• Federal Insurance Office Seeking Further Comment On Affordable Personal Auto Liability Insurance for Affected Persons 
  • July 6, 2015
  • Law Firm: Colodny Fass, P.A. - Sunrise Office
  • In a Request for Information ("RFI") published today, July 2, 2015, the Federal Insurance Office ("FIO") is seeking comments and supporting information on its proposed working definition of "affordable personal auto liability insurance for affected persons."

    The proposed definition reads:

    "A personal auto liability insurance policy is affordable if the annual premiums are within the financial means of most people as measured by an affordability index for Affected Persons in the standard market. Personal auto liability insurance is presumed to be affordable if, with respect to household income, the affordability index does not exceed two percent for Affected Persons in urban areas, for low to moderate income persons within a specific geographic area (including rural areas), or for all individuals in majority minority geographic areas."

    To create its proposed working definition of "affordable personal auto insurance based on an affordability index, the FIO sequentially considered:
    • A definition of "affordability;"
    • A definition and calculation of an affordability index;
    • A calculation of average premium;
    • A definition of the market scope for an affordability index; and
    • A definition of "affected persons."
    Based on feedback received from its initial April 2014 invitation for comment, the FIO also formulated a proposed methodology for calculating an "affordability index for affected persons," as well as a proposed definition of who is an "affected person."

    Today's RFI is also seeking comment on the key factors the FIO is proposing for calculation of an Affordability Index for Affected Persons (e.g., premium, income, and other metrics); and how the FIO could best obtain appropriate data to monitor affordability effectively.

    Comments must be received through the Federal eRulemaking Portal (http://www.Regulations.gov) on or before August 31, 2015.

    In the RFI, the FIO explained that creating a working definition of "affordability" was necessary to guide further analysis of the cost of personal auto insurance in order to monitor affected persons' access to it. The FIO also acknowledged that it does not have access to information sufficient to establish a final definition of "affordable personal auto insurance for affected persons" based on a normative standard, external benchmark or percentages of individuals purchasing personal auto insurance.

    Further analysis will also require data on the cost of personal auto insurance beyond currently available numbers relating to premiums for personal auto insurance, which the FIO has concluded are inadequate to monitor the extent to which affected persons have access to affordable personal auto insurance.

    Subtitle A of Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which established the FIO, also provides it with the authority to monitor the extent to which affected persons have access to affordable insurance products other than health insurance. Given this, the FIO is doing so for the following reasons:
    • With the exception of New Hampshire, all states and the District of Columbia require consumers to maintain auto liability insurance as a condition of automobile ownership.
    • The percentage of uninsured motorists countrywide has hovered around 14 percent between 2002 and 2009.
    • Owning an automobile is likely associated with a higher probability of employment and other factors associated with economic well-being.
    • Industry representatives assert that auto insurance has become more affordable over time, but consumer representatives disagree, saying auto insurance has become less affordable for low-income consumers and minorities.