Oppose SB 1083

FTC Report

Oppose SB 1083

Legislation would reduce competition and increase auto insurance rates.

View FTC Report: Nixing the Fix, An FTC Report on Trade Restrictions

Currently, most auto insurance policies allow for the use of both OEM (original equipment manufacturer) and non-OEM parts to make covered repairs. This choice of repair options helps maintain cost competition in both parts and repair services. In many instances, insurers use OEM parts when parts of like kind and quality are not available, or if a policy endorsement specifies the use of OEM parts.

SB 1083 would require insurers to use only OEM parts on vehicles less than 36 months old and restrict repairs to the use of an OEM “repair process.” Such restrictions would reduce competition, give increased pricing power to OEM manufacturers and dealer repair facilities, reduce customer options, and potentially increase the cost of automobile insurance, without any clear benefit or increase of quality for consumers. •

The auto parts marketplace includes quality OEM and non-OEM parts. This variety fosters healthy price competition to the benefit of consumers. Consumer and insurer choice creates competition that helps control the cost of repairs.
Texas has very high claims in its auto market, thanks to our crowded highways, theft rate, and variety of natural hazards that damage cars throughout the state. Over the past 10 years, insurers have paid 99.7 cents in claims and claims expenses for every dollar of premium collected across the industry, with inflation and supply issues driving up costs year by year, according to Texas Department of Insurance data. Any increase in cost caused by a statutory reduction of competition in the insured repair market would necessarily be reflected in insurance rates.
In its report “Nixing the Fix, An FTC Report on Trade Restrictions,” the Federal Trade Commission identified anticompetitive practices in auto repair, including “unavailability of parts, repair manuals, diagnostic software and tools” and “disparagement of non- OEM parts and independent repair.” The full report is available at: www.tcais.org/ftc. Texas should not ratify non-competitive practices in the statute that drive up consumer and insurance costs.
Reducing choice in repair by requiring specific OEM processes could limit physical access to insured repairs, exposing customers to long waits and increased costs associated with alternate transportation.
“OEM processes,” if statutorily required, could be manipulated to reduce choice and increase cost. The requirement, akin to adoption by reference, could give anticompetitive processes and pricing the force of law, with neither market competition or other review to provide controls.