Published: June 2014

Advocates ask for auto insurance affordability study

Consumer Action joined over 30 organizations from around the country in urging the U.S. Treasury Department’s Federal Insurance Office (FIO) to collect data from insurance companies in order to assess the affordability of auto insurance for low- and moderate-income Americans and those living in historically underserved communities. Advocates want to know what discounts, if any, are extended these customers and who qualifies for the programs.

In a letter to the U.S. Treasury Department’s Federal Insurance Office (FIO), advocates noted that 76% of Americans believe that a good driver should pay less than $500 per year for a basic auto insurance policy, according to a recent representative national survey conducted for Consumer Federation of America (CFA) by ORC International. For millions of Americans,socio-economic factors – including occupation, education and credit score – push bare bones auto insurance premiums far beyond this $500 threshold, making auto insurance coverage inaccessible to many good but low- or moderate-income drivers.

The groups recommended three key requirements for FIO’s information gathering efforts:

    1. Data collected should be precise enough to indicate the actual premiums insurers charge drivers, rather than average rates that obscure the wide range of premiums that companies charge to good drivers with different socio-economic characteristicsand the factors that tend to drive up prices for low- and moderate-income and minority drivers.
    2. An affordability metric should consider both the public’s views on reasonable prices and programmatic efforts to make auto insurance affordable for low-income drivers in California.
    3. FIO should work with regulators and, as necessary, use its own authority under the provisions of Dodd-Frank (31 U.S.C. §313 (e)) to collect data directly from insurance companies in order to ensure the most accurate information is available.

Advocates reiterated the FIO’s previously stated concerns that the mandatory nature of auto insurance in all states but New Hampshire, in conjunction with the well-documented facts that access to an automobile dramatically increases economic opportunity and unaffordable insurance drives up the number of uninsured motorists on the roads. However, instead of focusing on aggregate data and average premiums, the groups emphasized the need to get precise information about how much insurance companies charge actual good drivers with low- and moderate-incomes, as well as those living in minority and other underserved communities.

Lead Organization

Consumer Federation of America (CFA)

Other Organizations

Americans for Financial Reform | Central New York Citizens in Action, Inc. | Citizen Action/Illinois | Consumer Action | Consumer Assistance Council of Cape Cod and the Islands Consumer Federation of America | Consumer Federation of California | Consumer Watchdog | Consumers for Auto Reliability and Safety (CA) Consumers Union | Delaware Community Reinvestment Action Council Economic Fairness Oregon | Florida Alliance for Consumer Protection Georgia Watch | Job Opportunities Task Force (MD) Kentucky Equal Justice Center | Maryland Consumer Rights Coalition Michigan Poverty Law Program NAACP | National Council of La Raza | New Economy Project (NY) | New Jersey Citizen Action | North Carolina Consumers Council NYPIRG | Oklahoma Policy Institute | Policy Matters Ohio | Public Advocates | Staten Island Legal Services (NY) United Policyholders | US Public Interest Research Group Vehicles for Change (MD) | Virginia Citizens Consumer Council Woodstock Institute (IL)

More Information

To read the entire letter, please click here.

For more information, please visit the CFA website.

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