Starting Aug. 1, auto insurance companies in Minnesota will be required to allow customers the freedom to choose any auto rental company if the customer has car replacement in his or her collision coverage. Insurers are allowed to recommend a company to a consumer, but are prohibited from making this a stipulation of service.
SF 508, signed into law by Gov. Mark Dayton May 25, mandates that insurance claims representatives will have to give customers obtaining a replacement car rental a verbal advisory, which reads, "Minnesota law gives you the right to choose any rental vehicle company, and prohibits me from requiring you to choose a particular vendor."
The road to that legislation was paved by a precedent-setting bill in New York State, a Minnesota anti-steering law already in place regarding glass repairs and a grassroots effort by a local car rental operator who saw that change was needed.
Laying the Groundwork
"I lived at the Capitol just talking with as many people as I could and monitoring the process because we didn't have any funds for lobbyists," says McKenzie Prokosch, account relations manager for Choice Auto Rental, a locally owned provider of insurance replacements.
Prokosch spent most her time meeting with the legislative commerce committee members and organizations in support of the cause. "I don't have any political experience, but I wasn't afraid to ask questions, whether it was to the [committee] members or their legislative assistants," she says.
More than 40 auto body shops joined in by signing a letter sent to legislators urging them to pass SF 508. The Alliance of Automotive Service Providers and the Minnesota Auto Dealers Association were also on board, along with eight other auto rental companies. "There are a lot of other locally owned companies here fighting the same battle," she says. "We just wanted to be able to compete, and also for consumers to know they had an option."
A New York anti-steering bill passed last year helped to lay the groundwork for Prokosch and the authors of the Minnesota law. The grassroots effort in New York gave these small rental companies the incentive and hope for a victory in Minnesota.
"I was expecting it to take years," says Prokosch, referencing the New York process, which had taken four years. The Minnesota legislation was pushed through in about four months.[PAGEBREAK]
A registered opponent of the bill, the American Insurance Association (AIA), called the bill "anti-reform" and stated that it went against freedoms of the marketplace in a prepared statement April 13.
"The bill is definitely opening up the free market and allowing people to compete. And when there's competition, obviously you get the best service and best rate for the consumer," a main point used throughout the legislative process, Prokosch says.
The Insurance Federation of Minnesota (IFM), a nonprofit insurance trade association, opposed the original bill due to vague wording. The original bill stated that insurance companies would not be allowed to "pressure" the insured to a certain rental company. The word "pressure" was changed to "require." Once the word was changed, IFM moved its stance to neutral.
The bill was also opposed by insurance agencies because it called for a written notice to the insured, which is what the New York law states. The added expense of this written notice would have cost the insurance companies an estimated $4-5 million annually, according to Prokosch. "I had no interest in adding an expense for anyone," she says.
Prokosch says the verbal advisory is probably better anyway, since so many people don't read their policy thoroughly. "It's right in people's faces as it is happening," she says. She also cited that there's already a verbal advisory for auto glass replacement, so it wouldn't be foreign for the insurance claims representatives to add this to their protocol.
The anti-steering bill received overwhelming support, with only two voting against it in the Minnesota House. The bill received unanimous support in the Senate.
Leveling the Playing Field
Part of Prokosch's role at Choice Auto Rental is to communicate the company's services with insurance agencies. She says many times in the past she wasn't allowed to do so, but SF 508 opens this door.
"It's a benefit for [insurance companies] to know what's out there," says Prokosch, adding that she understands the benefit of an insurance company having a preferred vendor in an attempt to get a better deal. "So we went at it basically as a consumer awareness issue and then also to level the playing field for other businesses," she says.
The next step for Minnesota's car rental businesses, Prokosch says, is to make sure the auto shops are also aware of the change.
"Consumer's preference will now be the deciding factor on who handles the rental for them," Prokosch says. "On August 1, everyone involved with the claim, insurance companies, body shops and rental companies, will be saying the same thing to the customer: 'You are able to use any rental vendor you prefer!'"
Since the passing of this law in Minnesota, Prokosch has fielded numerous calls from other states looking for similar change in their market. "The interest and suggested need for change has been overwhelming," Prokosch says.