As New Hampshire’s Insurance Commissioner, my role is to protect consumers of insurance products. It is in this capacity that I write in support of Governor Sununu’s veto of HB 664. This bill was an effort to amend New Hampshire’s primary insurance consumer protection statute—Chapter 417. This statute is known as the Unfair Insurance Trade Practices Act. It catalogues specific trade practices that are prohibited as unfair to the insurance buying consumer and is enforced by the New Hampshire Insurance Commissioner. HB 664 would have amended Chapter 417 to add a new insurance practice deemed to be unfair to the consumer—to “knowingly fail to pay” an auto body repair shop “to the extent the . . . vehicle is repaired in conformance with applicable manufacturer’s procedures.” It is clear that this language would increase insurance payments to auto body repair shops, but it is not at all clear that insurance consumers would be well served by this bill.
The most predictable effect of this bill is that personal auto policyholders in New Hampshire will experience a rate increase because of increased claims costs. However, the amount of this increase is difficult to estimate because New Hampshire would be the first state to pass this legislation. Although New Hampshire enjoys the 9th lowest average premium in the country, we have the 4th highest percentage of premium attributed to collision coverage. This is an indication that the cost of repairs are already a concern in this state, and any move to further increase such costs would have to be well justified. It has been suggested that this legislation would improve safety. However, no proof of safety concerns was offered at any of the hearings on this bill. The Insurance Department has reviewed over 4 years of consumer service data, and we did not find any complaints about the safety of a vehicle following a repair.
What would the use of “manufacturer’s procedures” amount to in practice? Well, a common requirement is that only the original manufacturer’s parts be used. The problem with this is that New Hampshire already has an “after-market parts” law, Chapter 407-D, that allows insurers to require the use of after-market parts for older cars if the parts are of “like kind and quality.” This is a model law that exists in many states and is designed, in part, to limit the cost of auto insurance to consumers consistent with safety. HB 664 attempts to deal with this by exempting “any and all parts” that may be recommended by manufacturer’s procedures. Similarly, “tooling and equipment” recommended by manufacturer’s procedures are also sometimes exempted. The result is that the bill is extremely vague and unclear as to what it requires.
Chapter 417 is a consumer protection law and should not be hijacked to serve other interests. If there is a consumer protection issue to be addressed regarding manufacturer’s procedures, then certainly there is nothing wrong if an indirect benefit accrues to an involved business sector. However, the profit level of a particular business sector is not now and should never be a goal of the law. It is my hope that the Governor’s veto of HB 664 is not overridden and that the legislature takes this issue up again next year. I remain confident that, with a more considered approach, the various interests that have had input on this bill can work together to come up with language that is clear and enforceable and that takes into account actual consumer protection issues in a way that is consistent with existing insurance laws. The Insurance Department is willing to work with all interested parties to construct a more focused version of HB 664 that addresses valid consumer protection and cost concerns.