NAMIC Responds to Latest CFA Survey

Robert Detlefsen, Ph.D.
Vice President, Public Policy
National Association of Mutual Insurance Companies

RE: NAMIC Responds to Latest CFA Survey

“The Consumer Federation of America’s news release describes the ‘findings’ of ‘a new analysis’ that the organization claims to have performed regarding insurers’ use of an individual’s level of education and occupation as rating factors for automobile insurance. The CFA’s major empirical finding is that five of the nation’s ten largest auto insurers use education and occupation as rating factors, while five do not. It’s major normative conclusion is that the use of education and occupation as rating factors is ‘unfair’ because ‘in effect, auto insurers are discriminating on the basis of income and race,’ an assertion for which the CFA provides absolutely no evidence.

“As for the online rate quotes that CFA claims to have received from the ten companies mentioned in its news release, it is impossible to determine the extent to which the quoted rates from any of the companies were influenced by education or income. For example, one reason the quoted rates may seem high is that CFA gratuitously added lack of insurance coverage for more than fifteen days to the profile of its hypothetical consumer, apparently to inflate the online rate quotes. Insurers generally regard absence of coverage as an indication of higher-than-average risk.

“The CFA correctly notes that ‘few drivers if any pay’ the rates cited in its news release, but fails to substantiate its conclusion that ‘these high rates […] effectively deny low- and moderate-income consumers coverage.’ This would be true only if all insurers charged rates equivalent to the online rate quotes CFA says it obtained from ten insurers. In all likelihood, however, most consumers could find cheaper rates simply by shopping among the dozens of other auto insurers that typically compete for their business in virtually every geographic market.”

Lisa Floreancig
Public Affairs Director - State & Policy Affairs