The freshly minted Federal Insurance Office (FIO) is making its first moves toward the auto insurance sector. In an April 10 notice posted to the Federal Register, the FIO announced it is undertaking a study to examine the affordability and availability of auto insurance to what it terms “traditionally underserved communities and consumers.”
Industry representatives, regulators and policyholders are invited to contribute to the discussion, which hopes to determine “the metrics and data FIO should use to monitor” affordability for these groups.
The study falls under the FIO’s umbrella authority to “monitor the extent to which traditionally underserved communities and consumers, minorities and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance.”
The FIO’s move comes after several consumer advocate group reports that indicate some auto insurance rating factors have a disparate impact on low- to moderate-income people as well as communities of color.
Former Texas Insurance Commissioner and Director of Insurance for the Consumer Federation of America J. Robert Hunter told Insurance Business insurers are not necessarily “going after” these groups but due to a desire to attract wealthier clients, some communities wind up underserved.
“In my opinion, the insurance companies want to attract rich people and discourage poor people because [insurers] make the most money on multi-lining,” Hunter said. “They may feel it’s better to be a little underpriced on the auto side in exchange for writing more lines of business for home, life, banking, or yacht insurance.”
Historically, the issue of auto insurance regulation has been left up to the states. In Hawaii, for example, insurers are restricted to driving history only when assessing rates. California regulators also watch closely over rate-making factors, which decreases cost for some communities.
FIO Chief Michael McRaith made waves earlier this year when he suggested the debate over state versus federal insurance regulation was a “relic.” Analysts are unsure of McRaith’s position on greater federal regulation as the recently released FIO report remains somewhat ambiguous.
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