Canadian Underwriter

Should body shops be allowed to pay referral fees to towing firms?

March 15, 2018   by Greg Meckbach, Associate Editor

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A recent Aviva Canada auto repair fraud investigation raises the question of whether body shops should be allowed pay referral fees to tow truck operators.

CSN, which has more than 335 collision repair centres in Canada, does not give referral fees to tow truck drivers, CSN chief operating officer Flavio Battilana told Canadian Underwriter Tuesday.

“It’s wrong,” Battilana said in an interview, adding it would be “unaffordable” for CSN repair centres to pay such a fee.

If a customer’s vehicle is towed to a CSN centre, but the customer does not wish to have their vehicle repaired by CSN, the vehicle “is released as per customer and/or insurance company direction,” Battilana said.

Ontario law requires tow truck operators to tell motorists whether or not they are getting a “financial incentive for towing a vehicle to a particular vehicle storage facility or repair shop.” But there is no prohibition on such a fee right now.

A ban on such fees “merits discussion,” Elliott Silverstein, manager of government relations at CAA South Central Ontario (which provides roadside service and writes auto insurance) said Wednesday in an interview with Canadian Underwriter. Silverstein did not go so far as to say there should actually be a ban in place.

One “has to understand what the implications are” of such a ban, Silverstein said. “I think it’s one of those things where we have to understand the entire landscape. So how does that work? Who would be prohibited from referrals? In what sense? Would there be exemptions? So, for example, I know there are insurers who have preferred body shops, preferred groups they work with. So how expansive would (a referral ban) be? It merits a conversation.”

Aviva Canada said Monday it is calling on the Ontario government to ban referral fees including, but not limited to, collision repair centres paying tow truck operators.

Aviva made that recommendation when it announced the results of an undercover investigation in which insurance fraud investigators posed as motorists whose cars were damaged in collisions.

Aviva staged 10 such scenarios. All 10 cars were deliberately damaged, but could still be driven. They were fitted with hidden cameras and taken in for repair. In nine cases, some kind of fraud happened, Aviva alleged. In at least one case, a tow truck operator allegedly billed Aviva for towing a vehicle that the consumer actually drove in to the body shop. Aviva alleges the body shop paid the towing company a referral fee.

“There are good independent operators both in the auto body shops and the towing industry,” Silverstein told Canadian Underwriter Wednesday. “You don’t want to paint it with a brush and put everybody in to account for some of these challenges. Some actors in these industries are causing these problems, more so than others, and I think this is an opportunity to address some of the problems.”


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4 Comments » for Should body shops be allowed to pay referral fees to towing firms?
  1. Bob says:

    I fail to see how the payment of a referral fee by the body shop (or police or anyone else for that matter) to the tow company benefits the insured, the insurer or contributes in any manner to decreasing the cost of auto repairs in the province. The cost of these referral fees are ultimately downloaded on to the unsuspecting insurer and/or insuring public.

    Referral fees benefit nobody EXCEPT the body shops and tow companies.

    They should ALL be banned, plain and simple.

  2. Frank Cain says:

    Body shops and tow truck operators, to name a few, should be licensed as professionals, first having been awarded accreditation by the Ontario Government. Their operations should be monitored by respective Boards in an ongoing system of checks and balances in much the same way certain medical service fraternities are under the watchdog of various colleges. One deals with individuals, the other with vehicles, either one capable of creating turmoil within the insurance industry. The main reason this current situation exists is because no one is watching. Time the Government set its sites on being a better watchdog.

    Reminds me of a line from a movie on questionable validity; put a fox in the henhouse and you’ll have chicken for dinner every night.

  3. Bart Mobbs says:

    First let me say this, preferred
    Collision shops are paying referral fees.
    The discounted rates that they give to insurance companies is a referral fee and that includes Carstar, CSN
    As far as Aviva’s investigation is concerned it is vary biased and flawed at non preferred facilities the only people that write the estimates and ok parts to be replaced are employees of Aviva.
    Blaming the tow trucks has become easy on the part of some insurance companies to promote their agenda to take the choice or right to choose a facility of their choosing.

  4. Referral fees are not a bad thing be themselves, provided they are not gouging the end user and the service provided is worth it. When you hear of people basically being blackmailed for their own vehicle that is wrong and the government or the police need to step in and protect the public.

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