A Missed Opportunity

In July 2016, the agency published a notice in the Federal Register describing the method by which it would determine whether auto liability insurance coverage is affordable for minority and low- and moderate-income (LMI) consumers. In the notice, the FIO explained that "personal auto liability insurance is presumed to be affordable if using an affordability index that is calculated by dividing the average annual written personal automobile liability premium in the voluntary market by the median household income for ZIP codes identified as being majority-minority or majority-LMI, the affordability index does not exceed 2%." The FIO asserted, without elaborating, that "this approach [...] reflect[s] the intent of the [DoddFrank] statute to monitor 'traditionally underserved communities and consumers.'" Anyone who is familiar with the U.S. automobile insurance market would find it hard to believe that more than onethird of American consumers are "traditionally underserved" by auto insurance carriers. [...]since the FIO's objective was to monitor the affordability of automobile liability insurance specifically for minority and LMI consumers, the agency's ZIP-code-level approach was certain to be both under-inclusive and overinclusive. [...]the report makes no attempt to calculate the extent to which these and other insurance cost-drivers, such as escalating vehicle repair costs, attorney involvement in the claim process, and the growing problem of distracted driving, to name a few, affect auto insurance pricing. With new leadership at the FIO, the office may yet find a way to constructively engage with state legislators, regulators, and insurers to address the challenges facing the U.S...