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  • Staff Contact: Jeffrey Brewer     
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Jeffrey Brewer











January 30, 2012



CFA’s Prescription for the Nation’s Auto Insurance Markets would Hurt Consumers; Competition Best Serves Policyholders


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.