Auto glass legislation opens competition, but could cost jobs

April 09, 2012

Until a rock hits your windshield, auto glass is something most of you probably never worry about. But a bill pending at the state capitol could affect who repairs your windshield and how much it will cost you. From Phoenix, KJZZ’s Paul Atkinson explains.

Safelite customer service representative Kelly Durkin Safelite customer service representative Kelly Durkin works in the company's Chandler contact center. (Photo by Paul Atkinson - KJZZ)

Okay, was that rock from the road?” asks a Safelite customer service representative, “and were you injured by that flying rock?”

A customer service representative at a Safelite call center in Chandler handles an insurance claim for a cracked windshield. Almost all insurance companies contract this claims process to what are called third-party administrators like Safelite.  But Safelite also runs a separate business that repairs auto glass. And smaller glass companies allege Safelite’s third-party administration business steers repair work to itself.  John Blackwell runs Penske Auto Glass.

“A third party administrator should be just that -- a third party,” says John Blackwell.  “You don’t go to an escrow company to buy a home and have them say ‘hey, we have a better deal on a mortgage right here for you.’

Blackwell points to Safelite’s own statistics, that its auto glass shops represent less than 10-percent of approved repair facilities in the company’s network, but Safelite refers itself 26-percent of the business.  That’s why Blackwell and other glass shops support a bill that would change that.

Penske Rapid Repair's Dave Hurdel replaces a windscreen at Mercedes of Chandler. Penske Rapid Repair's Dave Hurdel replaces a windscreen at Mercedes of Chandler.(Photo by Paul Atkinson - KJZZ)

“This bill goes a long way to do the right thing for the consumer in the fact that it allows them to choose a glass shop that maybe specializes in the types of vehicles they own or what have you,” says Blackwell.

House Bill 2197 requires third-party administrators to contract with any glass repair shop that’s bonded, insured, and accredited.  And if a customer doesn’t have a preferred shop, the bill would force those administrators to offer three randomly selected auto glass companies on a rotating basis.  Again, John Blackwell.  

“If you were randomly assigned a shop, there would be no chance for steering or controlling the choice of the customer,” Blackwell says.”

“On multiple occasions now, our business model has been vindicated by the courts,” says Bill O’Mara, Safelite’s vice president of contact center operations.

Bill O’Mara is in charge of Safelite’s call center in Chandler.  He says competitors have sued Safelite claiming its call centers steer business to its own repair shops.  But O’Mara says name recognition plays a large role in customers selecting Safelite, which advertises nationally and has shops in all 50 states.

Safelite's Chandler customer service center Safelite employees 600 people at its Chandler contact center. (Photo by Paul Atkinson - KJZZ)

“Within the past few years we’ve provided a million and a half taped calls to the courts and gave the courts access to the actual conversations that we had with the policyholders and with our customers and we were found to have no fault,” O’Mara says.

This could be a big deal for Safelite. The company was recruited to come to Arizona a few years ago. It opened its call center in Chandler and now has 600 employees.  O’Mara says plans to add another 300 jobs are on hold because of House Bill 2197.

“It was an open arms environment when we arrived here,” says O’Mara. “Now we’re getting a kind of ‘no vacancy sign, and it’s a little bit alarming for us right now.”

The bill is also a concern for insurance companies that use third-party administrators. Noel Young is regional counsel for All-State Insurance, which pays Safelite to handle its auto glass claims.

“What this bill does is it circumvents the free marketplace,” Young says. “It interferes with Allstate’s right to contract for the benefit of the consumer.”

Young says Allstate contracts with glass repair shops based on the quality of their work and their affordability.  He’s worried that forcing third-party administrators to use almost all glass repair shops in the state could lead to shoddy work and higher costs for customers.

“The bill helps perpetuate fraud in Arizona,” says Young.  “And whether you realize it or not, auto glass fraud costs millions and millions and millions of dollars to consumers.”

The advocacy group Consumer Watchdog acknowledges the current system is flawed, but adds that House Bill 2197 goes too far. It says any reform must ensure consumers are put first, not the insurance companies or the repair shops.  The bill is awaiting debate in the Senate. If approved, it’ll go to the House for a final vote. 

Listen to an interview with Doug Heller, executive director of Santa Monica based Consumer Watch.