Federal Regulation

Consumer Organizations Call on Federal Insurance Office to Update Auto Insurance Affordability Study and Dig Deeper Into Sources of Unfairness in Market

 |  Press Release

Washington, D.C. — In a comment letter sent to the agency on Monday, July 26, Consumer organizations urged the Department of Treasury’s Federal Insurance Office (FIO) to update a 2017 study on the affordability of auto insurance in historically underserved communities and to conduct a deep and thorough investigation of unfair discrimination in auto insurance markets. While state laws in all states but New Hampshire require drivers to purchase auto insurance, it is often unaffordable for lower-income drivers. Industry pricing practices that rely on non-driving, socio-economic characteristics of customers disproportionately penalize people of color with higher premiums and fewer choices in the market.

Citing President Biden’s note from a February 2021 town hall that “[i]f you live in a black neighborhood, you’re going to pay a higher premium on your car,” the 22 consumer and community organizations submitting the comments wrote:

As the only product that most Americans are required to purchase by law, it is particularly important that auto insurance is available, affordable, and priced fairly in the marketplace…Even drivers with unblemished driving records may find that the cost of coverage in their community and for people with their socio-economic characteristics far exceeds their family budget…

The comments are available here.

The groups argue that FIO should prioritize an immediate update of its 2017 study that found that about 18 million Americans live in ZIP codes where auto insurance is unaffordable, and they urged FIO to produce this report annually as was originally proposed. The report, however, was not updated at all during the prior administration. In addition to updating the 2017 study, the groups urged FIO to produce additional complementary research, including:

  • collecting data about uninsured drivers, drivers with force-placed auto insurance coverage, and enforcement of mandatory insurance laws;
  • analysis of insurers’ use of socio-economic factors — including employment status and occupation, level of education, homeownership status, credit history, and marital status — and other non-driving data in auto insurance marketing and pricing as well as claims handling and anti-fraud efforts; and
  • testing underwriting and rating factors for disparate impacts on communities of color.

The comments were submitted by the following local, state, and national organizations:

Center for Economic Justice
Center for Justice & Democracy
CPAN
Consumer Action
Consumer Federation of America
Consumer Federation of California
Consumer Reports
Consumers for Auto Reliability and Safety
Demos
Georgia Watch
Latino Action Network
Los Angeles County Department of Consumer and Business Affairs
National Community Reinvestment Coalition
New Yorkers for Responsible Lending
Oregon’s Stop the Debt Trap Alliance
Texas Appleseed
The One Less Foundation
United Policyholders
U.S. Public Interest Research Group
Vehicles for Change

Contacts:

Doug Heller, 310-480-4170
Michael DeLong, 925-708-1135