Auto Insurance Practices Deny Economic Opportunities to LMI Households

The auto insurance marketplace denies important economic opportunities, especially those related to employment, to low- and moderate-income (LMI) households, according to a study released yesterday by CFA.  The study, which was undertaken by CFA Executive Director Stephen Brobeck and Director of Insurance J. Robert Hunter with support from The Ford Foundation, also provides suggestions on how state insurance regulators could ensure that mandated auto insurance coverage is fairly priced and affordable for these families so that they have greater access to car ownership and jobs.

The following are among the report’s key findings:

• For the large majority of LMI households, automobile ownership greatly increases economic opportunities, particularly access to jobs.
• These households cannot legally own a car without purchasing auto insurance, whose premiums often exceed $700 and sometimes cost thousands of dollars.
• These premiums reflect not only considerable disparate impacts but also some discriminatory treatment, such as being charged more for less liability coverage when all other factors are held constant.
• In large part because of high costs and disparate impacts, a significant minority – perhaps one-quarter to one-third – of LMI drivers do not carry auto insurance and are driving illegally.
• State-based policies and programs – especially reduced mandatory coverages, programs offering lower premiums to safe drivers, and more vigorous efforts to eliminate disparate treatment and reduce disparate impacts – have the potential to equitably reduce auto insurance costs for responsible LMI drivers.

“In some areas, many responsible lower-income drivers are required to spend more than $1000 a year for liability coverage that is often unfairly priced and provides no real insurance protection to them,” Brobeck said.  Added Hunter: “State insurance commissioners have the ability to take steps that would equitably reduce auto insurance costs for responsible lower-income drivers, thus increasing access to car ownership and employment in a difficult economic environment.”

USDA Expands Controversial Food Inspection Program

The USDA’s Food Safety and Inspection Service (FSIS) announced this month that it was developing a new voluntary poultry slaughter inspection program, based on the agency’s controversial HACCP-Based Inspection Models Project (HIMP).  Chris Waldrop, Director of CFA’s Food Policy Institute, and Carol Tucker-Foreman, Distinguished Fellow, released a statement raising concerns about this action.

Waldrop and Tucker Foreman noted that the HIMP program has not been subject to independent review since 2001, when GAO called into question the data used by FSIS to justify the program.  The administration’s move to expand the program now preempts a new GAO review, requested by Sen. Kirsten Gillibrand (D-NY), so that the public could be provided with an assessment of the program before its expansion was considered.  Moreover, the move comes at a time when testing based on new Salmonella and Campylobacter standards is just beginning.  And the voluntary expansion is being undertaken despite FSIS’s previous findings that, while some plants exceed the Salmonella standard, others do not, and that plants may temporarily change their food safety processes during FSIS verification sampling.

“Participation in this new voluntary poultry slaughter program will provide plants with certain advantages, such as increased line speeds,” Waldrop said. “Plants that are unable to meet the new performance standards for reducing pathogens should not be permitted to continue to enjoy those advantages under the program.”

Consumer Groups Support 54.5 MPG Standard

At hearings on fuel economy standards in Philadelphia and San Francisco this month, CFA and Consumers Union (CU) spoke out in support of proposed rules to increase passenger vehicle fuel economy standards to 54.5 mpg by the year 2025.  At the hearings, CFA Research Director Mark Cooper presented findings of a recent pocketbook analysis which found that savings on gasoline are greater than greater than the increase in the monthly payment to cover the cost of fuel saving technology.

“By far the single largest benefit of ‘54.5 by 2025’ is the reduction of consumer expenditures on gasoline,” Cooper said. “The consumer pocketbook savings for the typical consumer with a 5-year auto loan will be immediate and substantial.”  Added CU Policy Counsel Shannon Baker-Branstetter: “Consumers are hungry for more fuel-efficient vehicles.” She cited a new CU consumer survey which found that 93 percent of those surveyed want to see stricter fuel-economy standards and more than half (56 percent) are considering a hybrid or alternative fuel vehicle for their next vehicle purchase.

California Urged to Adopt Strong Limits on Tailpipe Emissions

New California rules to limit automobile ozone and greenhouse gas emissions moved one step closer to passage last week, when state clear air officials voted unanimously to adopt the Advanced Clean Cars Program. In testimony earlier this month before the California Air Resources Board, CFA Director of Public Affairs Jack Gillis urged the board to continue the state’s leadership in the area of reducing automobile greenhouse gas emissions by approving a strong set of rules.  “In practice, tailpipe emissions standards encourage the development of cars that go farther on a gallon of gas, and of alternatively-fueled vehicles. The result is cleaner, more efficient cars that help reduce America’s vulnerability to oil and gasoline price shocks,” he said.  Strong standards will “protect consumer pocketbooks and choice in future showrooms and reduce our dependence on oil,” he added.  The rules still must be approved by the California Office of Administrative Law and the Environmental Protection Agency.

Consumers Encouraged To Seek Cheaper Alternatives to Refund Anticipation Loans

As the tax season gets underway in what is expected to be the last year in which costly refund anticipation loans are available from banks on a large-scale, nationwide basis, CFA and National Consumer Law Center (NCLC) encouraged taxpayers looking for quick refund cash to consider lower-cost or free alternatives.  For example, taxpayers with a bank account can use e-filing and direct deposit to get their refunds within 8 to 15 days at no additional cost.  Taxpayers without a bank account can get the same benefit by using e-filing and direct deposit to a prepaid card, which can include any existing payroll or prepaid card that the taxpayer already has.

Unfortunately, with the end of RALs by banks in sight, a few high cost fringe lenders, including payday lenders, have stepped into the fray.  “Consumers have even more reason to avoid RALs made by payday lenders,” said CFA Director of Financial Services Jean Ann Fox. “These RALs are likely to be more expensive and riskier.”  On the other hand, they are less likely to be as widespread as bank RALs, she said, since nonbank lenders do not have the same ability banks have had to flout state usury laws.

CFA and NCLC expect to release their annual comprehensive report on the RAL industry, regulation, and litigation in February.