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Jeffrey Brewer
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Phone:
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847-553-3763
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Jeffrey.brewer@pciaa.net
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CFA’s Prescription for the Nation’s Auto Insurance Markets
would Hurt Consumers; Competition Best Serves Policyholders
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CHICAGO – The following statement regarding a
Consumer Federation of America study outlining steps state insurance
commissioners could take to increase affordability of mandated auto coverage
can be attributed to Paul Blume, senior vice president of state government
relations for the Property Casualty Insurers Association of America
(PCI).
“The Consumer Federation of America’s (CFA) misguided
public policy prescription to increase affordability of auto insurance would be
counterproductive and hurt the low- and moderate-income motorists they claim to
represent. Their approach would result in higher costs and fewer choices for
all consumers.
“While we agree that low minimum liability coverage
requirements would produce lower costs for some consumers, the CFA’s other
recommendations would make insurance more expensive. The CFA has the flawed
impression that overregulation will keep insurance rates down. Ultimately,
overly restrictive laws and regulations have been shown time and again to
reduce consumer choice and inhibit market innovations. This approach has
adverse consequences which mean higher prices and fewer choices for consumers.
“The CFA’s opposition to several common insurance
underwriting practices such as credit-based insurance scoring is counter to the
empirical data that show these factors are strong predictors of risk. An
insurance score only measures risk-relevant variables (i.e., payment history,
public records, etc.) that are indicators of potential future risk. Living
within one’s means and paying bills on time are not traits that are restricted
to any particular income bracket: they are universal qualities that exist
regardless of income.
“Credit-based insurance scoring increases the
availability and affordability of insurance. An annual survey issued by the
Arkansas Insurance Department year after year shows that about 90 percent of
consumers in that state either see a discount in the price of their insurance
or are unaffected because of credit. Because the use of credit information
benefits so many consumers, almost all states allow insurers to use it subject
to reasonable restrictions.
“Creating an environment of robust competition is the
best step that state insurance commissioners can take to address the
availability and affordability of insurance. Competitive marketplaces result in
the lower costs and provide all consumers with a broader array of products and
services. Competition forces insurers to eliminate inefficiencies and
stimulates companies' efforts to attract and retain customers, offering
innovative products that provide greater value to consumers. However,
unnecessary, burdensome and counterproductive overregulation just adds to the
cost of insurance.”
PCI is composed of
more than 1,000 member companies, representing the broadest cross-section of
insurers of any national trade association. PCI members write over $180
billion in annual premium, 38.3 percent of the nation’s property casualty
insurance. Member companies write 44.3 percent of the U.S. automobile
insurance market, 31.6 percent of the homeowners market, 36.3 percent of the
commercial property and liability market, and 42.6 percent of the private
workers compensation market.
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