Monitoring Availability and Affordability of Auto Insurance; Assessing Potential Evolution of the Auto Insurance Market |
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Steven Seitz
Department of the Treasury
27 May 2021
[Federal Register Volume 86, Number 101 (Thursday, May 27, 2021)]
[Notices]
[Pages 28681-28683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11167]
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DEPARTMENT OF THE TREASURY
Monitoring Availability and Affordability of Auto Insurance;
Assessing Potential Evolution of the Auto Insurance Market
AGENCY: Federal Insurance Office, Departmental Offices, Department of
the Treasury.
ACTION: Request for information.
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SUMMARY: The Federal Insurance Office (FIO) of the U.S. Department of
the Treasury (Treasury) is issuing this Request for Information (RFI)
to solicit input regarding FIO's future work relating to monitoring the
availability and affordability of automobile (auto) insurance. Building
upon its prior work, FIO will undertake a holistic analysis of the
domestic personal auto insurance business, focusing on: (1)
Affordability of coverage and disparities in premium pricing, with
particular attention to traditionally-underserved communities and the
impact of non-driving factors; and (2) market evolution and structural
shifts in the conduct of the business, including the effects of
technology and the use of big data, as well as changes related to the
COVID-19 pandemic. Additionally, FIO seeks feedback on updating its
prior work on auto insurance, including its January 2017 Study on the
Affordability of Personal Automobile Insurance (2017 FIO Affordability
Study).
DATES: Submit written comments on or before July 26, 2021.
ADDRESSES: Submit comments electronically through the Federal
eRulemaking Portal at http://www.regulations.gov, in accordance with
the instructions on that site, or by mail to the Federal Insurance
Office, Attn: Alex Hart, Room 1410 MT, Department of the Treasury, 1500
Pennsylvania Avenue NW, Washington, DC 20220. Because postal mail may
be subject to processing delays, it is recommended that comments be
submitted electronically. If submitting comments by mail, please submit
an original version with two copies. Comments should be captioned ``FIO
Auto Insurance Study.'' In general, Treasury will post all comments to
www.regulations.gov without change, including any business or personal
information provided such as names, addresses, email addresses, or
telephone numbers. All comments, including attachments and other
supporting materials, are part of the public record and subject to
public disclosure. You should submit only information that you wish to
make available publicly.
FOR FURTHER INFORMATION CONTACT: From the Federal Insurance Office:
Alex Hart, Senior Insurance Regulatory Policy Analyst, 202-213-6850,
Alex.Hart@Treasury.gov; Daniel McKnight, Policy Advisor, 202-631-1979,
Daniel.Mcknight@treasury.gov, or Andrew Shaw, Senior Policy Advisor,
(202) 304-4532, Andrew.Shaw2@Treasury.gov. Persons who have difficulty
hearing or speaking may access these numbers via TTY by calling the
toll-free Federal Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
The Personal Auto Insurance Market
The U.S. personal auto insurance sector is a significant part of
the U.S. economy, both in terms of its aggregate size and its impact on
individual consumers and their economic well-being. In 2020, this line
of business accounted for approximately $247 billion of direct premiums
written, or
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about 35% of the domestic property & casualty (P&C) insurance sector's
total premiums of $711 billion. Auto ownership is associated with
greater opportunity for economic well-being, such as better access to
employment opportunities.\1\ All U.S. states except for New Hampshire
require a driver or owner of a motor vehicle to have auto liability
insurance or financial security, which may be satisfied by auto
liability insurance, when registering or while operating a motor
vehicle. However, in 2019 nearly 13% of drivers in the United States
were uninsured.\2\
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\1\ FIO's previous work on auto insurance affordability
discusses these issues in greater depth. See Federal Insurance
Office, U.S. Department of the Treasury, Study on the Affordability
of Automobile Insurance (2017), https://home.treasury.gov/system/files/311/FINAL%20Auto%20Affordability%20Study_web.pdf.
\2\ Insurance Research Council, ``One in Eight Drivers
Uninsured,'' news release, March 21, 2021, https://www.insurance-research.org/sites/default/files/downloads/UM%20NR%20032221.pdf.
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The domestic personal auto insurance business has been evolving
throughout the 21st century. New consumer preferences and recent
technological innovations--including the increased use of big data and
artificial intelligence--have led to changes in nearly all aspects of
the business, including availability of products, pricing,
underwriting, distribution, claims adjudication and processing, and
risk management. Additionally, developments in the sharing economy
(such as ride-sharing and delivery services) and automation are likely
to further reshape the business in the future. The COVID-19 pandemic
accelerated some of these changes, such as an increased consumer
preference for usage-based insurance and telematics, which could
permanently alter the sector.
FIO's Previous Work on Auto Insurance
Title V of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 established FIO within Treasury and authorizes
FIO to, among other things, monitor the extent to which traditionally
underserved communities and consumers, minorities, and low- and
moderate-income (LMI) persons have access to affordable insurance
products regarding all lines of insurance other than health
insurance.\3\
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\3\ FIO Act, 31 U.S.C. 313(a), (c)(1)(B). Title V also
designates the Secretary as advisor to the President on ``major
domestic and international prudential policy issues in connection
with all lines of insurance except health insurance.'' Id. at sec.
321(a)(9).
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In 2014 and 2015, FIO issued two public notices soliciting comments
relating to monitoring the affordability of personal auto insurance for
traditionally underserved communities and consumers, minorities, and
LMI persons (collectively, ``Affected Persons'').\4\ FIO then issued a
notice in 2016 detailing a proposed methodology for examining the
affordability of personal auto insurance (2016 FIO Notice).\5\ The 2016
FIO Notice also indicated that FIO would use available data from the
Census Bureau, statistical agents, and certain states for an initial
affordability study, the 2017 FIO Affordability Study.\6\ In addition,
FIO indicated that for a subsequent study in 2017 following the 2017
FIO Affordability Study, FIO would request large auto insurers (i.e.,
those having a statutory surplus greater than $500 million and annually
collecting more than $500 million of premium for personal auto
insurance) to voluntarily provide to the statistical agents with which
the insurers typically work the following information: (i) ZIP Code-
level premium data; (ii) for liability coverage at the financial
responsibility limit; and (iii) for the voluntary market.\7\ Although
FIO did not proceed with this voluntary data call to large auto
insurers, it has continued to monitor auto insurance market
developments, as noted in its recent Annual Reports.\8\ Additionally,
FIO's Federal Advisory Committee on Insurance (FACI) has considered
issues related to personal auto insurance.\9\
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\4\ 79 FR 19969 (Apr. 10, 2014), 80 FR 38277 (Jul. 2, 2015).
\5\ 81 FR 45372 (July 13, 2016).
\6\ 81 FR at 45381.
\7\ 81 FR at 45381.
\8\ See, e.g., Federal Insurance Office, U.S. Department of the
Treasury, Annual Report on the Insurance Industry (2020), 26-27, 31-
32, 35, https://home.treasury.gov/system/files/311/2020-FIO-Annual-Report.pdf.
\9\ See, e.g., Federal Advisory Committee on Insurance, Minutes
of the Federal Advisory Committee on Insurance (September 29, 2020),
https://home.treasury.gov/system/files/311/FACI-Minutes-9-20.pdf.
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The 2017 FIO Affordability Study sought to provide quantifiable
information on auto insurance affordability for Affected Persons. The
data examined by FIO for the 2017 FIO Affordability Study did not
include all U.S. auto insurance policies. Instead, it was based on ZIP
Code-level premium data that was voluntarily provided by several U.S.
states and a statistical agent.\10\ The 2017 FIO Affordability Study
calculated and reported data based on an Affordability Index, which is
the ratio of the average annual written personal auto liability premium
in the voluntary market to the median household income (based on U.S.
Census Bureau data) for U.S. Postal Service ZIP Codes in which Affected
Persons were 50% or more of the population. The 2017 FIO Affordability
Study indicated that approximately 18.6 million Americans live where
auto insurance costs more than 2% of median household income.
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\10\ With some state-specific exceptions, P&C insurers generally
are required by state law to send premium, claims, and loss data to
statistical agents, who then compile the data for state insurance
departments. The states, in turn, use the reported information to
ensure that insurance rates meet statutory standards and to monitor
the insurance market.
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Recent Attention on Auto Insurance
In 2020, the House Appropriations Committee recommended that FIO
``examine the impact of non-driving related factors, such as a
consumer's credit history, homeownership status, census tract, marital
status, professional occupation, and educational attainment, on the
affordability of auto insurance premiums for traditionally underserved
communities.'' \11\ President Biden also noted differences in personal
auto insurance pricing in a televised Town Hall meeting on February 16,
2021.\12\
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\11\ U.S. House of Representatives Committee on Appropriations,
Report together with Minority Views to Accompany H.R. 7668 (116th
Congress, 2nd Session), https://www.congress.gov/116/crpt/hrpt456/CRPT-116hrpt456.pdf.
\12\ President Joseph R. Biden, Jr., ``Remarks by President
Biden in a CNN Town Hall with Anderson Cooper,'' (remarks, CNN Town
Hall, Milwaukee, WI, February 16, 2021), https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/17/remarks-by-president-biden-in-a-cnn-town-hall-with-anderson-cooper/.
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FIO's Upcoming Analysis of Auto Insurance
Building upon its past work, FIO is issuing this RFI as part of a
holistic analysis of the domestic personal auto insurance business,
focusing on the following key themes:
(1) Affordability of coverage and premium pricing disparities--with
particular attention to traditionally underserved communities and
considering the impact of non-driving factors--including an analysis of
available data and an update of FIO's past work on auto insurance, and
(2) market evolution and structural shifts in the conduct of
business, including the effects of technology and the use of big data,
as well as changes related to the COVID-19 pandemic.
II. Request for Comments
FIO invites comments on the following questions:
Data Analysis
1. Please provide your views on FIO updating its 2017 FIO
Affordability Study. How could the 2017 FIO
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Affordability Study methodology and reporting be improved? What time
period should be covered in an updated study? Should FIO update the
study on a periodic basis, and if so, how frequently?
2. What data should FIO use to update the 2017 FIO Affordability
Study? For example, should FIO proceed with the proposed data
collection outlined in the 2016 FIO Notice (i.e., a request for
voluntary production of ZIP Code-level premium data limited to large
insurers that have a statutory surplus greater than $500 million and
that annually collect more than $500 million of premium for personal
auto insurance)? Why or why not? What alternate criteria, if any, would
you propose if FIO administers a data collection?
3. Some recent auto insurance affordability analyses have leveraged
rating databases to study how quoted policy pricing varies based on
demographic and geographic inputs. Should FIO consider an analysis of
affordability using premium quotations? Why or why not? If yes, what
data sources are available?
4. Are there other quantitative approaches that FIO could take to
effectively study auto insurance affordability? If yes, what are the
approaches and their corresponding, available data sources?
Non-Driving Related Factors in Personal Auto Insurance Underwriting and
Pricing
5. What should be the role of non-driving related factors (such as
a consumer credit history, homeownership status, census tract, marital
status, professional occupation, and educational attainment) in
personal auto insurance underwriting and pricing?
6. How should FIO assess the use of such non-driving related
factors? What principles should be used to distinguish between
appropriate and inappropriate use of non-driving related factors in
personal auto insurance underwriting and pricing? What metrics could
FIO use to assess the impact of non-driving related factors on the
affordability and accessibility of auto insurance? What data sources
are available to help assess these factors?
Structural Market Changes in Personal Auto Insurance
7. What drivers of change (e.g., specific technology advances,
consumer preferences, the entrance of auto manufacturers in
underwriting and issuing insurance policies, etc.) are currently
having, or likely to have, significant effects on the structure of the
personal auto insurance business? Please describe these likely impacts
and why they are occurring.
8. What responses to the COVID-19 pandemic--whether by consumers,
the insurance industry, or insurance regulators--have the greatest
likelihood of leading to long-term structural change in auto insurance?
How can FIO evaluate the potential long-term or permanent effects of
the pandemic on the personal auto insurance business?
9. What are the biggest challenges and opportunities for the
personal auto insurance business resulting from current and anticipated
structural changes? How are ongoing structural changes affecting
underwriting and pricing practices?
10. Please describe how big data is being used in the personal auto
insurance business. What are the benefits and risks to both consumers
and insurers in the use of big data, particularly as it relates to auto
insurance underwriting and pricing?
11. Please provide your views on how FIO can quantify structural
changes to the personal auto insurance market and their potential
effects.
General
12. Please provide any additional comments or information on other
issues or topics that may be relevant to FIO's work on personal auto
insurance, the 2017 FIO Affordability Study, or other related matters.
Steven Seitz,
Director, Federal Insurance Office.
[FR Doc. 2021-11167 Filed 5-26-21; 8:45 am]
BILLING CODE 4810-AK-P