Neb. bill requires OEM auto parts for first 3 years of car life, holds insurers to procedures

A new Nebraska bill would prohibit insurers from requiring aftermarket parts on vehicles aged 3 years or less during the time of the crash.

“Individuals who just bought a new car don't want aftermarket parts installed,” Legislative Bill 602 sponsor Sen. Rich Pahls, R-Omaha, told a Feb. 16 Banking, Commerce and Insurance Committee hearing, according to the state legislative news service Unicameral Update.

And leases can demand lessees return vehicles containing only OEM parts.

“FCA US LLC vehicle lease agreements specify that just Genuine FCA US LLC replacement parts be utilized for collision repairs to the vehicle,” Nov. 20, 2021, Stellantis position statements on aftermarket parts and structural parts state.

Stellantis’ Ram 1500 was the fifth-most-leased vehicle in the country within the third quarter of 2021, according to the latest Experian data available.

The average third-quarter 2021 new-vehicle lease was 36.69 months, according to Experian. Out of the five credit categories tracked by Experian, only deep subprime lessees had terms averaging less than 36 months . Near-prime lessees posted the longest average lease, at 37.26 months.

Nebraska Auto Body Association Vice President James Rodis observed in an interview Thursday that such consumers “don’t even own the cars.”

LB602 would also bar carriers from deviating from at least some OEM procedures.

“When consumer care provided to a motor vehicle relates to the repair of the original equipment manufacturer part, an insurer shall not want such consumer choose to be completed in a manner which is contrary to the specifications from the manufacturer from the automobile,” Legislative Bill 602 states.

However, a person would be allowed to override this if they had first received “a written notice of consumer choose to be practiced.”

While LB602 would permit aftermarket parts after a vehicle’s 36th month, it might require insurer to see the vehicle owner of this possibility in advance.

“Within the REPAIR Of the COVERED MOTOR VEHICLE UNDER THE DAMAGE COVERAGE PROVISIONS OF THIS POLICY, We might REQUIRE OR SPECIFY THE USE OF AFTERMARKET PARTS Not provided BY THE ORIGINAL EQUIPMENT MANUFACTURER,” insurance policies would need to state in a minimum of 10-point type — with this particular language the only real content on the page. “SUCH AFTERMARKET PARTS ARE REQUIRED TO Attend LEAST EQUAL IN TERMS OF FIT, QUALITY, PERFORMANCE, AND WARRANTY TO ORIGINAL EQUIPMENT MANUFACTURER PARTS.”

The consumer must acknowledge this clause with a signature.

Insurers would also need to notify the automobile owner around the back end about what types of parts were used in their vehicle’s repair.

For their part, an appearance shop would have to disclose any aftermarket parts as well as their origin to the customer. The shop must also notify the customer “warranties applicable to the aftermarket part are provided through the maker from the aftermarket part and not the manufacturer of the automobile,” LB602 states.

Rodis said the bill is the first since 1992 from his trade group.

“Our association kind of died off,” Rodis said. However, NABA has come roaring back to life in recent years. It’s grown from a mere dozen members to a lot more than 100 having a collective presence in 47 from the state’s 49 districts, he explained.

Rodis told the Feb. 16 Banking Committee hearing the sophistication of vehicles meant parts previously considered adequate were now insufficient, according to Unicameral Update.

“The sad and terrifying part is that the insurance providers directing the use of these aftermarket parts do not track or notify consumers when these parts are decertified,” Rodis said, based on Unicameral Update. “Each one of these parts is integral in a collision.”

The outlet reported that bill opponent Robert Bell, executive director from the Nebraska Insurance Federation, argued that aftermarket parts was required to be comparable to OEM editions in Nebraska.

The Unicameral Update didn’t specify which particular state law or regulation Bell was referencing. However, the Nebraska Department of Insurance’s Chapter 45 aftermarket parts regulation carries similar language as to the Bell described.

Of course, not every aftermarket parts on the market are comparable. The IIHS and CAPA both let the use of aftermarket parts but also warn that some available on the market aren’t equivalent. “Not even an industry professional can tell an excellent replacement part from the rest by taking a look at it or by whatever fancy brand or authoritative name they call it,” CAPA argues.

Sabin’s Body Shop owner Sean Sabin told the Banking Committee insurers focus on cutting expenses, not safety, Unicameral Update reported.

“I speak with countless insurance adjusters every year,” Sabin said, based on Unicameral Update. “The only real conversation which comes up is solely about the price of the repair.”

Unicameral Update wrote that Bell, who had been also representing the Nebraska Insurance Information Service, argued that aftermarket parts save consumers money on repairs and lower premiums.

The insurance industry’s own pitch for aftermarket parts suggests the constituents only save customers about $20 annually in premiums. And aftermarket parts don’t appear to be keeping costs down much whatsoever in Nebraska. The state’s average auto premium rose 19.06 percent between 2021 and 2021, the last 5 years with data offered by the nation's Association of Insurance Commissioners. U.S. inflation only agreed to be 5.2 percent in that time, based on the Bls. Nationally, auto body work costs rose nearly 8.7 percent, and auto parts costs fell 2.3 percent during those 5 years.

“We do worry about our policy holders,” said Bell, according to Unicameral Update. “We don't want our insureds injured; we don't want unsafe vehicles either. Whether it's within an accident later and there's more injuries or more damage to property due to this aftermarket part, guess who pays? It is the insurance providers.”

Recyclers also opposed LB602. Automotive Recycling Industry of Nebraska Director Scott Merritt said the balance would produce an unfair marketplace, based on Unicameral Update.

The bill’s language doesn’t seem to ban recycled parts, since it states “Original equipment manufacturer part means a component for any motor vehicle that is manufactured by a manufacturer” with manufacturer understood to be a brand new vehicle manufacturer. There’s no qualification about the OEM part’s age or prior usage in LB602.

However, Automotive Recyclers Association has argued that bills requiring OEM procedures automatically ban the components — even if an exemption for parts is explicitly crafted right into a bill. OEM position statements reject using recycled parts too.

The Banking Committee by Friday hasn’t voted on the bill. “We’re still in committee,” Rodis said Thursday. “… We’re still in the fight.”