Auto Insurers Fail to Reward Low Mileage Drivers

Large auto insurers frequently fail to reward drivers with low mileage despite a strong relationship between low mileage and insurance claims, according to CFA research released last week.  In fact, three of the five largest insurers often give low-mileage drivers no break at all.

“The failure of most large insurers to adequately reward low mileage especially harms lower income and older drivers because they drive the least,” said CFA Executive Director Stephen Brobeck. “This lack of concern for mileage, along with an emphasis on other non-driving factors such as occupation and income, help explain why insurers charge many lower income drivers such high prices for minimal, state-required liability coverage.”

Using websites of the nation’s five largest auto insurers – State Farm, Allstate, Progressive, GEICO, and Farmers – CFA priced minimum, state-required liability coverage in ten cities for a hypothetical 30-year old single woman with a perfect driving record and a high school degree who rents a house in a moderate income ZIP Code and drives a 2005 Honda Civic. CFA compared prices quoted to this driver for both 5,000 and 20,000 miles driven per year.

According to the research, three of the five insurers – Farmers, Progressive, and Allstate – often or always quoted the same annual premium for 5,000 and 20,000 miles driven annually. In most cases, Farmers and Progressive did not even ask consumers for their annual, estimated mileage in preparing the quotes. State Farm is the only major insurer that consistently rewards drivers for low mileage.

In addition, the research found that few states require, or even encourage, insurance companies to emphasize the number of miles driven in pricing auto insurance. One exception, as shown in the survey, is California, which requires auto insurers to treat annual miles driven as the second most important factor in pricing (driving safety record is first).

“Annual mileage is one of the few factors available in auto insurance pricing that not only is strongly related to accident claims but also is deemed fair by most Americans,” said CFA Director of Insurance J. Robert Hunter. “State legislators and regulators should insist that auto insurers appropriately use mileage in their rate-making.”

“If insurers were to properly reward consumers for less driving,” he added, “that would not only lessen their auto insurance costs, but also reduce the number of uninsured motorists, accidents, air pollution, and the impact on global warming.”

Senate Committee Passes Bill to Delay ROV Safety Standards

Despite strong opposition from a coalition of consumer safety advocates, health professionals, insurers and individuals who lost loved ones in off-highway vehicle crashes, the Senate Committee on Commerce, Science and Transportation voted 15-9 last week to further delay long-stalled Consumer Product Safety Commission (CPSC) setting safety standards for recreational off-highway vehicles (ROVs).

“We are profoundly disappointed with the Senate Commerce Committee decision to favorably vote out this bill,” stated CFA Legislative Director Rachel Weintraub. “Not only does this bill further delay much needed ROV safety standards but it also required CPSC to cover the cost of the unnecessary study while undermining CPSC’s expertise on these issues.”

The ROV In-Depth Examination Act of 2015 would prevent the CPSC from setting ROV safety standards, including standards related to lateral stability, vehicle handling, and occupant protection, for up to two years while the National Academy of Sciences studies a number of the CPSC’s proposed requirements.  It would impose this delay despite the fact that the CPSC has already collected extensive research to support the proposed rule, and that the rule has already been delayed deliberately and repeatedly since 2009.

A broad coalition of safety advocates sent a letter to the Committee urging opposition to the legislation.  The letter cites death and injury data that “show a need for swift action, rather than once again postponing the completion of safety standards.”

2015 Cars Show Continued MPG Gains

Fuel efficiency continues to increase for 2015 on a model by model basis, according to an analysis of 1,163 new vehicles released by CFA earlier this month.

From 2014 to 2015, the percentage of vehicles with an Environmental Protection Agency (EPA) fuel economy rating of at least 23 miles per gallon (mpg) ticked up from 50.5 percent to 52 percent.  Meanwhile, the percentage of vehicles with fuel economy at or below 16 mpg, the so-called gas guzzlers, declined from 8.5 percent to 6.1 percent.   However, the analysis also showed that individual car company fleets are backsliding on their overall fuel economy performance.

“In 2015, seven auto companies met or exceeded their 2014 performance,” said CFA Public Affairs Director Jack Gillis. “There is no doubt that since the announcement of higher CAFE standards, many car companies have improved their selection of vehicles with greater fuel efficiency, proving that 54.5 mpg by 2025 is achievable. The fact that the number of cars getting over 23 mpg has risen by almost 40 percent in the last ten years is strong evidence that reaching the goal of 54.5 mpg by 2025 is indeed attainable.”

“Consumers realize immediate savings at the pump with a CAFE compliant vehicle,” added CFA Research Director Mark Cooper. “Those purchasing these efficient models can rest assured they will receive a return on their investment for years to come.”

WTO Rejects Country-of-Origin-Labeling

The World Trade Organization has rejected a U.S. appeal of its decision that country-of-origin-labeling (COOL) on meat unfairly discriminates against Canadian and Mexican meat imports. “U.S. consumers want more, not less, information about their food,” said CFA’s Director of Food Policy Institute Chris Waldrop in a press statement.  “It’s a shame that the meat industry and our trading partners have fought so hard to deny consumers such basic information about where their meat is coming from.”

CFA conducted a poll in 2013 that found that a large majority of Americans strongly support mandatory country-of-origin labeling for fresh meat and strongly favor requiring meat to be labeled with even more specific information about where the animals were born, raised and processed.

“Today’s final ruling by the World Trade Organization now puts in motion a WTO process to determine the level of sanctions Canada and Mexico can impose on the U.S.,” said Waldrop. “While Canada in particular has claimed high damages due to COOL, a study by Auburn University Professor Robert Taylor found that COOL had no impact on imports of cattle from Canada.”

In March CFA testified to the Livestock and Foreign Agricultures House Subcommittee stating that COOL provides consumers with important information about the source of their food, and they have a basic right to know where their food originated.

Anti-Consumer Regulatory Reform Bill Advances in Senate

On a party-line vote, the Senate Committee on Banking, Housing and Urban Affairs Committee approved “regulatory reform” legislation last week that would eliminate crucially important consumer protections and reopen financial markets and consumers to the risks that brought down the financial system in 2008. CFA sent a letter to the Committee in advance of the vote urging opposition to the bill absent significant changes.

Focusing on three mains issues that are included in the draft bill — home ownership and financing, financial stability, and improved access to capital and tailored regulation in the financial markets – CFA identified numerous provisions that would need to be significantly altered or dropped before the organization could support the legislation.

“While there may be important changes that could be considered in Dodd-Frank to lessen burdens on smaller, community institutions and to streamline regulatory oversight, the scope and breadth of the changes contained in this bill’s provisions are overly broad and should not be supported without significant changes to restrict their coverage and narrow their effect,” the letter stated.

CFA also sent a letter to the Committee about the  Democratic substitute amendment to Chairman Shelby’s draft “Regulatory Improvement Act of 2015.” The letter stated that, “While we view the Democratic substitute as a better starting point and have concerns with some of the provisions proposed, the substitute amendment does not undermine consumer protections in the same manner as the Chairman’s proposal and in some areas, it improves the implementation of critical regulations.”