After Assemblyman and small business owner Roger Niello's editorial in the Sacramento Bee on October 3, 2009 about government regulations affect on small business, I felt compelled to weigh in on the matter. Most of us small business owners feel there is nothing we can do about our day-to-day regulation issues. Today there was another article in the Sacramento Bee about a business issue with a bigger giant - insurance companies. A group of 40 Northern California body shop owners gathered with the intent of filing a class action suit against State Farm Insurance: One individual, with the fortitude to take a stand, rightly or wrongly, is pleading his case to yet a higher authority, the justice system, and he seeks numbers to enhance his case. He claims the insurance company representatives guide their claimants to "preferred" vendors and thereby deny an equal playing field for all qualified vendors. Of course, the management of the carrier denies this and paints a rather negative picture of the accuser. Here are the facts as I see them.
First, the claims handling model of this insurance carrier is simple and effective: Hire bright, college graduates, provide a moderate income, extol the well-established virtues of a large, financially sound American Institution, isolate them from the local claims communities (adjuster-vendor educational associations, educational events offered by associated organizations) and let them experience the day-to-day questionable claims with insureds who justify their behavior with "I've paid premiums for 20 years and this is my first claim." It does not take long for claims personnel to sour on the job and their desire to persuade the claimant to use someone of their choosing and whom they control. Of course, management stays blind to this reality and can empower their mid-west, Protestant Ethics, along with a good dose of naivete to plead their very well financed and legally represented case.
Second, giants like State Farm Insurance, can squash a small operator or 40 small operators if they so desire. They are exempt from antitrust laws that are designed to encourage competition in the marketplace; their accuser(s) are not. If 40 independent body shop owners organize to discuss prices lower than what the Farm pays, discuss that they would guarantee the work in all 40 locations and claim that their behavior was unsanctioned and not intended to harm State Farm, they would likely be charged for violating the Sherman Act, the federal antitrust law, also known as the "competition law."
Lastly, it may be possible to win a battle but you could likely lose the war. One of our brightest and most honorable national association members fronted the move to pass legislation known as the Colorado Insurance Consumer Freedom Of Choice Bill in 2007 that prevents insurance companies from dictating which restoration company must be used in covered property repair insurance losses. House and Senate concurred that passage of bill would safeguard public against monopolies, trusts and market barriers, as well as foster and encourage competition. This gentleman's business nearly went broke since then in spite of his national reputation for superior, ethical service to his customers.
(Download Colorado Governor Signs Consumer Freedom of Choice Bill)
