ZIP Code-Based Auto Insurance Rates Hurt Minority and Lower Income Consumers

Many good drivers are paying far too much for auto insurance simply because of their home ZIP code, according to a new CFA report, which found significant premium differences among neighbors living within 100 yards of each other in adjacent ZIP codes, sometimes as close as across the street or even next door. In each of the ten cities tested, the higher-priced ZIP code had a lower median income and a higher percentage of non-white residents than the neighboring, lower-premium ZIP code.

CFA noted that these price hikes on lower-income drivers based on their residence are part of a larger problem in which auto insurers use a host of socio-economic factors, including job title, level of education, and homeownership status, to impose higher premiums for mandatory auto insurance on those least able to afford it.

“When we look at the many ways in which lower- and moderate-income Americans are targeted with higher prices for the same product as their higher-income neighbors, we have to rethink the state enforced rules governing the pricing of state-mandated auto insurance,” said CFA Director of Insurance J. Robert Hunter.

CFA sought online premium quotes from Allstate, Farmers, Geico, Liberty Mutual, Nationwide, and Progressive in ten cities: Atlanta, Austin, Buffalo, Columbus, Denver, Detroit, Minneapolis, Philadelphia, Tampa, and Trenton.

The report found:

• Good drivers living in the lower-income ZIP codes tested faced annual premiums that are $410 higher, on average, than their next-door neighbors in higher-income ZIP codes.
• Residents of the lower-priced ZIP codes tested are overwhelmingly white, 72% on average, while the costlier ZIP codes have far more people of color, with only 29% white, on average.
• In every city tested, at least one insurance company charged $200 more for the same coverage to someone living on the wrong side of a ZIP code line.
• People living on city borders in Trenton and Detroit paid 43% and 62% more, respectively, than drivers living across the street on the Lawrence Township, NJ and Grosse Point, MI sides of the street.
• Of the six companies tested, Farmers and Allstate rates increased the most across ZIP code boundaries: $734 (31%) and $661 (28%), respectively.
• Nationwide, GEICO, and Progressive also showed large increases: $373 (22%), $315 (30%), and $253 (23%), respectively.
• With the exception of Columbus and Detroit, Liberty Mutual’s rates did not vary much between the adjacent ZIP codes tested.

CFA insurance experts said that drastic price hikes for adjacent ZIP codes are indefensible and that state regulators need to do a better job reviewing insurance company rating plans to ensure that any premium differences tied to ZIP codes are fair and reasonable. In a letter sent to the nation’s Insurance Commissioners, CFA argued that its alarming findings should lead every state’s Department of Insurance to investigate insurers’ use of ZIPs and craft rules to eliminate sharp increases along contiguous community borders.

“Insurance companies once drew red lines around communities they didn’t want to serve. Now they overprice them,” said CFA Insurance Expert Douglas Heller, who conducted the research with CFA Research Advocate Michelle Styczynski.

One model insurance commissioners might look to is the rate-setting model adopted in California under Proposition 103. According to a recently released CFA analysis of California’s Proposition 103 insurance reforms, drivers in the state have saved $154 billion on auto insurance since 1988, when Proposition 103 was adopted.

Under Proposition 103, insurance companies must justify any rate changes before they can be charged to customers. That requirement applies to home, rental, business and other forms of property-casualty insurance as well as auto.

During the 30-year period in which Proposition 103 has been in effect, no state has seen smaller increases in auto insurance expenditures than California, which has also become the nation’s second most competitive auto insurance market. For the liability insurance coverage that state law requires all drivers to purchase, Californians have seen the average premium drop since the enactment of Prop 103, while drivers around the country pay significantly higher prices.

“We have been studying America’s auto insurance markets for years, and California has set the standard for savings, fairness, and real competition. If anyone doubts that voters can make a difference, there is 150 billion dollars of proof in the wallets of Californians who enacted Prop 103 and reined in the insurance industry 30 years ago,” Hunter said.

FSIS Urged to Strengthen Protections against Contamination in Ground Beef

In the wake of a massive recall by Cargill Meat Solutions, Inc. of 132,606 pounds of ground beef products suspected to be contaminated with the Shiga toxin-producing Escherichia coli (“STEC”) E. coli O26, CFA joined other members of the Safe Food Coalition earlier this month in asking USDA’s Food Safety and Inspection Service (FSIS) to revisit the agency’s requirements for controlling contamination in ground beef.

The coalition’s letter questions whether FSIS should require companies to do more to address the threat that STECs pose, and in particular, whether the FSIS testing protocol for STECs is adequate. Since 2011, FSIS has considered any product contaminated with one of six STEC strains to be adulterated. However, the agency does not require companies to test for the six STEC strains as it does for E. coli O157:H7, which the agency classified as an adulterant in 1994.

“The testing and control protocols for STECs differ in important ways from those associated with E. coli O157:H7,” the groups explained. “In particular, FSIS does not direct plants to take specific action to eliminate risks associated with STECs, operating instead under the assumption that testing and safety protocols for E. coli O157:H7 are sufficient to eliminate the risk of non-O157 STECs. Considering the Cargill outbreak, we are concerned that this assumption is no longer valid and places both beef producers and consumers at risk of greater E. coli exposure to non-O157 serotypes.”

Centers for Disease Control and Prevention (CDC) data shows that O157 controls and preventions are inadequate for preventing non-O157 STEC infections. Human infections linked to E. coli O157 decreased from 2005 to 2009, but over the same period infections from non-O157 STECs increased by 50%.

“FSIS should recommend ‘test and hold’ for all STECs, not just E. coli O157:H7, and discontinue the assumption that testing and safety protocols for the O157:H7 serotype are sufficient to control or eliminate the risks posed by non-O157:H7 STECs. Considering that E. coli O157:H7 and the six STECs captured by the FSIS 2011 rule are all adulterants in ground beef, they should receive similar treatment under FSIS regulations and compliance guidelines,” the groups concluded.

CPSC Rejects Effort to Improve ROV Death and Injury Data

Earlier this month at a U.S. Consumer Product Safety Commission (CPSC) decisional meeting about their 2019 Operating Plan, an amendment was offered to require the CPSC to expand its all-terrain vehicle (ATV) annual death and injury report to include recreational off-highway vehicles (ROVs). This amendment, offered by Commissioner Kaye and supported by Commissioner Adler, was rejected by a 3-2 vote of the Commission.

“CFA strongly supports efforts by the CPSC to issue annual ROV death and injury data. We applaud Commissioner Kaye’s amendment to improve ROV safety data and we were profoundly disappointed that a data-driven agency would reject an effort to improve data on a product that has been gaining popularity and that has been subject to numerous recalls,” stated CFA Legislative Director Rachel Weintraub in a press statement.

“Due to the CPSC’s lack of data, CFA has been tracking real time death data for ROVs and other off-highway vehicles (OHVs), has released a blog on the increasing number of OHV recalls, and last January sent a letter to the CPSC urging the Agency to provide clear information to consumers about ROVs that are catching fire, as mentioned in a December 2017 joint statement from CPSC and Polaris regarding specific models of Polaris ROVs,” said Weintraub.

CFA documented 118 ROV deaths in 2016, 130 in 2017, and thus far in 2018, 119 deaths. CFA data are likely an underestimate of actual fatalities, although CFA constantly updates the data as more information is obtained. “Vastly more information is needed about ROVs, rather than less. Today’s decision by the Commission is a roadblock for safety, data collection, and transparency,” concluded Weintraub.

DC Council Urged to Protect Consumers from Deceptive Automatic Renewal Clauses

With the Washington, D.C. City Council considering legislation, Title II of the Consumer Disclosure Act of 2018 (B22-0020), to improve protections against deceptive automatic renewal clauses in consumer contracts, ten consumer and community advocacy groups sent a letter to members of the City Council urging them to support the legislation and oppose any weakening amendments.

“Over the years, consumers and small business owners alike have been forced to sign an overabundance of lengthy fine print contracts to participate in even the most mundane kinds of commerce. Contracts for music or movie streaming, gym memberships, dating services, purchasing a newspaper subscription, leasing office equipment or even a home cleaning service often contain automatic renewal clauses which will cause the contract or membership to renew automatically if the consumer fails to notify a merchant of their desire to cancel prior to a date of the merchant’s choosing,” the groups wrote.

Title II of the Consumer Disclosure Act of 2018 would prevent these unwelcome financial surprises by requiring:

• Clear disclosure of any automatic renewal clause;
• Affirmative consent from a consumer prior to a contract renewing for a term of 12 months or more;

Originally the legislation required notice to be sent to consumers when their long-term contracts are set to renew on a “month to month” basis, with clear instructions on how to cancel if they no longer wish to continue. After receiving the groups’ letter, however, Council Member David Allen revised the bill to require businesses to obtain affirmative consent for such renewals as well.

“If enacted, this legislation will give District residents the tools they need to avoid being ensnared by hidden clauses lurking in automatically renewing contracts and will serve as a model for other jurisdictions,” said Susan Grant, CFA Director of Consumer Protection and Privacy.

Consumer, Public Health Groups Push for Better Antibiotics Data Collection

CFA joined other members of the Keep Antibiotics Working (KAW) Coalition in writing to the Food and Drug Administration’s Science Board on the National Antimicrobial Monitoring System (NARMS) last month to support a recommendation that FDA work with USDA to create a system to collect data on how antibiotics are used on-farm, including information on quantities of antibiotics used and the specific indications for use.

NARMS tracks antimicrobial resistance in foodborne and other enteric bacteria. Despite recent improvements, consumer and public health groups remain deeply concerned with the NARMS program’s ongoing failure to include a system to collect data on the use of antibiotics on-farm.

“Federal agencies and policy makers need these data to better interpret the trends in antimicrobial resistance reported by NARMS,” the coalition wrote. “On-farm antibiotic use data are needed to make connections between use and resistance.”

The KAW Coalition asked the Science Board to support a number of recommendations to strengthen NARMS, including incorporating sampling of imported foods into NARMS, collecting more metadata on sample sources, and committing to releasing annual NARMS reports in the year following the data collection.

“The NARMS program is a vital public health surveillance program that has undergone continuous improvement despite serious resource challenges. We hope that these comments will help guide future improvements for this important program,” the coalition concluded.