wants to use Safelite. Quite often the consumer simply wants to ascertain if there is coverage. When the call is automatically forwarded to Safelite, the consumer hangs up and tries again. Quite often Safelite is unable to verify coverage whereas the insurance company can easily do that. When Safelite handles the claim, the consumer that is inquiring only to see if coverage is in effect, often is tagged with an incident report which may in turn show up on his or her CLUE report. If no coverage is in effect, and Safelite is successful in closing a cash sale, the consumer will typically pay higher prices. To check this out, simply log onto Safelite's website and get a cash quote and then do the same at other non_Safelite shops.
Since Safelite manufactures and distributes aftermarket windshields, consumers are often left in the dark or even misled when it comes to the quality of the windshield being purchased. It is generally known in the auto glass industry that windshields made by the companies that make the windshields for car manufacturers (OE-original equipment) are superior in fit and quality when compared to aftermarket parts (OEE-original equipment equivalent) since most aftermarket windshields are reverse engineered. Many of the aftermarket pieces of glass are mass produced in China and other Asian countries. Most independent auto glass repair facilities not affiliated with Safelite will at least explain about quality and fit. This is especially important to consumers concerned about maintaining quiet rides.
Under the current way of doing business, shops that have capitulated to the insurance companies and joined the networks in order to keep from being “badmouthed”, are less inclined to explain the differences in quality because the pricing agreement requires discounts off a set NAGS “benchmark” or average price. So there is more profit when using the cheaper aftermarket pieces of glass since it usually costs less. Insurance jobs are no longer put out to bids so the consumer loses. Even if there were cost savings in the current way of doing business, where is the proof that the policyholder (consumer) benefits and not the stockholder?
In summary, in no other industry is one company required to notify a competitor in order to get authorization to perform a service for a consumer as in the auto glass industry. In no other industry aside from the auto glass industry is one business required to divulge proprietary business information to a competitor let alone required to submit invoices to a competitor. In no other industry is a business required to wait to be paid by a competitor. The auto glass industry needs help fast. It doesn't need more legislation. It needs enforcement officials to do their jobs and start enforcing antitrust/anti-competition laws.
Possibly the National Association of Insurance Commissioners (NAIC) could amend their list of improper claims practices to include:
Forcing a policyholder to deal with a competitor of their chosen repair facility during the claims process, forcing a repair facility to deal with a direct competitor during the claims process, utilizing a biased TPA during the claims process and utilizing network agreements for price fixing. Actually this is only common sense but I guess they must be put into writing.