Michigan TPA Code of Conduct Bill Moves Forward
November 3, 2011

A Michigan bill that would place several requirements on third-party administrators, including the addition of a code of conduct by which those that also provide auto glass services would have to abide in order to maintain both services, was passed out the state's insurance committee this week, and now moves to the full Senate for review.

The bill, introduced earlier this year by Sen. Joseph Hune, would amend the state's insurance code to require third-party glass claims administrators (TPAs) that also offer auto glass retail services "to adopt and follow a code of conduct when processing, paying, administering or monitoring such a service." In addition, TPAs would be required to file annual reports with the Commissioner of the Office of Financial and Insurance Regulation (OFIR) pertaining to their handling of auto glass claims, and quarterly reports with auto glass businesses that participate on their networks. The legislation, if passed, also would prohibit an auto glass business from offering "a rebate, gift, cash or anything of value to an insurer in exchange for referring a claim to the facility."

The code of conduct that TPAs with retail divisions would need to follow contains several specific provisions as well, as follows:

  • If an insured had a preference of an auto glass retail facility, and that facility is on the TPA's network, no other repair facility could be recommended;
  • The TPA could not close its network to new applicants if the network contains facilities that it owns or are related to; and
  • If the insured did not have a preference of a glass shop, or if the preferred facility wasn't on the TPA's network, the TPA would have to suggest three network facilities "on an objective basis that was designed not to give a preference to facilities related to or affiliated with the third-party biller.

Several Michigan auto glass business owners have worked with legislators on the bill, including Ron Overbeck, co-owner of Auto One in Brighton, Mich.

"We expect to get the bill passed before the end of the year," Overbeck told glassBYTEs.com™/AGRR™ magazine this afternoon. "It's about bringing transparency and objectivity to the referral process, and about protecting small businesses."

The Michigan chapter of the National Federation of Independent Businesses (NFIB) also has backed the bill.

"The issue for small business is unfair competition by exclusive contracting," says NFIB state director Charlie Owens. "The vast majority of auto glass replacement and repair is paid for by auto insurance companies. When a single entity or group of entities has significant control over a market and uses that position to skew the market, the result is unfair competition."

"Whenever we have an entity that basically controls the market, it is the duty of the legislature to be sure that fair play, consumer choice and competition are preserved," adds Owens. "In this case the insurance industry controls the market for auto glass repair by virtue of the fact that almost all claims for damage flow through them and are paid by them. They have the power to determine who stays in business and who doesn't and this must be held in check to prevent unfair competition that ultimately will narrow consumer choice and drive smaller companies out of business."

S.B. 0306 originally was introduced in March, but the session had a lengthy recess in the summer. Hune's office had advised glassBYTEs.com™/AGRR™ magazine in June that he planned to revive discussions this fall.

Stay tuned to www.glassBYTEs.com™ for more on this legislation as it becomes available.

This story is an original story by AGRR™ magazine/glassBYTEs.com™. Subscribe to AGRR™ Magazine.
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