INSURANCE INDUSTRY TRENDS: Policy affordability study seen as flawed

by | Feb 7, 2012 | News

The insurance industry fired back after a report from the Consumer Federation of America (CFA) claimed that insurance premiums have become an undue economic burden on low- and moderate-income Americans, and argued that state regulators should do more to help reign in these costs.
“What is undeniable is that high auto insurance costs for (these) households either impose a substantial financial burden or greatly limit economic opportunity, especially access to jobs,” said the report’s authors, who are a former Texas regulator and the executive director of insurance at the CFA.
The report suggests lowering minimum liability limits, creating special programs (as has been done in California and New Jersey) to help low-income Americans get cheaper insurance coverage, and eliminating policy pricing elements (such as education level and credit history) that the CFA claims hurt low-income households.
But the insurance industry has attacked the report,pointing to a recent report from the National Association of InsuranceCommissioners that found that the national average expenditure for autoinsurance dropped every year between 2005 (when it was $832) and 2009 (when it was $785).
“The most effective way to lower the price of auto insurance is reduce the costs of
underlying factors” like the cost of health care and abuse of the system, said Robert Hartwig, president of the Insurance Information Institute. “Changing rating factors that have been shown to accurately project future losses will only distort prices and result in good drivers subsidizing riskier ones.”