Financial Services Roundtable Requests Federal Insurance Office Withdrawal of Proposed Auto Insurance Affordability Definition; 50 Consumer Groups Disagree
Sep 3, 2015
In an August 31, 2015 letter, the Financial Services Roundtable (“FSR”) requested the Federal Insurance Office (“FIO”) to withdraw its proposal to calculate a new auto affordability index, explaining that the FIO proposal fails to recognize key factors that drive insurance pricing trends.
Meanwhile, Consumer Federation of America and nearly 50 other consumer advocates urged for a stronger “affordability” definition.
The FSR said the FIO proposal would also ” . . . impose onerous and unreasonable reporting requirements on insurance providers.” In place of the proposed index, the FSR suggested that the FIO use currently available sources of data in order to monitor the affordability of auto insurance.
To view the FSR letter, click here.
The FSR describes itself as the leading advocacy organization for America’s financial services industry, with a mission of keeping its members informed on the vital policy and regulatory matters that impact their businesses. FSR members include the leading banking, insurance, asset management, finance and credit card companies in America.
In contrast, nearly 50 organizations from 23 states and the District of Columbia that had jointly submitted comments to FIO earlier this year also sent a letter stating that the FIO must establish a strong affordability standard for low- and moderate-income Americans. The groups called on the FIO to move forward with its proposal to collect data directly from insurance companies and review the cost of basic liability auto insurance for financially strained drivers–the numbers of whom they estimated to be in the “tens of millions.”
“Unaffordable auto insurance leaves many Americans in the predicament of either not driving, which dramatically restricts their economic opportunities, or driving without insurance, which not only is illegal but puts them and other drivers at risk,” the groups wrote.
In July 2015, the FIO issued a request for comments on its proposal to create an affordability index that deemed auto insurance affordable if it cost less than two percent of the household income of low- and moderate-income drivers and other underserved Americans (available here: http://1drv.ms/1J8jZR2). The FIO’s proposal aimed to address a central requirement of the part of the Dodd-Frank financial reform law that created the FIO in 2010. Consumer, civil rights and community groups that had jointly submitted a letter to FIO offered support for the two percent index, but cautioned that the way FIO determined both the income levels and the price of insurance would determine the validity and utility of the index.
The groups explained:
“Premiums in any given area, even when limited only to those offered to good drivers, can vary widely around a range of factors including annual miles driven, occupation, credit score, level of education, marital status, homeownership, history of prior insurance coverage and others. Further, because premiums for good drivers of lower socio-economic status tend to be higher than those offered to high wealth drivers, using an overall average premium would falsely lower the market’s average price by including premiums that are not actually available to lower-income drivers due to the various factors considered by insurers.”
In their letter this week, the groups provided recommended guidelines for the FIO to use in determining the average income of “Affected Persons” –identified by the Dodd-Frank Act as low- and moderate-income, minority, and those in underserved communities. The groups also offered suggested parameters for the consumer profiles that should be used by FIO to determine the actual cost of basic auto insurance faced by low- and moderate-income drivers and others in underserved communities.
Their August 31, 2015 letter is available here: http://bit.ly/1JzOMZs
It was signed by the following organizations:
National groups
- Americans for Financial Reform
- Consumer Action
- Consumer Federation of America
- Consumers Union
- NAACP
- National Association of Consumer Advocates
- National Consumer Law Center (on behalf of its low-income clients)
- National Council of La Raza
- U.S. PIRG
- United Policyholders
State groups
- Alaska Public Interest Research Group, AK
- Center for Economic Integrity, AZ
- California Reinvestment Coalition, CA
- Consumer Federation of California, CA
- Consumers for Auto Reliability and Safety, CA
- Public Advocates, CA
- Delaware Community Reinvestment Action Council, DE
- Consumer Federation of the Southeast, FL
- Florida Alliance for Consumer Protection, FL
- Georgia Watch, GA
- Citizen Action/Illinois, IL
- Health & Disability Advocates, IL
- NAACP (Chicago Southside Branch), IL
- Open Communities, IL
- Project IRENE, IL
- Woodstock Institute, IL
- Indiana Association for Community Economic Development, IN
- Kentucky Equal Justice Center, KY
- Consumer Assistance Council, Inc. of Cape Cod and the Islands of Massachusetts, MA
- Massachusetts Consumers Council, MA
- Maryland Consumer Rights Coalition, MD
- Vehicles for Change, MD
- Maine Center for Economic Policy, ME
- Three Rivers Community Action, MN
- Coalition for a Prosperous Mississippi, MS
- Rural Dynamics, Inc., MT
- North Carolina Consumers Council, NC
- Reinvestment Partners, NC
- New Jersey Citizen Action, NJ
- New York Public Interest Research Group (NYPIRG), NY
- Western New York Law Center, NY
- NHS of Greater Cleveland, OH
- Policy Matters Ohio, OH
- Oregon Consumer League, OR
- The One Less Foundation, PA
- Fair Credit Foundation, UT
- Virginia Citizens Consumer Council, VA
- Virginia Poverty Law Center, VA
Additional comments in support of the FIO proposal were filed by New Yorkers for Responsible Lending and are available here: http://bit.ly/1NVzH7B
Should you have any questions or comments, please contact Colodny Fass.
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