The U.S. House Committee on Financial Services held a hearing entitled, “Drivers of Discrimination: An Examination of Unfair Premiums, Practices, and Policies in the Auto Insurance Industry.” The purpose of the hearing was to consider two pieces of legislation that would remove non-driving related factors to be considered by insurance companies when calculating risk for auto insurance costs. The Preventing Credit Score Discrimination in Auto Insurance Act (H.R. 1756) prohibits the use of a credit report, a credit score, or other consumer information in determining auto insurance coverage or rates. The second bill, the FAIR Study Act directs the Federal Insurance Office within the U.S. Department of the Treasury to conduct a study and report annually on the “accessibility to consumers of affordable private passenger automobile insurance coverage and identify disparities between communities in auto insurance costs and payout based on the predominant racial makeup for such communities.”
U.S. Congressman Steve Stivers (R-OH) stated that the U.S. House Committee on Financial Services has introduced a number of bills aimed at restricting factors that insurers consider when calculating insurance policies but have seen roadblocks on both sides of the aisle. Additionally, in his opening statement, Congressman Stivers acknowledges discrepancy in insurance costs between Ohio and Michigan despite having demographically similar constituencies. Witness testimonies from Elizabeth Dwyer, Superintendent of Insurance, the State of Rhode Island, and Erin Collins, Vice President of the National Association of Mutual Insurance Companies, both opposed the legislation viewing it as unnecessary to the current system and negatively effecting the competitiveness and innovation of the insurance market to create new practices. Sonja Larkin-Thorne, who has spent her career in the insurance industry, testified that “California, one of the largest personal automobile insurance markets in the country does not allow the use of insurance credit scores, yet the state remains one of the most competitive personal automobile insurance markets in the country.” In their opening statements, Dwyer and Collins both opposed the legislation under consideration by the committee. Witnesses Douglas Heller and Larkin-Thorne agreed that Congress does have a role here but to also work with regulatory standards in place. Mr. Eric Poe also urged committee members that fundamental changes in the industry are needed. Despite conflicting views, representatives and panelists all agreed maintaining a healthy, competitive market is essential and that discrimination in auto insurance policies is opposed by all.
- Douglas Heller, Insurance Expert, Consumer Federation of America
- Elizabeth Kelleher Dwyer, Superintendent of Insurance, the State of Rhode Island, on behalf of the National Association of Insurance Commissioners
- Eric Poe, CPA and Chief Operating Officer, CURE Auto Insurance
- Sonja Larkin-Thorne, Consumer Advocate (retired)
- Erin Collins, Vice President – State Affairs, National Association of Mutual Insurance Companies
To view the hearing in its entirety, click here.
Both chambers of Congress have seen bills introduced this year to abolish the Federal Insurance Office. The Federal Insurance Office (FIO) was established by Title V of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). The FIO is housed within the U.S. Department of the Treasury and is headed by a director who is appointed by the secretary of the Treasury.
Opposition to the FIO can be seen by the introduction of two bills; H.R. 1862, the Federal Insurance Office Abolishment Act of 2019 by U.S. Congressman Alexander Mooney (R-WV), and S. 1586, introduced by Senators Ted Cruz (R-TX), Cindy Hyde-Smith (R-MS), and James Inhofe (R-OK). In a press release, Senator Cruz stated that this bill will “rein in bureaucratic overreach by the federal government and allow insurance regulation to be centered in the states.”
U.S. Congressman Mooney also introduced the same legislation during the 115thCongress, however, the bill died in committee. Despite numerous attempts to abolish the FIO, The Automotive Service Association (ASA) sought the establishment of the FIO, during Dodd-Frank deliberations, to offset a state regulatory insurance environment that was biased against collision shops and consumers. The ASA opposes any efforts to abolish or limit the FIO’s jurisdiction.
According to Politico, the Consumer Federation of America will hold a conference call briefing today “to discuss ‘new research on how major auto insurers charge higher prices to consumers who have minimum liability limits and want to increase their protection.'”
The call will be today, July 15, 2019 at 12:00 p.m. EDT.
- Bob Hunter, CFA Director of Insurance
- Doug Heller, CFA Insurance Expert
Call-in phone number is: 800-247-5110; password, CFACALL.
To learn about the Consumer Federation of America, click here.
State Representative Terry Landry (D-96) introduced House Bill 411, which changes current restrictions on insurance companies directing consumers to specific motor vehicle repair shops. Current law prohibits an insurer from requiring an insured to use a particular place or shop as a condition when making a payment incident to a claim, while the proposed law allows the insurer to provide options for consumers when selecting a motor vehicle repair shop. Insurers must inform consumers that they are not required to use the recommended repair facility. The legislation was introduced on March 29, 2019 and passed the Louisiana House of Representatives and Senate. The bill has been signed by the Governor and will go into effect on August 1, 2019. The Louisiana Legislature ended their regular legislative session on June 6, 2019.
On May 31, 2019, Assembly Bill 8050 was introduced in the New York General Assembly, which requires compliance with collision repair guidelines and service bulletins issued by vehicle or original equipment manufacturers (OEM) and forbids insurance companies from requiring repair shops to deviate from those guidelines without the written consent of the vehicle owner. Additionally, if an OEM repair procedure requires scans or a diagnostic test of the vehicle, it will be considered as part of the repair procedure.
ASA supports OEM repair procedure legislation and AB 8050. Following OEM repair procedure guidelines not only ensures that the vehicle is being repaired efficiently but ensures the best opportunity for safety for the motoring public. The bill has been assigned to the Assembly’s Insurance Committee.
To read more about the bill, click here.
On Tuesday September 17, 2019, Insurance Commissioner Ricardo Lara will hold a hearing in Los Angeles to learn how insurers’ use “affinity group” criteria, such as occupation or education level, to set automobile insurance rates. California’s insurance code “permits insurers to issue insurance coverage on a group basis; however, the rates charged for any group insurance are also required to comply with other applicable California laws.” Commissioner Lara has received complaints that drivers with similar driving characteristics are receiving different automobile group rates due to affinity group criteria.
To view the press release from the California Department of Insurance, click here.
To view the Notice for the hearing, click here.
On May 1, 2019 Chairman Al Green (D-TX), Subcommittee on Oversight and Investigations, convened a hearing entitled, “Examining Discrimination in the Automobile Loan and Insurance Industries.” In a memorandum to the subcommittee, the Financial Services Committee Majority Staff provided background information on the issue, stating, “auto loan debt is the third largest category of household debt, after mortgages and student loans. Nearly all American households own at least one vehicle, and most Americans must borrow money in order to purchase a car. Auto borrowing varies by income, age, and state.” As vehicles are becoming increasingly sophisticated, it makes sense that their price tag would reflect those technological advancements. A monetary increase of any product has the propensity to impact any American family; research unveiled in the memorandum highlights that non-white borrowers were charged significantly more than white consumers. The memorandum also noted that due to a lack of data collection of discriminatory practices in auto finance, it is difficult to make any significant progress in abetting the issue. Opening statements from Committee Members highlight that it is unacceptable that there is discrimination in this industry.
- John W. Van Alst, Attorney, National Consumer Law Center; Director, Working Cars for Working Families, and NCLC project
- Rachel J. Cross, Policy Analyst, Frontier Group
- Kristen Clarke, President and Executive Director, Lawyers Committee for Civil Rights Under Law
- Joshua Rivera, Policy Advisor, University of Michigan, Poverty Solutions
- James Lynch, Chief Actuary, Vice President of Research and Education, Insurance Information Institute
To view the hearing in its entirety, click here.
This week the New Hampshire House of Representatives passed an amended House Bill (HB) 664, which addresses the issue of original equipment manufacturer (OEM) repair procedures for collision repairs. The amendment specified that if a repair procedure from an OEM includes the need for additional operations such as pre- and post-scans, calibration, or diagnostic test of the vehicles systems, the insurer shall reimburse the repairer for those operations; however, it excludes glass repair and replacement when done by a glass company. The amendment also acknowledges paint and materials pricing used by repairers. The bill was passed by a floor vote of 202-105 and will move to the Senate for further action.
This week the Connecticut Joint Committee on Insurance and Real Estate held a public hearing on House Bill 7266, addressing original equipment manufacturer (OEM) repair procedures for collision repairs. The ASA supports this legislation and has submitted comments to the Committee including a proposed amendment. The amendment assures no insurer shall condition payment of a claim to the insured or to any person conducting a collision repair based upon the utilization of any repair procedure or specification that does not confirm to the original manufacturer’s repair procedures. Additionally, it is critical that pre- and post-scans are part of the repair processes as this is more important than ever with emerging vehicle technologies. This will ensure that the State of Connecticut has done as much as possible to protect consumers, small businesspersons, and the motoring public.
To view the full letter to the Joint Committee on Insurance and Real Estate, click here.