FIO Highlights Need for More Scrutiny of Insurance Industry Practices
The insurance industry’s growing use of “big data,” marital status and sex-based pricing, and mandatory arbitration agreements can be harmful to consumers, the Federal Insurance Office (FIO) concluded in its first annual report on consumer access and protection issues related to auto insurance. Released late last month, the report calls for increased scrutiny of these practices from state policymakers and regulators.
In a press release praising the report, CFA and Center for Economic Justice (CEJ) urged policymakers around the country and the National Association of Insurance Commissioners to take stock of their states’ insurance markets and initiate efforts to address the weaknesses identified by FIO.
“Auto insurance is required of drivers in every state except New Hampshire, yet there has never been a government analysis – state or federal – examining whether or not low-income drivers can actually afford to comply with these insurance mandates,” said CFA Director of Insurance J. Robert Hunter. “We eagerly await FIO’s report on affordability and expect that the new administration will continue to monitor this vital issue, which impacts the inner cities particularly hard.”
The report marks the first comprehensive governmental look at insurance consumer issues, according to the consumer groups. They note that FIO praises state insurance regulators where appropriate but, importantly, also identifies failings that impact consumers. The report also illustrates the public value of FIO, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act and was given responsibility to monitor insurance markets and identify gaps in state-based regulation.
“While states have the job of regulating most insurance products, it is extremely valuable for Americans to have an independent federal agency putting resources and expertise toward monitoring consumer issues in the insurance marketplace,” said CEJ Executive Director Birny Birnbaum.
Appeals Court Overturns Ban on High-Powered Magnets
Delivering a blow to child safety, a panel of judges on the Tenth Circuit Court of Appeals has vacated a Consumer Product Safety Commission (CPSC) rule to ban dangerous, high-powered magnets. Consumer groups and pediatricians expressed grave concerns over the decision.
High–powered magnet sets, marketed under names such as Zen Magnets, are composed of tiny high-powered magnet balls or cubes, often with 200 or more magnets to a set. When more than two magnets are swallowed, their attractive force (flux) allows them to find each other across or between different segments of the digestive system. For example, connections can occur between the stomach and the small intestine, between the small intestine and the colon, or across loops of bowel.
The CPSC passed a strong standard in 2014 making these magnets safer and preventing the sale of unsafe magnets after children suffered critical injuries and even died after ingesting these magnets. The court vacated and remanded the rule, arguing that the CPSC had not conducted adequate analysis to support its factual findings.
“We are profoundly disappointed by this decision. Without a doubt, this decision puts children at risk,” said CFA Legislative Director Rachel Weintraub. “The hazards associated with rare earth magnets are severe and hidden. Children suffer severe health consequences that could result in death or lifelong health problems. Caregivers cannot always identify when specific small magnets are missing nor that their child ingested them. Parents should make sure to keep these unsafe products out of children’s reach and preferably out of their homes,” she added.
Holiday Shopping Alert: Recalled Toys May Be Available in Online Stores
Some toys that have been recalled for lead, powerful magnets, and other hazards may still be available through online retailers this holiday season, according to the U.S. Public Interest Research Group Education Fund’s 31st annual Trouble in Toyland report, released last month in conjunction with CFA.
“We should be able to trust that the toys we buy are safe,” said Mike Litt, Consumer Program Advocate with U.S. PIRG. “However, until that’s the case, consumers should understand two things: first, not all recalls may be well-publicized so you should check your house for previously recalled toys and second, some toys that are recalled may still be available online.”
The report lists 44 toys totaling 35 million units recalled by the Consumer Product Safety Commission (CPSC) from January 2015 to October 2016 and warns that that some of these recalled toys may still be available online or still in homes. Among the products identified by researchers as still for sale when the report was compiled were: a toy glockenspiel recalled for high levels of lead in the paint, a remote-controlled flying toy with a charging cord that can overheat, and a pencil case containing powerful magnets that can pose an ingestion hazard to children.
“Ideally, manufacturers would use the same resources to recall a product as they use to market the product,” said CFA Legislative Director Rachel Weintraub. “This includes making sure that the consumers who need to know – those who own or purchased the product – find out about the recall. But unlike durable nursery products, such as cribs, which are required to provide a way to register the product so that the manufacturer can contact the purchaser or owner in case of a recall, that’s not the case with cheaper toy recalls where product registration is not required.”
Parents and caregivers can take a number of steps to protect children from potential hazards, including subscribing to email recall updates from the CPSC at www.recalls.gov, shopping with US PIRG Education Fund’s Toy Safety Tips at www.toysafetytips.org, examining toys carefully for hazards before purchase, reporting unsafe toys to www.SaferProducts.gov, and putting small toy parts out of reach of young children. The full Trouble in Toyland report is available at www.toysafetytips.org.
Administration Officials Address CFA Financial Services Conference
Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis Borzi and Federal Insurance Office Director Michael McRaith delivered keynote addresses at CFA’s financial service conference earlier this month. Americans for Financial Reform Executive Director Lisa Donner and Mercatus Center Associate Professor J.W. Verret discussed the election’s implications for financial services. The conference also included general session panels on access to mortgage credit, ability-to-repay standards for the credit marketplace, auto insurance affordability, and financial service providers’ collection and use of consumer data.