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.