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Insurance Cost Information Regulation

American Government Special Collections Reference Desk

American Government Topics:  National Highway Traffic Safety Administration

Insurance Cost Information Regulation

Barry Felrice
Federal Register
March 22, 1994

[Federal Register: March 22, 1994]


_______________________________________________________________________

Part X





Department of Transportation





_______________________________________________________________________



National Highway Traffic Safety Administration



_______________________________________________________________________



49 CFR Part 582



Insurance Cost Information Regulation; Rule and Notice
DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 582

[Docket No. 74-40; Notice 6]

 
Insurance Cost Information Regulation

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Denial of petition for reconsideration.

-----------------------------------------------------------------------

SUMMARY: This notice denies a petition submitted by the National 
Automobile Dealers Association (NADA) for NHTSA to stay the effective 
date of and reconsider its final rule requiring new automobile dealers 
to distribute insurance cost information to prospective purchasers 
without charge. The petitioner urges that in place of making dealers 
responsible for reproducing copies of the booklet containing the 
information, the agency undertake that responsibility. After reviewing 
the petition, the agency has concluded that the final rule is 
consistent with section 201(e) of the Motor Vehicle Information and 
Cost Savings Act. Similarly, the agency continues to believe that the 
final rule is consistent with the rulemaking record. Finally, this 
notice rejects the argument by the petitioner that the final rule is 
unreasonable because the cost of reproducing copies of the insurance 
cost information is substantially greater for dealers than for the 
agency.
    Based on these conclusions, NHTSA has decided to deny the 
petitioner's request that the agency amend the final rule. In view of 
this action, and of the fact that, subsequent to the filing of NADA's 
petition, the agency provided NADA with five additional copies per 
dealer of the 1993 insurance cost information booklet in return for 
NADA's agreement to mail these copies to each new car dealer, there is 
no basis for a stay of the effective date of the final rule. 
Accordingly, the request for a stay is likewise denied.

FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market 
Incentives, National Highway Traffic Safety Administration, 400 Seventh 
Street SW., Washington, DC 20590 (202) 366-4936.

SUPPLEMENTARY INFORMATION:

I. Background

    On March 5, 1993, NHTSA published a final rule amending the 
Insurance Cost Information Regulation (49 CFR part 582) to require 
dealers of new automobiles to distribute to prospective purchasers 
comparative insurance cost information that is prepared and provided 
annually by the agency (58 FR 12545). The information consists of data 
compiled by the Highway Loss Data Institute (HLDI). The rule was issued 
to further implement section 201(e) of the Motor Vehicle Information 
and Cost Savings Act (Cost Savings Act), which states that the 
Secretary of Transportation

    Shall by rule establish procedures requiring automobile dealers 
to distribute to prospective purchasers information developed by the 
Secretary and provided to the dealer which compares differences in 
insurance costs for different makes and models of passenger motor 
vehicles based upon differences in damage susceptibility and 
crashworthiness.

    NHTSA commenced this rulemaking proceeding in response to a lawsuit 
filed by Consumers Union of the United States against the Secretary of 
Transportation and NHTSA's Administrator to compel the agency to 
``develop and ensure disclosure of comparative insurance cost 
information'' in accordance with section 201(e). (Consumers Union v. 
Pena, No. 90-2369, D.D.C., filed September 26, 1990, dismissed May 20, 
1993). After meeting with representatives of Consumers Union and the 
Insurance Institute for Highway Safety (IIHS) and further analyzing 
insurance data, the agency tentatively concluded that collision loss 
experience data collected and reported by HLDI are the best available 
indicators of the effect of damage susceptibility on insurance costs, 
although they bear no relationship to vehicle crashworthiness. Based on 
the above, NHTSA published a proposal to require that new automobile 
dealers make available to prospective purchasers collision loss 
experience data that HLDI collects, updates, and publishes annually (56 
FR 56963, November 7, 1991).
    In response to comments on the proposal, the March 5, 1993 final 
rule addressed such issues as the use of HLDI information as the data 
source, the format of data presentation, the mandatory text to 
accompany the HLDI data, the exclusion of personal injury protection 
data, the responsibility for printing and distributing the information, 
the timing of publication and dealer compliance, and the costs 
associated with the rulemaking.
    On March 24, 1993, NHTSA published a notice containing the 1993 
text and data that new automobile dealers are required to include in an 
insurance cost information booklet that they must make available to 
prospective purchasers (58 FR 16098). NHTSA also mailed a sample copy 
of the 1993 booklet to each new automobile dealer on the mailing list 
used by the Department of Energy to distribute the ``Gas Mileage 
Guide.'' The notice noted that dealers are responsible for reproducing 
sufficient numbers of copies of the booklet to assure that they are 
available to be given to prospective purchasers as of April 21, 1993.

II. Petition for Reconsideration

    On April 5, 1993, the National Automobile Dealers Association 
(NADA) petitioned NHTSA to reconsider certain aspects of the March 1993 
final rule. NADA is a national trade association that represents over 
19,000 new automobile and truck dealers across the country. In 
petitioning the agency to reconsider the final rule, NADA claimed that 
requiring dealers to reproduce or otherwise obtain sufficient copies of 
the insurance cost information was (1) inconsistent with and contrary 
to section 201(e) of the Cost Savings Act, (2) contrary to the public 
interest and to the rulemaking record, and (3) unreasonable. Each of 
these contentions and the agency's response to them are discussed 
below.

III. Agency's Response to the Petition

A. Congress Did Not Direct NHTSA to Bear the Costs of Reproducing and 
Distributing Copies of Insurance Cost Information

    In its petition for reconsideration, NADA stated that its principal 
objection to the final rule ``arises from NHTSA's mandate that 
automobile dealers, rather than the government, reproduce the insurance 
cost information published in 49 CFR Sec. 582.5.'' NADA contended that 
Congress' intent was for NHTSA to be responsible for reproducing the 
requisite number of copies of the insurance cost information booklets 
and distributing these copies to the dealers at no charge.
    After reviewing the Cost Savings Act and its legislative history, 
NHTSA continues to interpret section 201(e) as not requiring NHTSA to 
bear the responsibility for reproducing and/or distributing the 
insurance cost information. The agency's responsibility under section 
201(e) is to ``develop'' the insurance cost information and ``provide'' 
it to dealers. The dealers have the responsibility under that same 
section to ``distribute'' the information to prospective purchasers. By 
sending a copy of the insurance cost information to new automobile 
dealers, the agency fully met its legal duty to ``provide'' the 
insurance cost information to dealers. Nothing in section 201(e) 
requires the agency to supply dealers with multiple copies of such 
information.
    While section 201(e) does not expressly specify the party 
responsible for reproducing this information, the agency believes that 
the requirement for dealers to distribute the information necessarily 
includes all actions necessary to comply with that requirement. The 
only exception is that the information, as opposed to the booklets or 
pamphlets containing the information, must be supplied by this agency. 
Therefore, the responsibility for reproduction may properly be assigned 
to the dealers.
    Section 201(e) is similar to the provision of the National Traffic 
and Motor Vehicle Safety Act (Vehicle Safety Act) that governs another 
NHTSA consumer information program. Under section 112(d) of the Vehicle 
Safety Act, the agency is authorized to require vehicle manufacturers 
to give prospective purchasers of vehicles notification of performance 
data and technical data related to performance and safety. Although 
section 112(d) does not explicitly state that the manufacturers must 
bear the responsibility of reproduction, NHTSA has consistently 
required manufacturers to do so to comply with 49 CFR Part 575, 
Consumer Information Regulations. Section 575.6(c) requires, among 
other things, that vehicle manufacturers provide consumer information 
to prospective vehicle purchasers ``* * * without charge and in 
sufficient quantity to be available for retention * * *.''
    Section 201(e) stands in marked contrast to section 506(b) of the 
Cost Savings Act, which requires the Environmental Protection Agency 
not only to ``compile'' fuel economy information, but also to 
``prepare'' a booklet containing that information. Further, it requires 
the Department of Energy to ``publish and distribute'' the ``Gas 
Mileage Guide'' (emphasis added). The language of section 506(b) 
demonstrates that when Congress wishes to require a government agency 
to bear the expense of publishing and distributing consumer 
information, it knows how to do so, and can do so unambiguously. NHTSA 
concludes from the absence in section 201(e) of the clear language 
found in section 506(b) that Congress did not intend to require that 
NHTSA be responsible for the publication, reproduction, or distribution 
of the insurance cost booklets.
    In its petition, NADA focused on the legislative history of section 
201(e), suggesting that the Conference Committee specifically rewrote 
the House version of the section to clarify its intent that NHTSA bear 
the responsibility to reproduce the insurance cost information and 
provide dealers with a sufficient number of copies.
    As explained below, NHTSA believes that NADA has not accurately 
characterized this legislative history. The House version of section 
201(e) would have required the agency to issue procedures requiring 
dealers to provide insurance premium rate information to prospective 
purchasers. The Conference Committee revised the section in two ways. 
First, it changed the nature of the information to be provided. Instead 
of premium rate information, prospective purchasers were to be provided 
information on differences in insurance costs based on differences in 
damage susceptibility and crashworthiness. Second, the Conference 
Committee made the agency responsible for developing the information to 
be distributed by the dealers. However, the Conference Committee did 
not make any change to indicate that the agency would be responsible 
for reproducing or distributing the information. In fact, that 
Committee did not mention that issue.

B. NHTSA is Authorized to Require Dealers to Furnish the Information 
Without Charge

    NADA contended that NHTSA has no authority to require automobile 
dealers to distribute the insurance cost information without charge to 
prospective purchasers. The agency disagrees.
    Section 201(e) directs the agency to ``establish procedures 
requiring automobile dealers to distribute [insurance cost information] 
to prospective purchasers.'' This mandate necessarily includes the 
authority to establish procedures that will ensure, to the extent 
possible, achieving the purposes of the section. The agency believes 
that prohibiting dealers from charging consumers for the information is 
reasonably necessary to ensure that the information is distributed as 
widely as possible. Allowing dealers to charge for the information 
would create a disincentive for consumers to request that information, 
thus undermining the purposes of section 201(e).
    It is also noteworthy that the requirement that the material be 
provided without charge was, as discussed above, included in the 
original version of part 582 as it was promulgated in 1975. It was not 
challenged at that time, and none of the commenters during the recent 
rulemaking suggested that this requirement should be modified.

C. Although NHTSA Has the Authority To Assume the Costs of Reproduction 
and Distribution, NHTSA Does Not Have the Funds To Do So

    NHTSA agrees that it has the legal authority to assume the 
responsibility for reproducing and mailing multiple copies of the 
insurance cost booklets to dealers. However, as a practical matter, the 
agency cannot do this because it lacks sufficient appropriated funds to 
publish and distribute sufficient copies of the information booklet to 
the thousands of new automobile dealers on an annual basis.
    NADA disagreed with NHTSA's statement about lack of funds by 
suggesting that Congress has over the years provided NHTSA with ``huge 
resources specifically earmarked by Congress for the production and 
reproduction of the insurance cost information document.'' NADA's 
suggestion is incorrect. Congress has not ``earmarked'' any funds for 
that specific purpose. While Congress has authorized funds for the 
general purpose of implementing Title II of the Cost Savings Act, it 
has not expressly appropriated these funds for the insurance cost 
information program. Rather, Congress has intended that these funds 
help implement the New Car Assessment Program (NCAP). See, e.g., 
``Department of Transportation and Related Agencies Appropriation Bill, 
1993,'' 102d Congress, 2d Session, S. Rep. 102-351, July 30, 1992; 
``Department of Transportation and Related Agencies Appropriation Bill, 
1992,'' 102d Congress, 1st Session, S. Rep. 102-148, September 12, 
1991. None of the funds actually appropriated by Congress were for 
reproducing or publishing the insurance cost information.
    All of the funds appropriated for NCAP are earmarked for that 
purpose. Moreover, the agency cannot shift funds at will in disregard 
of Congressional appropriations. Thus, the funds that would be 
necessary to publish and distribute the insurance cost information 
booklet are simply not available.

D. The Decision To Require Dealers To Bear the Costs of Reproducing and 
Distributing the Booklet Was Appropriate Notwithstanding Public 
Comments Urging the Agency To Bear Those Costs

    NADA suggested that NHTSA's decision to require dealers to 
reproduce sufficient copies of the insurance cost information was 
inappropriate because the commenters on the NPRM generally favored 
making the agency responsible for providing all necessary copies. The 
agency disagrees.
    In the NPRM, NHTSA proposed that automobile dealers would be 
required to make the insurance cost information available to 
prospective purchasers within 30 days of NHTSA's annual publication of 
the updated information in the Federal Register. The proposal suggested 
that vehicle manufacturers or dealer trade associations could provide 
the booklets to dealers. The agency solicited comments about 
alternative methods of distribution, including having the government 
publish booklets and send copies to dealers or having the government 
supply a sample booklet to each dealer, who would be responsible for 
making copies of the booklet.
    No commenter specifically addressed the costs of any of the 
distribution options. NADA and several other commenters requested that 
the distribution be patterned after DOE's method for publishing and 
distributing the ``Gas Mileage Guide'' to dealers.
    As explained in the preamble to the Final Rule, NHTSA concluded, 
after reviewing the public comments and other available information, 
that the most appropriate method of distribution, given the constraints 
on the agency's resources, would be to provide each dealer with a 
single copy of the booklet and have dealers reproduce the booklet so 
that it would be available to prospective purchasers. The agency 
concluded that including the information in DOE's ``Gas Mileage Guide'' 
would be unworkable, given problems with differences in presentation 
and timing, as the categories in the gas mileage guide do not 
correspond to those in the insurance guide and could lead to confusion. 
NHTSA also explained that it did not have sufficient appropriated funds 
available to publish and distribute multiple copies of the booklets to 
the thousands of new automobile dealers in the country. Including this 
information in the DOE guide would not alleviate this funding shortage. 
See 58 FR 12545, 12548.
    Notwithstanding this discussion in the preamble to the final rule, 
NADA stated that NHTSA's decision to provide each dealer with a single 
copy ``ignored'' the docket comments. In particular, NADA contended 
that ``Every comment addressing the specific issue of who should 
produce or reproduce the insurance cost document urged NHTSA to 
recognize that it was the government's responsibility.''
    The agency recognizes that the commenters who addressed this issue 
urged the government to assume the responsibility for reproduction. 
However, in reaching a final decision after seeking public comments on 
a proposed rule, an agency is neither required nor expected to tally 
the comments and fashion a rule in accordance with the majority 
position. Procedurally, an agency is required under the Administrative 
Procedure Act to carefully consider the comments on all significant 
issues and explain its reasons for accepting or rejecting those 
comments. Substantively, an agency is required to issue a rule 
consistent with the statute authorizing the rulemaking. The agency 
regards its actions in preparing and issuing the final rule as being 
consistent with these requirements.
    After reviewing NADA's petition, NHTSA continues to believe that 
requiring dealers to reproduce the insurance cost information booklets 
is consistent with section 201(e) and is appropriate and necessary, 
especially in light of the agency's limited funds. The commenters 
opposing the final rule generally did not suggest that the agency 
lacked authority to place the responsibility for reproducing the 
booklet on the dealers. Instead, they simply suggested that, as a 
matter of policy, it was preferable to place the responsibility on the 
government, either through direct distribution by NHTSA or by adding 
the insurance cost information to the DOE ``Gas Mileage Guide.'' 
However, as explained above, those options were not feasible.

E. NHTSA Considered the Interests of the Dealers

    NADA also stated that the requirement did not adequately consider 
the interests of the nation's light duty motor vehicle dealers, over 85 
percent of which are small businesses.
    NHTSA recognizes that most dealers are small businesses. However, 
the agency disagrees with the suggestion that it did not adequately 
consider the interests of the dealers. The agency notes that in the 
final rule it fully discussed the effects of the rule on small entities 
in accordance with the Regulatory Flexibility Act. NHTSA acknowledged 
that while many automobile dealers that will be affected by the 
regulation are small businesses, the regulation will not have a 
significant economic impact on dealers, either individually or 
collectively. Indeed, the economic impact on any dealer is likely to be 
minimal. The agency estimated in the final rule that a dealer's annual 
duplicating costs associated with the rule would not exceed $175.00 and 
that the actual costs would probably be much lower. Based on these 
considerations, the agency determined that no final regulatory 
flexibility analysis was required to be prepared. In view of the 
discussion below about the costs of reproducing the insurance cost 
information, NHTSA continues to believe that these conclusions are 
appropriate.

F. Requiring Dealers To Reproduce Sufficient Copies Is Reasonable 
Notwithstanding Any Difference in the Cost of Government Versus 
Individual Dealer Reproduction

    In the preamble to the final rule, the agency estimated 
photocopying costs to be approximately five cents per page or 40 cents 
for each of the eight-page booklets. That estimate was based on 
commonly available commercial copying rates. The agency further stated 
that even that low estimated cost could be significantly reduced if 
two-sided copying were used or if a central source, such as a trade 
association, printed the booklet in large volume and made it available 
to dealers.
    In its petition, NADA claimed that the cost of private reproduction 
of the booklet would be far greater than the cost of governmental 
reproduction and that therefore it was unreasonable for NHTSA to 
require dealers to reproduce the booklet. NADA disagreed with the 
agency's estimate that copying would cost five cents per page, claiming 
that it would cost between 15 cents and 25 cents per page to copy the 
information. Assuming that between 8,000,000 and 10,000,000 pages 
(i.e., 1,000,000 to 1,250,000 booklets) would need to be copied, NADA 
claimed that the rulemaking would cost its members between $1,200,000 
and $2,500,000. NADA also stated that it would be far less expensive 
for the government to reproduce and distribute the information than for 
each automobile dealer to do so.
    NHTSA has again examined the costs related to making multiple 
copies of the insurance cost information and continues to believe that 
the dealers' duplicating costs are slight. NHTSA stands by its figures 
for commonly available commercial copying costs. Indeed, the agency has 
learned of a large midwestern printer who has offered to provide 50 
copies of the booklet for $20.00 plus shipping costs, a figure directly 
in line with the agency's estimate of 40 cents per booklet.
    NADA did not suggest in its petition that the commonly available 
commercial copying costs are actually higher than the agency's figure. 
Instead, it made estimates based on dealers making copies with their 
own reproduction facilities and included in those estimates a variety 
of overhead costs. If a dealer's cost for internal reproduction were as 
high as NADA estimates, it is difficult to understand why the dealer 
would not choose instead to have the booklet reproduced commercially. 
In addition, the agency notes that NADA's petition did not address the 
possible cost savings available from two-sided copying or from having 
NADA or State automobile dealer associations publish this information 
in large quantities.
    NHTSA recognizes that the per-copy cost of printing a large number 
of copies is less than the cost of photocopying 50 or fewer copies. 
However, it should also be noted that the agency's approach minimizes 
mailing costs, which would be much higher if the government had to send 
50 copies of the booklet to each dealer, rather than one copy. In 
addition, the agency's approach minimizes waste, since dealers will 
only have to produce the number of copies they actually need. If the 
government were to send a specific number of copies (such as 50) to 
each dealer, it is likely that many copies would go to waste.

G. Prior Agency Statements Do Not Suggest That the Agency Would Bear 
the Cost of Reproducing and Distributing Copies of Insurance Cost 
Information

    NADA has also contended that language in NHTSA notices in 1975 and 
1990 indicated that the agency believed at those times that 
reproduction and distribution costs should be borne by the agency.
    The preamble to the 1975 final rule establishing Part 582 does not 
suggest that the agency believed that section 201(e) required NHTSA to 
bear those costs. NADA has cited the agency's statement in that 
preamble that it ``will prepare comparative indices for the dealers to 
distribute to prospective purchasers.'' However, this statement was 
nothing more than a reflection of the agency's duty to develop the 
substance of the text of the booklets. The statement did not address, 
directly or indirectly, the issue of who would pay for reproduction and 
distribution of the information.
    Moreover, in the notice of proposed rulemaking leading to the 1975 
final rule, NHTSA stated that section 582.4(b), which requires dealers 
to provide the insurance cost information without charge, was modeled 
after the identical provision in 49 CFR part 575, NHTSA's Consumer 
Information Regulations, which is discussed in section III.A. of this 
Notice. The agency noted that section 575.6(c) was intended to prevent 
manufacturers or dealers from undermining the consumer information 
program by charging consumers for the covered information. Had NHTSA 
intended to bear the responsibility for reproducing the insurance cost 
information, there would have been no need to incorporate language from 
Part 575 in the 1975 insurance cost information rule.
    NHTSA's 1990 denial of a Consumers Union rulemaking petition 
requesting the agency to generate and distribute consumer information 
regarding bumper performance does not indicate a contrary view. The 
agency's statement in its denial notice that implementing the Consumers 
Union request ``would require an unwarranted expenditure of the 
agency's limited resources'' was a reference to the costs of obtaining 
and analyzing the information necessary for a bumper performance 
information program, not the costs of reproducing or distributing it.

H. NHTSA-NADA Actions Regarding Reproduction and Distribution of the 
Information Booklets Eased the Burden on Dealers for the First Year of 
the Program

    After the filing of NADA's petition, NHTSA decided to take action 
in cooperation with NADA to facilitate compliance by the dealers in the 
first year of the insurance cost information program.
    In an effort to help dealers to implement this regulation in a 
smooth fashion in its first year, NHTSA and NADA agreed to provide 
dealers with five additional copies of the 1993 insurance cost 
information booklet. NHTSA reproduced these copies of the booklet, and 
NADA mailed them to all new automobile dealers (approximately 24,000), 
including dealers who are not members of that organization. While this 
program may not have provided many dealers with sufficient copies of 
the booklet to satisfy their responsibilities under the final rule, any 
dealer needing additional copies bore the responsibility for 
reproducing or otherwise obtaining them from private sources.
    With respect to 1994, NHTSA advised the House and Senate 
appropriations committees that additional funds would be needed if more 
than one copy of the booklet were to be provided to each dealer. The 
funds were not provided. The agency will therefore provide a single 
sample copy of the 1994 booklet to each automobile dealer on the 
Department of Energy's mailing list for the ``Gas Mileage Guide.'' The 
copy will enable the dealers to reproduce and distribute the booklet to 
prospective purchasers.

I. Agency Decision

    After considering NADA's petition for reconsideration and the other 
relevant information, NHTSA has decided not to amend Part 582 as 
requested by the petitioner. Accordingly, NADA's petition for 
reconsideration is denied. In view of this denial, and of the NHTSA-
NADA action to provide dealers with additional copies of the 1993 
booklet, there is no basis for a stay of the effective date of the 
final rule. Accordingly, the request for a stay is likewise denied.

    Issued on: March 17, 1994.
Barry Felrice,
Associate Administrator for Rulemaking.
[FR Doc. 94-6678 Filed 3-21-94; 8:45 am]
BILLING CODE 4910-59-P

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