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PIA Comments on New FIO Auto Insurance Affordability Index

WASHINGTON — The National Association of Professional Insurance Agents maintains that the new auto insurance affordability index developed and adopted by the Federal Insurance Office to measure affordability for “Affected Persons” (defined as traditionally underserved communities and consumers, minorities, and low- and moderate-income persons) may not produce meaningful results...
July 18, 2016

WASHINGTON — The National Association of Professional Insurance Agents (PIA National) maintains that the new auto insurance affordability index developed and adopted by the Federal Insurance Office (FIO) to measure affordability for “Affected Persons” (defined as traditionally underserved communities and consumers, minorities, and low- and moderate-income persons) may not produce meaningful results.

The FIO announced on July 13, 2016, that if the average auto insurance liability premium paid by Affected Persons is more than 2 percent of the median income in those neighborhoods, the auto insurance will be considered unaffordable.

“We appreciate the engaged process that FIO extended to the industry and the subsequent follow-ups for additional information and asking additional questions,” said PIA National Senior Vice President for Industry Affairs Patricia A. Borowski, noting that in addition to filing detailed comments, PIA met with FIO staff in 2015 to address their questions and convey the views of agents. “We further appreciate the FIO’s efforts to balance the many comments, and make a number of changes that have improved the outcome, as compared to the original proposal.”

“However, we still do not see if or how FIO will account for several other critical factors, such as the differences—most of them significant—that exist among all drivers as to their individual or collective household driving records,” Borowski said. “Assessing auto insurance affordability is much more complex than determining the affordability of housing costs under HUD methods.”

PIA remains concerned that defining affordability by a fixed percentage of income using a defined set of factors may not maximize the value of its results.

The FIO’s approach does not give enough weight to a number of variables, including non-insurance related factors that impact insurance prices or account for regional variations.

FIO Treasury Notice 7/13/16

 

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America SM. PIA’s web address is www.pianet.com.

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