September 11, 2015

The price to insure your automobile is becoming unaffordable to many, so a coalition of consumer, civil rights, and community groups are calling on the Federal Insurance Office (FIO) to establish stronger protections for consumers.

A group of nearly 50 organizations from 23 states and Washington D.C., including the North Carolina Consumers Council, composed a letter sent to the federal agency advocating for a more strict affordability standard for low- and moderate-income Americans. The groups called on FIO to move forward with its proposal to collect data directly from insurance companies and review the cost of basic liability auto insurance for tens of millions of financially strained drivers.

"Unaffordable auto insurance leaves many Americans in the predicament of either not driving, which dramatically restricts their economic opportunities, or driving without insurance, which not only is illegal but puts them and other drivers at risk," the groups wrote.

In July, FIO issued a request for comments on its proposal to create an affordability index that deemed auto insurance affordable if it cost less than two percent of the household income of low- and moderate-income drivers and other underserved Americans. This proposal was made in relation to the Dodd-Frank financial reform law that created FIO in 2010. The groups support the two percent index, but warned that the way both the income levels and the price of insurance would determine the validity and utility of the index.

The groups explained:

Premiums in any given area, even when limited only to those offered to good drivers, can vary widely around a range of factors including annual miles driven, occupation, credit score, level of education, marital status, homeownership, history of prior insurance coverage and others. Further, because premiums for good drivers of lower socio-economic status tend to be higher than those offered to high wealth drivers, using an overall average premium would falsely lower the market's average price by including premiums that are not actually available to lower-income drivers due to the various factors considered by insurers.

According to the Insurance Information Institute, average insurance costs for a standard sedan rose nine percent to $1,115 in 2014, up from $1,023 in 2013.

Editor's note: NCCC is a member of the Consumer Federation of America.