New Treasury Dept. Report Reveals that 8 Million Americans in NY-NJ-CT Live in Zip Codes Where Auto Insurance is Unaffordable

WASHINGTON, Jan. 24 -- The Consumer Federation of America issued the following news release:

For the first time, a governmental agency has issued a report detailing the severe problems low- and moderate-income ("LMI") Americans face in affording the auto insurance coverage required to be purchased by all states except New Hampshire. The report, by the U.S. Treasury Department's Federal Insurance Office (FIO), found that car insurance is generally unaffordable in 845 traditionally underserved ZIP codes across the United States.

The FIO report, "Study on the Affordability of Personal Automobile Insurance," assessed the cost of basic liability auto insurance in relation to household incomes in the nation's LMI ZIP codes and communities of color. The report identified as unaffordable the ZIP codes in which basic auto insurance premiums cost, on average, more than two percent of the ZIP's median household income. It found:

* 6 million people live in ZIP codes where auto insurance is unaffordable;

* Auto insurance is unaffordable for more than half of the residents of underserved ZIP codes in five states - Michigan, New Jersey, Rhode Island, New York, and Delaware;

* Among the largest states in each of the four census regions - New York, Florida, Illinois, and California - only California, which has the nation's most vigorous insurance consumer protections, has fewer than 1% of its residents living where auto insurance exceeds FIO's affordability standard.

* States with the greatest number of people living in Zip Codes where the state-required auto insurance has been found to be unaffordable are New York (5.2 million), Florida (2.8 million), New Jersey (2.3 million), Michigan (1.7 million), Pennsylvania (1.1 million) and Texas (873 thousand).

* The severity of the affordability problem in the New York-New Jersey-Connecticut region is detailed at the end of this news release.

The study and the supporting data, with average premiums for more than 9,000 ZIP codes, are available on the FIO website:

For more than two years, more than 50 consumer, civil rights, and community groups have been urging FIO to develop an auto insurance affordability standard and conduct research to help policymakers, regulators, and the public better understand the insurance challenges facing lower- and moderate-income drivers. The groups' most recent letters to FIO are available here and here.

"In every state but New Hampshire, American drivers are required to buy auto insurance, but there had never been a comprehensive study as to whether or not insurance prices are even affordable for lower- and moderate-income Americans until now," said J. Robert Hunter, Director of Insurance for Consumer Federation of America (CFA) and a former Insurance Commissioner of Texas and Federal Insurance Administrator. "The government can't force people to buy products in the private marketplace but pay no attention to whether the prices are sufficiently affordable that people can comply with these laws. That's why this report is so important and needs to be updated annually."

President-elect Trump has said that he wants to help inner cities by increasing job availability. One way to move toward this laudable goal, at no cost at all to federal taxpayers, is to make sure that lower-income, good drivers living in the inner cities can afford auto insurance. Academic research has repeatedly shown that limited mobility is directly correlated with limited economic mobility. For most Americans, whether they live in inner-cities, suburbs, or rural America, getting to good jobs requires an automobile. For LMI drivers in particular, affordable auto insurance plays a critical role in improving their economic situation.

"Now that the Federal Insurance Office has taken the lead, state insurance regulators need to follow suit," said Hunter. "They have duty to do so because the states require all drivers to purchase the liability coverage as a condition of driving a car and then punish people with fines, registration suspension and even jail time for not maintaining coverage."

President-elect, Congress Should Support FIO and Continued Research

Insurers have often complained about any effort by either the federal government or state regulators to collect data about insurance pricing practices and the cost of coverage for lower-income Americans. Recently, the Professional Insurance Agents ("PIO") even called for Congress to eliminate FIO. Consumer groups challenge the industry view, noting that companies have the benefit of laws that require every driver to purchase their product, so the public and policymakers need more information like that contained in FIO's report. FIO plays a very important role in insurance regulation by studying the regulatory system and commenting on gaps and shortfalls in consumer protection, according to the groups. In addition to today's report, FIO issued a paper last month that will greatly assist state regulators in identifying problems in insurance markets that should help focus state regulators on ways to increase consumer protections.

The FIO role should not be abrogated in any way, said CFA. Consumers need both active, pro-consumer state regulators and an effective Federal Insurance Office to help ensure that they are treated fairly by an industry to which they make annual premium payments, averaging more than $1,000 per household for this product they are required to purchase.

"As a former insurance commissioner, I can testify to the fact that the insurance industry brings huge financial and lobbying pressure to bear on each insurance department," said CFA's Hunter. "Consumers have no such presence before all but a few states. It is an unfair, imbalanced system that tends to be biased toward the industry positions. FIO's role of simply pointing out serious consumer protection issues and providing relevant data and analysis is extremely important. Any administration that respects working Americans and wants to improve the economic conditions in struggling communities must recognize the value in having an office dedicated to researching the auto insurance market and its affordability around the country."

Tristate Area Data

Of the nation's 18,635,212 people living in ZIP Codes where state-required auto insurance fails FIO's affordability index, fully 42.8% of them, 7,976,691, live in the New York, New Jersey, Connecticut tristate area.

New York

Of 1,794 ZIP Codes in New York, there are 403 that are predominantly made up of Affected Persons (that is, mostly minority or mostly lower-income). Of these, FIO found that 115 ZIP Codes had auto insurance premiums which were higher than 2% of income, and therefore failed the affordability test. 5,233,053 people live in these ZIP Codes. This means that over one in four (26.7%) New Yorkers live in ZIP Codes where affordability of state-required auto insurance is in doubt.

ZIP Codes with affordability index greater than 2.0 115

ZIP Codes with affordability index greater than 3.0 49

ZIP Codes with affordability index greater than 4.0 24

ZIP Codes with affordability index greater than 5.0 14

ZIP Codes with affordability index greater than 6.0 10

ZIP Codes with affordability index greater than 7.0 4

ZIP Code 10454 in the Bronx has an affordability index of 8.83, meaning that the typical purchaser of auto insurance there uses almost 9% of income purchasing state-required auto insurance. Most of the very high affordability index ZIP Codes are in the New York City area, but very high indices appear in Albany County, Syracuse, Buffalo and Rochester as well.

New Jersey

Of 595 ZIP Codes in New Jersey, there are 143 that are predominantly made up of Affected Persons (that is, mostly minority or mostly lower-income). Of these, FIO found that 82 ZIP Codes had auto insurance premiums which were higher than 2% of income, and therefore failed the affordability test. 2,309,120 people live in these ZIP Codes. This means that over one in four (26.0%) New Jersians live in ZIP Codes where affordability of state-required auto insurance is in doubt.

ZIP Codes with affordability index greater than 2.0 82

ZIP Codes with affordability index greater than 3.0 45

ZIP Codes with affordability index greater than 4.0 28

ZIP Codes with affordability index greater than 5.0 19

ZIP Codes with affordability index greater than 6.0 9

ZIP Codes with affordability index greater than 7.0 5

ZIP Code 08102 in Camden has an affordability index of 8.87, meaning that the typical purchaser of auto insurance there uses almost 9% of income purchasing state-required auto insurance. Most of the very high affordability index ZIP Codes are in several counties: Camden County, Essex County, Atlantic County, Passaic County and Mercer County.

Connecticut

Of 282 ZIP Codes in Connecticut, there are 51 that are predominantly made up of Affected Persons (that is, mostly minority or mostly lower-income). Of these, FIO found that 19 ZIP Codes had auto insurance premiums which were higher than 2% of income, and therefore failed the affordability test. 434,518 people live in these ZIP Codes. This means that over one in ten (12.1%) residents of Connecticut live in ZIP Codes where affordability of state-required auto insurance is in doubt.

ZIP Codes with affordability index greater than 2.0 19

ZIP Codes with affordability index greater than 3.0 7

ZIP Codes with affordability index greater than 4.0 3

ZIP Codes with affordability index greater than 5.0 2

ZIP Codes with affordability index greater than 6.0 1

ZIP Codes with affordability index greater than 7.0 1

ZIP Code 06702 in New Haven County has an affordability index of 8.03, meaning that the typical purchaser of auto insurance there spends more than 8% of income purchasing state-required auto insurance. Most of the very high affordability index ZIP Codes are in these counties: New Haven, Hartford and Fairfield.

The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy. Share This Page:

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