{"id":395,"date":"2014-07-02T23:38:00","date_gmt":"2014-07-02T23:38:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2014\/07\/next-up-the-affordable-car-act-more-updates.html"},"modified":"2014-07-02T23:38:00","modified_gmt":"2014-07-02T23:38:00","slug":"next-up-the-affordable-car-act-more-updates","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/07\/next-up-the-affordable-car-act-more-updates.html","title":{"rendered":"Next up: the Affordable Car Act? (more updates)"},"content":{"rendered":"\n<\/head>
(originally written April 11th)\n

This from today\u2019s Tribune<\/a>:<\/p><\/div>\n

On Thursday, the [Federal Insurance Office in the U.S. Treasury Department] \u2014 which is headed by Michael McRaith, the former head of Illinois\u2019 insurance department \u2014 announced it was seeking comments and information about the affordability of car insurance and ways to determine whether minority communities have enough access to it.<\/p><\/blockquote>\n

\u00a0Not much more detail than that, but this is astonishing. \u00a0Car insurance is a consumer product with a great deal of competition, with market niches for service-conscious and price-conscious consumers, including insurers who specialize exclusively in minimum legally-required coverage. \u00a0There are insurance agents all over the place, and the ability to pick up the phone and buy a policy. \u00a0There\u2019s an established system of high-risk policies for drivers with a record of accidents\/tickets. \u00a0The product is highly regulated to ensure that insurers have sufficient reserves, but it\u2019s also easy for a consumer to comparison-shop. <\/p>\n

Nonetheless, unnamed \u201cconsumer groups say it has become pricier for lower-income people and minorities,\u201d and the Office says, cryptically, \u201cthe definition of the affordability of personal auto insurance remains unclear.\u201d<\/p>\n

Where does this lead? \u00a0Will insurers be required to apply a community rating to car insurance, jacking up the premiums of responsible drivers? \u00a0Open insurance agencies in poor neighborhoods (even if they conduct their business online or by phone)? \u00a0Or do we need a system of subsidies to help the poor afford car insurance, since, according to the article, about 15% of motorists ignore the mandatory insurance requirement and are car-un-insured?<\/p>\n

Hey \u2014 what about a single-payer system? \u00a0Get into a wreck, get your repair costs covered by the government!<\/p>\n

UPDATE: \u00a0Here<\/a>\u2018s the actual text of the announcement. \u00a0Key points:<\/p>\n

The Dodd-Frank Wall Street Reform and Consumer Protection Act provides the Federal Insurance Office with a number of authorities including monitoring 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.
. . .
II. General Solicitation for Comments: The FIO hereby solicits comments, including supporting and illustrative information in support of such comments where appropriate and available, regarding:\u00a0<\/p><\/blockquote>\n

1. A reasonable and meaningful definition of affordability of personal auto insurance;\u00a0<\/p><\/blockquote>\n

2. The appropriate metrics to use in order to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable personal auto insurance; and \u00a0<\/p><\/blockquote>\n

3. The data source(s) FIO should use to monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable auto insurance.<\/p><\/blockquote>\n

\u201cAll lines of insurance\u201d \u2014 does that mean that life insurance is up next, or the \u201caffordability\u201d of homeowner\u2019s insurance in high-crime high-arson inner cities?<\/p>\n

And what happens if auto insurance is deemed \u201cunaffordable\u201d? \u00a0 How likely is it that this agency is going to stop at measuring affordability, rather than creating yet more progams to make auto insurance more \u201caffordable\u201d?<\/p>\n

SECOND UPDATE: <\/p>\n

Now I\u2019ve found the impetus behind this comment-solicitation, a report<\/a>,<\/u> dating to 2012,\u00a0by the Consumer Federation of America charging that car insurance is unfairly-unaffordable for the poor. \u00a0They have some legitimate concerns, claiming that insurers charge more for minimum-liability coverage than standard-liability coverage \u2014 which may indicate that people who seek out minimum-liability coverage are higher risks, or just that they figure that minimum-liability-coverage buyers aren\u2019t careful comparison-shoppers. \u00a0And apparently, if your auto lender purchases your car insurance for you, it\u2019s massively overpriced (but I don\u2019t know if the consumer has the option to buy the coverage on their own or not). \u00a0They also say, which I can believe, that low-income people are treated unfairly in the claims process \u2014 though I don\u2019t know to what degree it\u2019s initial unfair treatment and to what extent it\u2019s not knowing when and how to push back.<\/p>\n

But they complain about insurers using \u201clocation of residence, occupation, education, and credit rating\u201d in their underwriting, which seems legitimate to me as predictors of accidents. \u00a0They complain that there aren\u2019t enough insurance agencies in low-income areas, which doesn\u2019t seem credible in these days of online and phone transactions \u2014 I\u2019ve never met with an insurance agent in person in my life. \u00a0And they complain that a factor which would serve to reduce premiums for the poor \u2014 the lower number of miles they drive, on average \u2014 isn\u2019t being taken into account, although until recently there was no way to reflect this except self-reporting (now Progressive, at least, advertises an in-car tracking device to determine this and charge accordingly). <\/p>\n

Their solutions are state-level solutions: \u00a0lowering required minimum coverage (because, they say, the poor carry this, and everyone else has uninsured\/underinsured motorist coverage anyway, so no worries); having state insurance commisioners research rate fairness (citing the issue of higher premiums for minimum coverage, but presumably resulting in the state forbidding the inclusion of certain factors in underwriting); and creating a state-sponsored car insurance program for the poor (apparently California does this) or, the big one: \u00a0\u201ca strong case could be made, on the basis of simple fairness, for some subsidization of state-required insurance.\u201d<\/p>\n

This is all based on the executive summary. \u00a0But the complaints aren\u2019t that dissimilar from the complaints about health insurance, and the solutions similar, too. <\/p>\n

MORE UPDATES:<\/p>\n

So now it\u2019s May 6, and we finally got around to the price-shopping that we\u2019d been meaning to do for quite a while. \u00a0Our homeowner\u2019s and our auto insurance will both drop significantly. \u00a0I\u2019m not entirely sure how much of this is due to a certain \u201cre-setting\u201d of rates because the new guys are competing for our business, and how much is due to more sophisticated analysis of the actuarial data at the new insurer \u2014 both in terms of our driving record and the risk factors of our neighborhood, as well as our own credit ratings. \u00a0But it certainly does seem as if this is the sort of situation in which \u201csocial justice\u201d-oriented bureaucrats could decide that, for the good of people with low credit ratings, they\u2019ll step in and prevent insurers from using credit rating in their underwriting. <\/p>\n

ANOTHER UPDATE (July 2nd):<\/p>\n

We\u2019ve now got our Allstate \u201cDrivewise\u201d devices installed, and they track our driving with the promise of up to a 30% discount if we drive less than 12,000 miles per year and have \u201cgood behavior\u201d (no speeding and nminimal \u201chard braking events\u201d \u2014 though their algorithm for determining \u201chard braking\u201d seems to generate overly-many events if you\u2019re driving at low speeds to begin with, and stopping at stop signs rather than traffic lights). \u00a0It\u2019s actually interesting to go online and see, \u201chow long did that drive today actually take?\u201d \u00a0But I also read recently that Allstate relies most heavily on credit score in determining premiums, of all the major insurers, which goes a long way toward explaining the major, major drop in our car insurance rates from our former provider.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

(originally written April 11th) This from today\u2019s Tribune: On Thursday, the [Federal Insurance Office in the U.S. Treasury Department] \u2014 which is headed by Michael McRaith, the former head of Illinois\u2019 insurance department \u2014 announced it was seeking comments and information about the affordability of car insurance and ways to determine whether minority communities have […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-395","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nNext up: the Affordable Car Act? 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