New Ohio bill would require OEM parts option in insurance policies

New legislation has been filed in Ohio that would require auto insurance companies to offer coverage of OEM replacement parts.

HB 636, called the “Auto Insurance Transparency Act,” was introduced last week by Rep. Mark Johnson (R-District 92).

“If an automobile insurance policy does not cover OEM replacement parts, the insurer shall allow a claimant to complete the repair using OEM replacement parts so long as the claimant pays any difference between the cost of OEM replacement parts and the maximum policy coverage for the same part sourced from a non-OEM aftermarket replacement part manufacturer,” the bill states.

The act defines a replacement part as a “part or component of a motor vehicle designed to replace a similar part or component as originally equipped by the manufacturer of a motor vehicle.”

If passed, the act would require the insurer, repair facility, or installer providing the estimate to include in the written estimate:

• • “Clear identification of each non-OEM aftermarket replacement part;
  • “An indication of whether OEM aftermarket replacement parts are readily available and, if so, whether using OEM aftermarket replacement parts would require the repair to be completed by another repair facility or installer;
  • “A notice that the person requesting the repair has the right to choose OEM replacement parts, even if those parts are not fully covered by the person’s automobile insurance policy, as long as the person agrees to pay the difference between the cost of the OEM replacement parts and the maximum policy coverage for the same part sourced from a non-OEM aftermarket replacement parts manufacturer; and
  • “A notice with the following language in 10-point or larger type: ‘This estimate has been prepared based upon the use of one or more aftermarket replacement parts supplied by a source other than the manufacturer of your motor vehicle. Warranties applicable to these aftermarket replacement parts are provided by the parts manufacturer or distributor rather than by your own motor vehicle manufacturer.'”

Receipt and approval of the written estimate would have to be acknowledged by the signature of the person requesting the repair at the bottom of the written estimate, according to the bill.

“I think the benefit of that [HB 636] is going to be transparency; it ultimately becomes a consumer protection issue,” said Jason Rhoades, Ohio Autobody Association president. “Now there’s transparency, so insurers and policyholders alike will know what parts are going on their vehicles. I also believe that by putting it in place, there becomes an almost mandatory OEM endorsement that can ultimately benefit the insurance companies. It allows them to sell additional premium, and it’s a win-win for everybody.

“Now vehicles are being repaired the way that they’re supposed to be repaired with original equipment parts, and the insurer’s on board because they sold a policy that matches it, so we’re finally putting some things on a level playing field.”

The bill also states that any non-OEM aftermarket replacement part manufactured after Oct. 16, 1990, that replaces any of the nonmechanical sheet metal or plastic parts that generally constitute the exterior of a motor vehicle, including inner and outer panels, must have permanently affixed or inscribed, before the installation of the part, the business name or logo of the manufacturer.

Any insurer doing business in Ohio that violates the act would face penalties for unfair and deceptive acts or practices.

Rhoades said most policies are written with the premise that the standard policy language or parts procurement will start with used, recycled, reconditioned, or aftermarket parts as cost-saving measures.

“On your brand new 2025, you may not be OK with that,” he said. “You’ve put some things in place that the manufacturer can no longer stand behind. We’re having those conversations from the shop side. The insurer side needs to come on board with what is there so that their policyholders have an idea.”

Images

Featured image: The Ohio Statehouse (Credit: fotoguy22/iStock)