Consumer Groups Demand Action on Auto Insurance Affordability Research Languishing for Five Years

WASHINGTON, Aug. 4 -- The Consumer Federation of America issued the following news release:

Insurance Commissioners must resist industry pressure and pass a long-overdue proposal to collect data from insurance companies about how sales, premiums, and coverage vary from community to community around the country, consumer groups said in a letter to Commissioners earlier this week. Consumers Union, Consumer Federation of America, and Center for Economic Justice are urging Commissioners to support the "Auto Insurance Data Call" ahead of a National Association of Insurance Commissioners (NAIC) meeting that will be held in Philadelphia this weekend. A copy of the letter is available here.

The data call was developed by a Working Group of state regulators formed in 2012 to study "issues relating to low-income households and the auto insurance marketplace." The proposal would require insurance companies to provide Commissioners with detailed company data broken down by ZIP Code to "allow state insurance regulators to conduct market assessments of the private passenger automobile insurance industry, including possible analyses of affordability and availability issues."

"After more than five years of discussion, state insurance regulators -- the agencies responsible for ensuring fair treatment of auto insurance consumers -- are at the point of decision to collect data from insurers necessary to analyze availability and affordability of auto insurance -- what insurers are selling in what communities at what prices," said Birny Birnbaum, Executive Director of Center for Economic Justice. "Unlike other financial regulators who have routinely collected detailed data on consumer market outcomes for lending, insurance regulators have given insurers a free pass on their sales practices despite mountains of evidence indicating unfair and arbitrary pricing penalizing low- and moderate-income consumers. The proposed data collection will finally allow an objective analysis of insurer practices."

Auto insurance is a required purchase for drivers in every state except New Hampshire, so its affordability is critical to the economic lives of all Americans, and especially to working families for whom a car is essential but money is tight. Because of this mandated purchase, the consumer groups note, state regulators have a special responsibility to ensure that the companies selling the product operate in a fair and consistent manner across the marketplace and that the required coverage is available and affordable in all communities.

"The Auto Insurance (C/D) Working Group has been discussing data collection for years. The NAIC had the opportunity to set the terms of debate for analyzing affordability and availability of auto insurance but failed to take action while deferring to the Federal Insurance Office," the consumer groups wrote in their letter to Commissioners. In 2017 FIO published a report showing that 18 million Americans live in ZIP Codes where auto insurance is unaffordable. "It is long past time for the state insurance regulators to develop robust data collection for more meaningful and substantive analysis of auto insurance affordability and availability," the groups wrote.

The purpose of the data collection, according to the consumer groups, is to identify what policies insurers are offering at what price to which consumers, if rates are developed in a consistent manner, and, of particular import, whether specific groups of consumers face availability or affordability problems. Research by Consumer Reports and Consumer Federation of America has pointed to unfair pricing practices that weigh heavily on lower-income drivers and communities of color.

Wary of having discriminatory pricing and sales practices further revealed, insurance companies have been lobbying the NAIC to water down the research effort. Specifically, insurers want to have the data collected by an industry-controlled third party and only provided to regulators in aggregate. The consumer groups warned that bending to industry demands would undermine the important research since the industry proposed changes would dramatically diminish the utility of the data set.

Insurance companies and their statistical agents, which aggregate data for the industry, are "seeking to obstruct the examination of affordability and availability issues," the groups wrote. On the other hand, the stronger proposal that is set for a vote this weekend "will allow for unbiased analysis of availability and affordability issues."