Insurer Practices/Profits

Insurance Regulators Bow to Industry, Ignoring Calls for Independent Review of Auto Insurance Affordability and Insurer Pricing

Consumer Groups Call on NAIC to Disband Working Group that Turned Back on Consumers

Philadelphia – The National Association of Insurance Commissioners (NAIC) should disband its five-year old Working Group on Auto Insurance after the organization’s Auto Study Group discredited itself by bowing to industry pressure this weekend, consumer advocates said. On Sunday, the Auto Study Group abandoned a regulator proposal to collect data directly from insurance companies that would allow state regulators to better assess auto insurance rating practices and affordability in their states. Instead, the Group accepted an insurance industry alternative plan, which would allow insurance companies to choose what data to provide and have a statistical arm of the insurance industry whitewash that data further before providing it to regulators.

“After years of obstructing the efforts of the working group to collect data for a meaningful analysis of auto insurance affordability and pricing practices, the industry suddenly offered a gift of data as an alternative to the thorough research approach a group of state regulators had developed,” said J. Robert Hunter, Director of Insurance at Consumer Federation of America and former Insurance Commissioner of Texas.  “But the industry’s data, which it could have provided any time over the past five years, can’t be verified for accuracy, doesn’t allow for a meaningful analysis, and is designed to support industry talking points.  What the Working Group accepted yesterday is not a regulator-designed affordability analysis, it is an illegitimate industry self-evaluation, which the NAIC now proposes to legitimize.  The NAIC should not be serving as a PR firm for industry, and this pseudo study should be rejected.”

Last week Consumers Union, Consumer Federation of America, and Center for Economic Justice wrote to Insurance Commissioners in support of the regulator-designed version of the data call that was rejected yesterday in favor of the industry approach. The letter urged Commissioners to ensure the independence of the data collection effort by requiring individual insurer reporting of data specified by regulators.  In contrast, the industry proposed that insurer organizations provide aggregate data selected by insurers. That letter is available here.

Consumer advocates noted that the NAIC’s action yesterday on auto insurance data collection is the polar opposite of the approach regulators are taking for collecting data on terrorism insurance.  With terrorism insurance, the states are collecting insurer-specific data to analyze terrorism insurance markets.  The availability and affordability of auto insurance is a vital fact of life for millions of Americans who rely on their vehicles for work and engaging in society.  It makes no sense that insurance regulators are willing to collect data on terrorism insurance from individual insurers, but not collect data on auto insurance from individual auto insurers, the advocates said.

“It is astonishing that the statistical agents – who are appointed by regulators to collect data from insurers required by regulators – now refuse to provide insurer-specific data to the regulators who are supposed to have regulatory oversight over both the statistical agents and the insurers.  It is even more incredible that regulators accept this refusal from the industry they regulate.  This is really a case of industry telling regulators what data regulators can and cannot have,” said Hunter.

Hunter continued, “Why haven’t regulators been collecting information all along about consumer market outcomes to answer questions about auto insurance affordability and availability? It is a sad commentary on insurance regulation that, in 2017, regulators are thinking about asking insurers for data to answer questions that have been asked by consumers for decades. The lack of data on consumer market outcomes in auto insurance stands in stark contrast to the data available for home mortgage lending which has been in place for over 40 years. In an era when insurers are collecting all sorts of non-insurance data as well as insurance-related data about and from consumers, insurance regulators have failed to keep up.”

The consumer advocates also called on the NAIC to disband the Study Group, which was created in 2012 after consumer groups cited the need for serious research into auto insurance affordability, especially for lower- and middle-income Americans. With this vote, however, it has become clear that the Working Group is incapable of independence and only harms the effort to get to the bottom of insurance industry pricing and practices, said the consumer advocates.

Regarding the proposal adopted by the Auto Study Group, consumer groups highlighted the following:

  • This is no longer a study by insurance regulators, but an industry study – with data handpicked by insurers – which the NAIC now proposes to legitimize.
  • There is no ability to review the accuracy or completeness of the data because industry will not provide insurer-specific data, but only industry aggregate data.
  • The data that insurers are willing to provide won’t answer key questions – what companies are offering what insurance at what prices in which communities? The original regulator-designed proposal would have begun to answer those questions.
  • By providing only industry aggregate data, data quality review and analytic opportunities are lost. For example, there is no way to determine if low and moderate-income communities are predominantly served by high-cost “non-standard” insurers and if the large insurers are redlining communities of color.
  • The data offered by industry doesn’t include any information on true measures of affordability like quotes offered but not taken or policies cancelled because of non-payment of premium.

“We encouraged the NAIC to start down this road, because we held out hope that the working group would serve as an independent resource for state regulators, as we all work to improve access to affordable auto insurance around the country,” said Hunter. “In fact, the Study Group originally produced a considered and smart approach to the kind of research that was needed. With the Study Group’s failure to make meaningful progress, it is time to disband the group.”

Contact: J. Robert Hunter, 703-528-0062; Doug Heller, 310-480-4170

The Consumer Federation of America is a nonprofit association of more than 250 consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.