Insurers Cheer U.S. Legislation Expanding Aftermarket Parts Sales

Insurance trade groups are cheering the introduction of a congressional bill that would weaken automakers’ patent protection over collision repair parts, saying a shorter period during which alternative suppliers are barred from selling aftermarket parts would benefit consumers.

Along with applauding the measure, called the Promoting Automotive Repair, Trade, and Sales (PARTS) Act, the Property Casualty Insurers Association of America (PCI) publicly released a report calculating the cost savings consumers could see if aftermarket parts were given surer footing in the marketplace.

Last year, the national trade organization had highlighted the PARTS Act as a crucial industry issue in 2013.

The PARTS Act was introduced to the U.S. House and Senate on Tuesday. Under the proposed legislation, automakers would see the period that their design patents on cosmetic replacement parts are enforceable cut down from 14 years to 30 months.

During the 30 months that those patents are enforceable, alternative suppliers would be able to test, distribute and market those parts without infringing on automakers’ rights. After that period, those suppliers would be able to sell aftermarket parts directly to drivers and body shops.

The act has also received backing from the Automotive Body Parts Association, which said that less competition burdens drivers with “higher insurance costs, more totaled vehicles and limits their choices on how they can get their vehicle repaired.”

Consumers shoulder the cost of repairs whether they pay for the repairs directly or not, as insurance premiums can increase alongside overall repair costs that companies pay for claims, according to Johnathan Bergner, NAMIC’s federal affairs director.

“Ultimately, this is a consumer issue,” Bergner said in a statement.

According to PCI, lower repair costs can lead to cheaper premiums, and the PARTS Act can go a long way in reducing those repair costs.

PCI Estimates Premium Hike without Aftermarket Parts

The National Association of Mutual Insurance Companies (NAMIC) estimates that automakers hold about two-thirds of the collision repair parts market. Loosening that hold with the PARTS Act could mean between $1.5 billion and $2.4 billion in annual savings for consumers, according to NAMIC.

According to the PCI study, using only original equipment manufacturer (OEM) parts in repairs would mean a 2.6 percent increase in the combined liability and physical damage premium per insured car, averaging out to $24 more to overall premiums per vehicle a year.

“As the major car companies seek to use patent law to gain a monopoly on the use of collision repair parts, this research highlights what the dramatic cost impact could be if quality alternatives to car company parts were no longer available,” said Bob Passmore, PCI’s senior director of personal lines, said in a statement. “The loss of a competitive market for parts could result in an additional $2.34 billion in insurance costs per year that could be passed on to drivers in the form of higher premiums.”

Caution from Regulators and Administrators Center on Safety

However, the quality of aftermarket parts has been questioned by regulatory and enforcement departments across the U.S.

Last summer, California’s insurance regulator battled industry groups over more stringent controls that state officials say were necessary to ensure public safety.

According to a summary from state officials, defective aftermarket parts have been allowed to “infiltrate the repair process” and led to substandard repairs.

In 2011, the attorney general in West Virginia sued Liberty Mutual, claiming the insurer used “junkyard parts” in repairs.

The majority of states in the U.S. require some kind of identification of aftermarket parts or notification whenever they are used in repairs. Only Alaska, Delaware, Kentucky, Maine, Minnesota, Montana, North Dakota, South Carolina and Vermont lack notification and identification requirements.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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