Dallas Fort Worth Insurance Lawyer Blog
Not just Kimble County automobile owners but everyone should be concerned about a story published recently in the New York Times. It is titled, “Millions Live Where Car Insurance Is Unaffordable, Study Says.”
Millions of Americans live in areas where auto insurance is unaffordable according to a new analysis from the federal government.
The report, from the Federal Insurance Office, analyzed premiums for basic liability automobile coverage in more than 9,000 zip codes with high proportions of “underserved” consumers, including minorities and people with low to moderate incomes. It found that rates were unaffordable in 845 of such zip codes, or about 9 percent of them. Nearly 19 million people live in the unaffordable areas, the report found.
The study defined “unaffordable” areas as those where the ratio of the average auto premium to household income exceeded 2 percent. Nationally, the average household spends about 2 percent of its annual income on auto insurance.
The Treasury Department, the insurance office’s parent agency,did not respond to requests for an interview about the report, which was published last week and did not make specific policy recommendations. The insurance office was created in 2010 by the Dodd-Frank financial reform law to study insurance markets, which are largely regulated by state governments.
Robert Hunter, director of insurance with the Consumer Federation of America, said that affordable auto rates were a big factor in economic mobility, since owning a car gives people access to a wider range of jobs. And most states set a minimum of auto liability coverage that people must buy.
“You need to make sure people have a chance to afford the insurance you require.” he said.
As the Consumer Federation noted, the report found that auto insurance was unaffordable for more than half of the underserved zip codes in five states: Michigan, New Jersey, Rhode Island, New York and Delaware. And close to half of the affected population identified by the study live in the tristate area of New York, New Jersey and Connecticut.
Industry groups have been critical of the insurance office, and they took issue with the report.
Property Casualty Insurers Association of America, said the report suggested that car insurance was actually affordable in most areas. The study, they say, did not adequately address the effect of an increase in the number and severity of auto accidents.
The National Association of Professional Insurance Agents recently called for the elimination of the insurance office. They also say that the study’s measure of affordability didn’t take into account the complex criteria used in setting rates. “Any assessment of auto insurance affordability should account for several other factors, such as the differences – most of them significant – that exist among all drivers as to their individual or collective household driving records.”
The insurance office study is based on auto premium data that is publicly available or was voluntarily provided by states, but does not include all U.S. auto policies, the report said. The office said it expected to include more premium data from large insurers in future versions of the study, which it aims to update annually.
The report also cautioned that its analysis looked “collectively” at affordability in broad geographic areas, but was “not appropriate” for measuring whether a premium paid by any individual was affordable.