The USA Federal Insurance Office has initiated a study looking into the affordability and availability of auto insurance.
In an April 10 notice posted to the Federal Register, the FIO says it is seeking comments by June 9 from regulators, consumer groups, industry representatives, policyholders, academia and others.
Specifically, the FIO is looking for, “A reasonable and meaningful definition of affordability,” as well as “the metrics and data FIO should use to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable auto insurance.”
The FIO says it is acting under its authority to “monitor the extent to which traditionally underserved communities and consumers, minorities and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance.”
The FIO initiative is driven in part by concerns that the data collected by the National Association of Insurance Commissioners may not be adequate and that “other data sources will likely be needed,” according to a regulatory bulletin from industry law firm Nelson Levine de Luca & Hamilton, LLC.
Nelson Levine lawyers say the FIO has the authority to collect information directly from the insurance industry that “it may reasonably require” in carrying out its duties.
Before it can do that, the bulletin says, the FIO must determine that the information is not available in a timely manner from relevant federal agencies, state regulators and publicly available sources. The FIO also has subpoena power in certain circumstances, Nelson Levine says in the bulletin.
Regarding its interest in auto insurance, the FIO notes that auto liability is mandatory in all states except New Hampshire, and that owning an automobile “is likely associated with a higher probability of employment and other factors associated with economic wellbeing.” Furthermore, the FIO says the percentage of uninsured motorists nationwide has “hovered around 14% between 2002 and 2009.”
The FIO also says, “Industry representatives assert that auto insurance has become more affordable over time but consumer representatives assert auto insurance has become less affordable for low-income consumers and minorities.”
On the question of affordability, the FIO says, “While the definition of availability is largely settled, the definition of the affordability of personal auto insurance remains unclear.”
The FIO says the Availability and Affordability Subcommittee of the Treasury Department’s Federal Advisory Committee on Insurance (FACI Subcommittee) suggested a definition for affordability could be ensuring the cost of personal auto insurance is “a reasonable percentage of a consumer’s income.” But the FIO says that can be subjective and difficult to discern.
“One approach may be to interpret personal auto insurance premium payments as affordable if such payments do not prohibit individuals and/or families from purchasing other required necessities,” the FIO says. “Or, personal auto insurance may be interpreted as affordable if it is actually purchased by individuals and/or families.”
Insurance consumer advocates have been pressing for FIO involvement since December 2012, when they brought the issue up at an NAIC winter meeting.
The NAIC responded by issuing a report at its recent Spring National Meeting in Orlando which concluded that that states and territories could take a variety of actions to address the issue, according to lawyers at Colodny, Fass, Talenfeld, Karlinsky, Abate & Webb, P.A., in Florida.
CFTKAW lawyers say the NAIC report proposed that these actions should range from activities common to most states, such as the creation of rate comparison guides or the implementation of restrictions on underwriting guidelines, to initiatives unique to a small number of states such as comprehensive programs to provide low-cost liability policies to low-income drivers.
The FIO says comments may be submitted electronically through the Federal eRulemaking Portal: http://www.regulations.gov, or by mail to the Federal Insurance Office, Attention: Lindy Gustafson, Room 1319 MT, Department of the Treasury, 1500 Pennsylvania Avenue NW., Washington, DC 20220.