South Carolina Hearing Proves Insightful

A recent hearing about steering the South Carolina legislature provided an interesting glimpse into how different industry factions view the issue and led to, as the committee's chairman put it, "diametrically opposite viewpoints from each side."

The first speaker was Cynthia Young from South Carolina Department of Insurance. She stated that her agency had received approximately 25-30 complaints from glass companies alleging that consumers were being steered. She said that her division had investigated these complaints and found that none of the consumers with whom she spoke were now alleging steering had taken place. "Everyone I talked with told me they were not steered," she said.

Young said that there were aggressive penalties for steering ranging from fines to suspension of the company's license.

Next to speak was Chantelle Smith, a consumer, who then described a case in which she was improperly steered. She recounted how she had asked for a particular glass company and was told that the insurer could not refer her to that shop. Smith, who is a part-time employee of Southern Glass in South Carolina, and a former employee of Safelite, was more familiar with the steering issue than most consumers. "I requested a copy of the tape in which the person from the insurance company told me I couldn't use the shop I wanted, and the person from Hartford hung up," she said. "I then asked for a copy of the recorded conversation and they said no I couldn't get it, only the agent could. The agent agreed and asked for the tape but was denied the information."

"I called Hartford and got a manager who explained there's a preferred vendor," said Smith. "He pulled up the list and named the top five vendors mine was the fifth one. So what was the problem? Then I asked 'Are you with Hartford?' He said no, he was with another glass company. I then asked if this conversation was recorded. 'No ma'am,' he said. I feel like I was misled and lied to."

"Were you ever actually on the phone with Hartford?" asked one of the committee members. "No, the manager confirmed I was with a glass network and the manager confirmed that as well," she added.

Jim Beth, government relations manager for Nationwide Insurance, followed Smith. "We see glass claims as a way to knock a home run for our consumers. We may not agree that you need your house rebuilt after a storm, but I can see easily when you need a windshield. Our policyholders tell us the warranty, being able to access a store around the country if the windshield fails, is important to them. Consumers believe you are getting a consistent job when they use a company like this."

"On a personal level I hate to see the loss of mom-and-pop glass businesses," he said, "but I think the market has changed. It's unfortunate. People are displaced, but you can't legislate consumer loyalty. People want a national brand they can count on. … people [independent glass companies] here are well-intentioned but they are seeking protections from a changing market. They'd do better to form their own network to compete." He said.

Julie Vaparis, an office manager for Southern Glass and Plastic, spoke next. "Policyholders are steered on a daily basis," she said. "We try to follow the rules. We are told [by the networks] to wait two days for authorization. We wait-two three days. When we finally get the authorization, Safelite is already there installing the glass."

"They put off and put off the authorization, and when I finally got one, I contacted the customer who told me that Safelite was there that morning," she added.

Vaparis was followed by Fred Price, president of Ace Glass in South Carolina, who said that, though he did not have an exact number, steering occurs several times a week.

Alan Epley of Southern Glass and Plastic shares Price's beliefs.

"Mr. Chairman, it is true that things are changing. We are changing also," he said. "We can compete with anyone in the world. Large companies have no advantage over us unless they have control over the consumer. Consumers have a choice 70-80 percent of the time. … if there wasn't any steering going on, companies in South Carolina would do just fine.

"We can compete if allowed to compete," he continued. "We are not looking for charity, just a fair marketplace. If you join a network that is run by your competitor, your competitor has the right to determine price and has the right to come in and audit your business. You are not allowed to refuse a job. You are off the job at your competitor's discretion. So if your competitor sends you a job that you can't make money on, you are not allowed to refuse it."

Safelite's general counsel Mark Smolik spoke next. "There is no doubt auto glass replacement industry has gone through significant change. The old way of doing business to get two or three estimates …is gone. It has been for a long time. Nationwide looks to us to process paperwork and remove their people from answering telephones, which we have done. Our CSRs go through certification training annually. Smolik then proceeded to take the committee through a "day in the life of a CSR." He explained how the phone was answered by Safelite and identified to the consumer at least twice. He asserted that the CSR takes all the information in approximately 4 ½ minutes.

"When we ask someone if they have preference, we know that people experience auto glass claims once every seven years. Only 15 percent have preference. If they do not, that claim will go to a Safelite shop, if we can't service the claim, then it goes to a network shop. If someone has a preference for a shop not on our network, we will inform them of two points."

"First, if the shop charges more than the insurance company deems reasonable, the insurance won't pay it," he continued
"Second, we talk about a warranty. The insurance company guarantees that if you use one of their preferred shops, the policyholder will have a warranty that follows them. The network means we can make sure there is a shop anywhere in the United States that can do so.

"There are many, many glass companies that will sue the insurance company for what are called short payments in the industry," Smolik continued. "They will sue for short pays. It's the exact opposite of what you are hearing now. There's a growing momentum to sue companies.

"About this point that Safelite will beat an independent glass shop to the insureds home, nothing can be further from the truth," Smolik. "What does happen sometimes is that an appointment is set up with the husband. He doesn't know it's a bad time. The wife calls back to change it and says 'I don't care who you send me just have someone here at this time." At that point, said Smolik, the original appointment is considered cancelled and new appointment is made. "They don't communicate, nobody calls the glass shop," he said. "It happens to us too. If we are steering I'd like to know about it. This is really a concerted effort by the Independent Glass Association that is working in many states to pass this type of legislation," he added.

At one point toward the end of the hearing Smolik was asked why his company was so opposed to anti-steering legislative if it did not engage in steering. Smolik replied by saying, "Well, the bill as it's written would prevent me from answering the phone and installing the glass. [pause] It's another thing to say that I can't steer, which I fully support, but it's absolutely, it's wrong. Because I don't even answer the phone for a host of insurance companies and yet I still process those invoices. So I'd have no opportunity to steer there, assuming those allegations are true. I'd be prohibited legislatively from processing the paperwork from those insurance companies."

Audio copies of the testimony are available to interested readers of glassbytes.com™ at no charge. To receive your free CD, please e-mail us your name, company, address and phone number at psmith@iga.org

CLICK HERE to discuss this story on the glassBYTEs.com™ forum.

CLICK HERE to see the Senate bill in it's entirety.

CLICK HERE to see the House bill in it's entirety.