Insurance Cost Information Regulation |
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Topics: National Highway Traffic Safety Administration
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Barry Felrice
Federal Register
September 13, 1994
[Federal Register: September 13, 1994]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 582
[Docket No. 94-73; Notice 1]
RIN 2127-AF44
Insurance Cost Information Regulation
AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In this document, NHTSA proposes technical amendments to the
insurance cost information regulations. Among the proposed changes are
revising the term ``passenger motor vehicles'' to read ``passenger
cars, utility vehicles, light duty trucks, and vans,'' and revising
from January to March, the availability date of the insurance
information. NHTSA also proposes making more explicit the limitations
of the collision loss data, and proposes recommending that prospective
purchasers contact insurance agents for more information. The technical
amendments are proposed to make the insurance cost information more
accurate.
DATES: Comments on this notice of proposed rulemaking must be received
by this agency not later than November 14, 1994.
ADDRESSES: Comments should refer to the docket number referenced in the
heading of this notice, and be submitted to: Docket Section, NHTSA,
Room 5109, 400 Seventh Street, S.W., Washington, D.C. 20590. (Docket
hours are 9:30 am to 4:00 pm, Monday through Friday.)
FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market
Incentives, NHTSA, 400 Seventh Street, S.W., Washington, D.C. 20590.
Mr. Kee's telephone number is (202) 366-4936.
SUPPLEMENTARY INFORMATION:
Background
Insurance Cost Information Regulation
49 U.S.C. 32302(c) states that the Secretary of Transportation (the
Secretary) shall prescribe regulations that require passenger motor
vehicle 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. By delegation from the Secretary,
NHTSA has been authorized to carry out the statute.
On January 31, 1975, NHTSA published 49 CFR part 582, Insurance
Cost Information Regulation (40 FR 4918). Part 582, as then
promulgated, required that automobile dealers ``make available to
prospective purchasers information reflecting differences in insurance
costs for different makes and models of passenger motor vehicles based
upon differences in damage susceptibility and crashworthiness.'' Part
582, however, did not specify information that dealers must provide.
On March 5, 1993 (58 FR 12545), NHTSA published a final rule
amending part 582. The rule complemented the 1975 rulemaking, and
completed implementation of section 32302(c). The March 1993 final
rule, which became effective April 5, 1993, requires dealers of new
automobiles to make collision loss experience data available in
booklets to prospective purchasers. The information to be provided in
the booklet is specified in section 582.5, which requires inclusion of
a complete explanatory text and updated data on auto insurance costs
published annually by NHTSA.
The mandatory text specified by part 582 relates to, among other
topics, the limitations of the auto insurance cost data as a predictor
of differences in insurance premiums. Essentially, those limitations
result from the fact that most of the factors that insurance companies
use to establish premiums relate to driver characteristics and, except
for the vehicle's value, are not directly related to the vehicle
itself. Thus, as the text explains, the fact that a vehicle's
historical claims experience is somewhat better or worse than that of
other vehicles in its class may not be reflected in the premium that an
insurance company establishes for that vehicle. If the claims
experience is reflected, it is likely to have only a small impact on
the premium.
The mandatory text also urges consumers to contact insurance
companies if they wish to obtain precise information about actual
premiums for particular makes and models of vehicles. Previous studies
by NHTSA have revealed that the difference between the premiums charged
by different insurance companies for the same car and driver is greater
than the difference between the premiums charged by a given company for
comparably-valued cars that have different claims experience. NHTSA
believed the mandatory text would help to minimize consumer confusion
by providing customers with an understanding of the uses and
limitations of the auto insurance cost data.
In specifying the yearly insurance cost data that accompanied the
required text, NHTSA decided to rely on collision loss experience data
collected and reported by the Highway Loss Data Institute (HLDI), as
the best available indicator of the effect of damage susceptibility on
insurance costs.
In the March 1993 final rule, NHTSA specified HLDI's December
Insurance Collision Report as the data source for part 582. NHTSA
decided to specify HLDI's December Report because it contains more
current data and covers more vehicle models than other HLDI
publications. The HLDI data is presented in a format that ranks the
vehicles in each class from best to worst (with numerical values given
for each vehicle). NHTSA specified this format because it determined
the use of this ranking system should assist customers in evaluating
the comparative performance of comparable vehicles.
In the March 1993 final rule, NHTSA stated its belief that the HLDI
information should be available as soon as possible after its
publication date. Therefore, NHTSA stated its intent to publish the
annual Federal Register document updating HLDI's December Insurance
Collision Report data no later than January of the calendar year that
follows HLDI's publication of the data.
Proposed Amendments
In this notice of proposed rulemaking, NHTSA proposes to amend part
582 by making certain changes in section 582.5, that specifies the text
of the insurance cost information booklet. At present, the text
specifies the date ``January [Year to be Inserted].'' In this NPRM,
NHTSA proposes to revise ``January'' to ``March.'' The change to a
later month will allow NHTSA adequate time to publish the comparative
insurance cost information booklet. HLDI sends the December Insurance
Collision Report data to NHTSA in mid-January. The data is then
formatted for printing and distributed to automobile dealers by mail.
NHTSA can thus expect that the booklet will be published by March of
each year.
Part 582 presently specifies a comparison of insurance costs for
``passenger motor vehicles.'' In this NPRM, NHTSA proposes to revise
``passenger motor vehicles,'' at appropriate places in Sec. 582.5, to
read ``passenger cars, utility vehicles, light duty trucks and vans.''
The proposed revisions would make clear that ``passenger motor
vehicles'' includes many vehicle types besides ``passenger car.''
In this NPRM, NHTSA also proposes to make certain changes to the
required text that would make more explicit the limitations of the
collision loss data. At present, the text in Sec. 582.5 explaining the
data's limitations states that the collision loss data table does not
include information about new models, models that have been
substantially redesigned, and models without enough claim experience.
In order to make clear that certain data should not be relied upon,
NHTSA proposes to revise the third paragraph in Sec. 582.5 to state:
The table is not relevant for new models or models that have
been substantially redesigned for [YEAR TO BE INSERTED], and it does
not include information about models without enough claim
experience.
At present, the fourth paragraph in Sec. 582.5 states that it is
unlikely that a consumer's total premium will vary more than five
percent depending upon the collision loss experience of a particular
vehicle. Upon further review, NHTSA believes it would be more accurate
to state that it is unlikely that a consumer's total premium will vary
more than ten percent. This notice proposes that change.
The reason for the change to ten percent is that the Insurance
Services Organization (ISO) recommends insurance premium rates to its
members. An ISO representative indicated to NHTSA that the collision
cost data could result in an insurance premium reduction of ten percent
rather than the five percent mentioned in the booklet ``Comparison of
Differences in Insurance Costs for Passenger Motor Vehicles on the
Basis of Damage Susceptibility,'' made available to motor vehicle
purchasers.
Finally, at present, Sec. 582.5 states that to determine the actual
premium that a consumer will be charged for insuring a particular
vehicle or for complete information about insurance premiums, the
consumer should contact insurance companies directly. In this proposed
rule, NHTSA proposes that Sec. 582.5 be revised to advise the consumer
to contact insurance company agents directly. Amending the text to
advise the consumer to contact the insurance company agents directly,
reflects the fact that the consumer's first point of contact with
insurance companies is the insurance company agent.
Regulatory Impacts
1. Executive Order 12866 and DOT Regulatory Policies and Procedures
This notice has not been reviewed under Executive Order 12866.
NHTSA has considered the impact of this rulemaking action and has
determined the action not to be ``significant'' under the Department of
Transportation's regulatory policies and procedures. The agency has
determined that the economic effects of the proposed amendments are
minimal, so that a full regulatory evaluation is not required. This
NPRM proposes minor amendments to the insurance cost information
regulation, so that the information to be provided to potential motor
vehicle purchasers is more accurate. Assuming these proposals are
adopted, any extra text that must be included in the information
booklet would be minuscule.
2. Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, NHTSA has
evaluated the effects of this notice of proposed rulemaking on small
entities. NHTSA estimates there are about 24,000 dealers of new
passenger motor vehicles. Many of the dealers would be considered small
entities, that may be affected by this proposed rule. However, NHTSA
believes that this proposed rule would not have a significant economic
impact on a substantial number of these small dealers. The rationale is
that this rulemaking proposes minor editorial changes, resulting in a
small amount of extra text in the insurance cost information booklet.
The potential cost increments associated with this proposed rule should
have negligible effects on the purchase price of new passenger motor
vehicles. For these reasons, I certify that the proposed rule will not
have a significant economic impact on a substantial number of small
entities.
3. National Environmental Policy Act
In accordance with the National Environmental Policy Act of 1969,
the agency has considered the environmental impacts of this proposed
rule and determined that if made final, it will not have a significant
impact on the quality of the human environment.
4. Federalism
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12623, and it has been determined
that the rule does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
5. Civil Justice Reform
This proposed rule would not have any retroactive effect, and it
does not preempt any State law. Chapter 323--Consumer Information of 49
U.S.C. does not provide for judicial review of rules issued pursuant to
49 U.S.C. 32302. The Administrative Procedure Act, 5 U.S.C. 701 et
seq., provides generally for judicial review of final agency action,
which in certain circumstances may include this proposed rule. The
Administrative Procedure Act does not require submission of a petition
for reconsideration or other administrative proceedings before parties
may file suit in court.
Procedures for Filing Comments
NHTSA solicits public comments on the issues presented in this
notice. It is requested, but not required, that 10 copies be submitted.
All comments must not exceed 15 pages in length. (49 CFR 553.21.)
Necessary attachments may be appended to these submissions without
regard to the 15 page limit. This limitation is intended to encourage
commenters to detail their primary arguments in a concise fashion.
If a commenter wishes to submit certain information under a claim
of confidentiality, three copies of the complete submission, including
purportedly confidential business information, should be submitted to
the Chief Counsel, NHTSA, at the street address given above, and seven
copies from which the purportedly confidential information has been
deleted should be submitted to the Docket Section. A request for
confidentiality should be accompanied by a cover letter setting forth
the information specified in the agency's confidential business
information regulation. 49 CFR part 512.
All comments received before the close of business on the comment
closing date indicated above for this notice will be considered, and
will be available for examination in the docket at the above address
both before and after that date. To the extent possible, comments filed
after the closing date will also be considered. Comments received too
late for consideration in regard to the final rule will be considered
as suggestions for further rulemaking action. Comments on this notice
will be available for inspection in the docket. NHTSA will continue to
file relevant information as it becomes available for inspection in the
docket after the closing date, and it is recommended that interested
persons continue to examine the docket for new material.
Those persons desiring to be notified upon receipt of their
comments in the rules docket should enclose a self-addressed, stamped
postcard in the envelope with their comments. Upon receiving the
comments, the docket supervisor will return the postcard by mail.
List of Subjects in 49 CFR Part 582
Administrative practice and procedure, Insurance, Motor Vehicles.
In consideration of the foregoing, NHTSA proposes to amend 49 CFR
part 582 as follows:
PART 582--[AMENDED]
1. The authority citation for part 582 would be revised to read as
follows:
Authority: 49 U.S.C. 32302, 32303; delegation of authority at 49
CFR 1.51.
2. Section 582.5 would be revised to read as follows:
Sec. 582.5 Information form.
The information made available pursuant to Sec. 582.4 shall be
presented in writing in the English language and in not less than 10-
point type. It shall be presented in the format set forth below, and
shall include the complete explanatory text and the updated data
published annually by NHTSA.
MARCH [YEAR TO BE INSERTED]
COMPARISON OF DIFFERENCES IN INSURANCE COSTS FOR PASSENGER CARS,
UTILITY VEHICLES, LIGHT DUTY TRUCKS, AND VANS ON THE BASIS OF DAMAGE
SUSCEPTIBILITY
The National Highway Traffic Safety Administration (NHTSA) has
provided the information in this booklet in compliance with Federal law
as an aid to consumers considering the purchase of a new vehicle. The
booklet compares differences in insurance costs for different makes and
models of passenger cars, utility vehicles, light trucks and vans on
the basis of damage susceptibility. However, it does not indicate a
vehicle's relative safety.
The following table contains the best available information
regarding the effect of damage susceptibility on insurance premiums. It
was taken from data compiled by the Highway Loss Data Institute (HLDI)
in its December [YEAR TO BE INSERTED] Insurance Collision Report, and
reflects the collision loss experience of passenger cars, utility
vehicles, light trucks, and vans sold in the United States in terms of
the average loss payment per insured vehicle year for [THREE
APPROPRIATE YEARS TO BE INSERTED]. NHTSA has not verified the data in
this table.
The table represents vehicles' collision loss experience in
relative terms, with 100 representing the average for all passenger
vehicles. Thus, a rating of 122 reflects a collision loss experience
that is 22 percent higher (worse) than average, while a rating of 96
reflects a collision loss experience that is 4 percent lower (better)
than average. The table is not relevant for new models or models that
have been substantially redesigned for [YEAR TO BE INSERTED], and it
does not include information about models without enough claim
experience.
Although many insurance companies use the HLDI information to
adjust the ``base rate'' for the collision portion of their insurance
premiums, the amount of any such adjustment is usually small. It is
unlikely that your total premium will vary more than ten percent
depending upon the collision loss experience of a particular vehicle.
If you do not purchase collision coverage or your insurance company
does not use the HLDI information, your premium will not vary at all in
relation to these rankings.
In addition, different insurance companies often charge different
premiums for the same driver and vehicle. Therefore, you should contact
insurance company agents directly to determine the actual premium that
you will be charged for insuring a particular vehicle.
Please Note: In setting insurance premiums, insurance companies
mainly rely on factors that are not directly related to the vehicle
itself (except for its value). Rather, they mainly consider driver
characteristics (such as age, gender, marital status, and driving
record), the geographic area in which the vehicle is driven, how
many miles are traveled, and how the vehicle is used. Therefore, to
obtain complete information about insurance premiums, you should
contact insurance company agents directly.
Insurance companies do not generally adjust their premiums on the
basis of data reflecting the crashworthiness of different vehicles.
However, some companies adjust their premiums for personal injury
protection and medical payments coverage if the insured vehicle has
features that are likely to improve its crashworthiness, such as air
bags and automatic seat belts.
Test data relating to vehicle crashworthiness are available from
NHTSA's New Car Assessment Program (NCAP). NCAP test results
demonstrate relative frontal crash protection in new vehicles.
Information on vehicles that NHTSA has tested in the NCAP program can
be obtained by calling the agency's toll-free Auto Safety Hotline at
(800) 424-9393.
[INSERT TABLE TO BE PUBLISHED EACH MARCH BY THE NATIONAL HIGHWAY
TRAFFIC SAFETY ADMINISTRATION]
If you would like more details about the information in this table,
or wish to obtain the complete Insurance Collision Report, please
contact HLDI directly, at: Highway Loss Data Institute, 1005 North
Glebe Road, Arlington, VA 22201, Tel: (703) 247-1600.
Issued on September 6, 1994.
Barry Felrice,
Associate Administrator for Rulemaking.
[FR Doc. 94-22545 Filed 9-12-94; 8:45 am]
BILLING CODE 4910-59-P