A consumer group on Monday Jan 31, 2012 issued a study that alleges “disparate treatment” of low-to moderate-income families by auto insurers nationwide. The group is asking state insurance commissioners to consider lowering minimum liability coverage requirements and creating low-income purchase programs.
The study from the Consumer Federation of America (CFA) concludes that the auto insurance marketplace “denies important economic opportunities, especially those related to employment, to low- and moderate-income (LMI) households.”
The study’s intent, and message, was immediately attacked by several national insurance associations claiming the CFA report is misguided, infers “malicious intent,” makes incorrect assumptions about underwriting and even gets some of the facts wrong.
The CFA study asks state insurance regulators to ensure that auto insurance is fairly priced and affordable for LMI families so that they have greater access to car ownership and jobs
“We think these solutions are fair and practical and can be delivered by state insurance commissioners,” said J. Robert Hunter, one of the report’s authors, a former Texas insurance commissioner. CFA’s Executive Director Stephen Brobeck co-authored the report.
According to the group, it worked with Santa Monica, Calif.-based Consumer Watchdog on the study. Consumer Watchdog is working to get signatures to qualify its Insurance Rate Public Justification and Accountability Act for California’s Nov. 6, 2012 ballot. The initiative would “ensure fair and transparent rates for health, home and auto insurance,” prohibiting “unfair pricing” for auto based on prior coverage and credit history, according to its backers.
The CFA study cites several examples that its authors say prove “disparate treatment” of LMI households. It also shows that the bottom rung of families considered to be low-income pay 8 percent of more of their annual income on auto insurance.
One example, taken from a study by Consumer Watchdog, was a 30-year-old man in St. Louis with a Ford Taurus and a perfect driving record who commutes 20 miles per day. He carries comprehensive and collision insurance and a $500 deductible. If he were an executive with an MBA degree living in an upscale suburb, his average annual insurance rate would be around $558, according to the study. Get a free auto insurance quote