“Being uninsured poses a potential threat not only to individual homeowners but also to communities and our national housing stock,” CFA explains in EXPOSED: A Report on 1.6 Trillion Dollars of Uninsured American Homes. “Being uninsured can foster deeper economic precarity for millions of homeowners across the country, especially those with lower incomes, and it is an important contributor to racial inequality. Inequalities in who has homeowners insurance will likely widen the long-standing racial wealth gap, as uninsurance disproportionately impacts Hispanic, Black, and Native American homeowners. Over time, insurance access is likely to become a key decider of who can fully reap the benefits of homeownership, including maintaining their home and building wealth.”

Using data from the American Housing Survey and American Community Survey, CFA found:

• One in thirteen American homeowners are uninsured—approximately 7.4% – living in about 6.1 million homes.
• Homeowners earning under $50,000 per year are twice as likely to lack insurance compared to homeowners in general. Among lower-income homeowners, 15% are without coverage.
• Certain demographics of homeowners are disproportionately at risk. 22% of Native American homeowners, 14% of Hispanic homeowners, and 11% of Black homeowners have no insurance.
• 35% of owners of manufactured homes and 29% of homeowners who inherited their homes lack coverage.
• Rural homeowners, those living in the metropolitan areas of Houston and Miami, and in Mississippi, New Mexico, and Louisiana are most likely to not have homeowners insurance.
• In 2021, an estimated $1.6 trillion in property value of homes lacked coverage. This includes $339 billion of uninsured Hispanic-owned homes and $206 billion of uninsured Black-owned homes.

“Many consumers are struggling to afford rising premiums and must go without homeowners insurance,” said Sharon Cornelissen, PhD, CFA’s Director of Housing and co-author of the report. “That puts them at risk of losing everything. One storm or wildfire means they have to go into deep financial debt to repair their home, live with unsafe and inadequate housing, or even become homeless.”

The report concludes with the following recommendations:

• State insurance regulators should collect more data to track homeowners insurance gaps and inequalities in insurance markets. Despite decades of proposals, regulators have consistently failed to collect granular and timely data needed for research, and so information and analysis about homeowners insurance is in its infancy.
• Problems in the homeowners insurance market pose a systemic threat to housing markets, and solving them will require extensive investments in mitigation. States and the federal government need to substantially increase investments in community risk reduction, home fortification and loss mitigation, and develop strategies to reduce insurers’ overreliance on unregulated, global reinsurance.
• Regulators should collect more information about racial homeowner insurance gaps. Historical work about racial discrimination in insurance markets has demonstrated the broad incidence of insurance “redlining,” similar to the denial of mortgages in Black and Hispanic communities. Insurance companies have not been held accountable for this; more research should be done and regulators should use existing Fair Housing laws to investigate these gaps, and if needed, to correct them.

“Insurance is an essential part of homeownership, financial security, and community resilience. When millions of American families simply cannot find or cannot afford insurance coverage for their home, we are all exposed,” said Douglas Heller, CFA’s Director of Insurance. “Not only are uninsured families unprotected, but the economic fabric of entire communities is also at risk if significant portions of residents cannot rebuild after a disaster. Our study should be a wake-up call for lawmakers, insurance and housing regulators, and the nation’s emergency management agencies.”

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Today many consumers struggle to afford steeply increased premiums, while others find it difficult to obtain insurance in the private market altogether. Concerns are growing that many American homeowners are forced by financial realities to forego homeowners insurance, sometimes called “going bare.” But going bare puts consumers at risk of accruing significant financial debt to repair their homes, having to live with unsafe and inadequate housing conditions, or moving from homeowner to homeless after disaster strikes.

Based on an analysis of 2021 American Housing Survey data from the US Census Bureau,
this report finds that:

• One in thirteen homeowners across the United States are uninsured (7.4 percent),
equivalent to 6.1 million homeowners.

• Homeowners making under $50,000 a year are twice as likely as the general
population to be uninsured (15 percent).

• Homeowners of color are disproportionally at risk, with an estimated 22 percent
of Native American, 14 percent of Hispanic, and 11 percent of Black homeowners
having no homeowners insurance.

• Over one third (35 percent) of owners of manufactured homes, as well as 29 percent
of those who have inherited their homes, have no homeowners insurance.

• Homeowners living in rural areas and those living in the metropolitan areas of Miami
and Houston are most likely to not have homeowners insurance.

• Even with conservative estimates, an estimated $1.6 trillion in property value of
uninsured homes was at risk in 2021: this includes $339 billion of uninsured Hispanic owned homes and $206 billion of uninsured Black-owned homes.

We conclude by offering research and policy recommendations:

1. More data are needed to track insurance gaps and pre-existing and emerging
inequalities in insurance markets.

2. The precarity of the homeowners insurance market poses a systemic risk to our
nation’s housing markets. Fixing this will require both investing in risk reduction and
reducing insurers’ overreliance on unregulated reinsurance.

3. Unavailable and unaffordable homeowners insurance continue to impact the racial
wealth and homeownership gaps. We need more research that examines racial
discrimination in insurance markets

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• How are insurers reducing or eliminating coverage in response to growing climate risk?
• What regions and communities are seeing the greatest premium increases and reductions in coverage as insurers shift risk onto consumers with coverage exclusions, higher deductibles, and other opaque actions?
• How are insurers’ underwriting and pricing responding to climate risk?

The consumer groups were responding to today’s NAIC announcement that it will begin data collection from insurers to assess insurers’ response to growing climate risk and rising insurance costs.  The NAIC action came nearly 18 months after the FIO announced its intention to collect such data from insurers in the absence of any relevant data from state insurance regulators.  After criticizing the FIO for its data collection effort, the NAIC was spurred into action to avoid further embarrassment.

Unlike regulators for other financial services, state insurance regulators have refused for decades to collect the granular consumer market outcome data needed to monitor the availability and affordability of auto and home insurance, the groups noted.  State insurance regulators today cannot answer basic questions about what is happening in their insurance markets because they haven’t collected the relevant data.

“It is clear that absent the FIO effort to address the gaping holes in state insurance market monitoring, the insurance regulators would have continued to do nothing to modernize data collection for market regulation,” said Birny Birnbaum, longtime consumer representative at the NAIC and director of the CEJ who is a member of the Federal Advisory Committee on Insurance that advises the FIO.  “FIO has demonstrated the wisdom of Congress, which created the agency as a key post-financial crisis reform with the mandate and tools to monitor the industry and identify gaps in state insurance consumer protection.”

“There is a growing homeowners insurance crisis across the country, and the NAIC has been far too slow to act,” said Douglas Heller, CFA’s Director of Insurance. “As an example, in January of 2024 NAIC updated its annual homeowners insurance report and the most recent data are insurance premiums from 2021. Getting the data call that FIO has prompted – and then expanding it in years to come – is critical to reforming the insurance markets that are wreaking havoc on families and businesses.”

Bob Hunter, CFA’s Insurance Director Emeritus and former Texas Insurance Commissioner, said that “during 40 years of work helping consumers of insurance, I have observed that the NAIC, which normally avoids taking action needed to protect consumers, suddenly becomes ‘brave’ at moments like this, when they fear the federal government is about to do what they should have been doing all along.”

“While anecdotal data, voluntary industry surveys, and data from last-resort programs have effectively raised the alarm, these have not painted a full picture, and selective disclosures from insurers can just as easily be used to exploit a crisis as they can to solve it,” said Carly Fabian, Insurance Policy Advocate at Public Citizen. “The success of the NAIC’s efforts, and Treasury’s reliance on them, hinges on an accessible data source that is updated regularly with data from every state.”

While praising the new data collection effort, the consumer groups also noted that it is limited in scope.  Despite evidence from the country about condominium associations, cooperatives, and affordable rental housing developers seeing few insurance choices and massive premium increases, the data call will not capture anything about the most vulnerable portions of the market. The NAIC should commit to expanding future data collection to better understand the impact of climate risk on Americans beyond those who live in single family homes, the groups said.

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The nonprofit, nonpartisan consumer organizations issued the following statements:

Birny Birnbaum, Executive Director of the Center for Economic Justice, said:

 “Reforming the title insurance industry is an essential component of addressing home buying and homeownership affordability.  Iowa is the only state that has created a low-cost alternative to title insurance.  While a few states have made some efforts to address the anti-competitive practices in title insurance, state insurance regulators have failed to rein in excessive title insurance premiums.  We’re hopeful that these new federal initiatives will jump start action at both the federal and state level.”

Douglas Heller, Director of Insurance for Consumer Federation of America said:

 “The title insurance market has been broken for decades, and homeowners and new homebuyers have paid the price. At the moment when consumers are finalizing a consequential financial decisions – buying or refinancing a home – they are forced to purchase title insurance to protect the lender in a market built on kickbacks to the agents who direct consumers toward an overpriced title insurance policy. The insurance industry and the agents who steer consumers to these insurance companies have lobbied relentlessly to block reforms that would create substantial savings for consumers, so we are very encouraged that the President is shining a light on this broken system.”

Sharon Cornelissen, CFA’s Director of Housing said:

 “It is encouraging to see the White House look at potential reforms of the title insurance industry. Unnecessarily expensive title insurance has added to the upfront costs of buying a home, creating barriers for first-time homebuyers. Excessive costs like this have no place in a housing market that is facing its worst affordability crisis in decades.”

As a background on problems in the title insurance market, the consumer groups highlight CFA’s 2013 testimony to the New York Department of Financial Services and Birny Birnbaum’s 2005 Analysis of Competition in the California Title Insurance and Escrow Industry.

The post Consumer Groups Applaud President Biden’s Announcement of Steps to Address Homebuying Closing Costs and Excessive Title Insurance Charges appeared first on Consumer Federation of America.

“Punishing safe drivers with higher premiums just because they don’t have perfect credit has always been unfair. The $20 million in refunds helped undo the unfair credit score penalties insurance companies imposed during the pandemic, when so many Nevadans faced significant financial pain and were not even driving, because they were stuck at home,” said Douglas Heller, CFA’s Director of Insurance. “We applaud both former Insurance Commissioner Barbara Richardson, who crafted this consumer protection, and Commissioner Scott Kipper, who implemented it after the Nevada Supreme Court upheld the rule.”

During the pandemic, the Division found that insurers’ credit score-based premium increases were unfairly discriminatory and in violation of state law. Its regulation banned companies from using consumer credit information to increase consumers’ premiums after March 1^st, 2020. The regulation also required insurance companies to provide refunds to consumers whose insurance premiums were increased because of their credit information before the regulation was adopted in early 2021. According to the Division, as of February 1^st, 2024, $20,960,078.02 in refunds have been provided to 163,975 Nevada consumers because of this rule, for an average refund of $127.82.

After an insurance industry challenge to the regulation, the Nevada Supreme Court sided with the Division, CFA and the Center for Economic Justice (CEJ), which jointly submitted a friend of the court brief in the case, and upheld the rule. The temporary consumer protection, which expires this spring, also prevented millions of dollars in additional credit score penalties that were never charged because of the regulatory prohibition, which was made fully effective after the Nevada Supreme Court victory in February 2023.

The consumer groups warned that many Nevadans could face significant premium hikes on consumers – including many with perfect driving records – due to their credit scores when the protection lapses in May. Noting that other data sources insurers use, for everything from marketing and pricing to claims handling and anti-fraud efforts, can also lead to unfair discrimination and higher prices for safe drivers, the groups said that the Nevada legislature should adopt reforms similar to a 2021 Colorado law that requires algorithm bias testing to root out unfair discrimination in insurance.

“The pandemic made clear that one type of data used by insurers could be unfair and unfairly discriminatory,” said Birny Birnbaum, Executive Director of CEJ.  “In the case of consumer credit information, the pandemic resulted in different prices for consumers with the same risk profile — the actuarial definition of unfair discrimination.  Insurers should be required to routinely test these non-traditional sources of data for unfair discrimination and racial bias.”

At the Property and Casualty Insurance Advisory Committee meeting, CFA’s representative, Michael DeLong highlighted that the end of this protection and the continued use of other socioeconomic factors in pricing – such as a driver’s education level, job title, or marital status – will exacerbate the pain of skyrocketing insurance premiums in the state.  It is clear, he noted, that reforms are needed to end the unfair discrimination that makes it difficult for many Nevadans to comply with the state’s mandatory insurance law.

“Nevadans are facing huge premium hikes as it is,” said Delong, a Research and Advocacy Associate with CFA. “State legislators need to step in, not only to continue the protection that refunded consumers $20 million, but to prevent other industry strategies that punish drivers simply because of their socioeconomic status. That would not only prevent further financial pain; it will help people avoid being priced out of coverage and possibly having to drive uninsured, which puts everyone at risk.”

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Specifically, CFA asked that the Committee adopt the Department’s recommendations to retain an agent fee line as a new source of operating funds, create two additional administrative positions, and implement a 9% increase in ASF (appropriated special funds) authority for mandatory expense increases.

By providing more resources to the Insurance Department, Delaware will see substantial benefits in the form of better consumer protection, more efficient regulation and a stronger insurance market.

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In testimony before the Committee, CFA urged the Insurance Department to release its report on unfair bias in auto insurance and urged the Committee to demand that insurance companies stop underwriting the fossil fuel projects that are driving climate change and increased home insurance premiums.

The Committee on Business and Economic Development conducts oversight of the Department of Insurance, Securities, and Banking (DISB), and can ask questions, demand answers, and make recommendations of that agency. Committee chair Kenyan McDuffie stated that this week’s January 31^st hearing was intended to get concerns and input from members of the public, in order to raise its concerns with the Insurance Department at the upcoming oversight hearing on February 7^th.

Currently, the Department is finalizing a report on unfair bias in auto insurance and what factors contribute to inequities faced by communities of color. Auto insurers use numerous socioeconomic factors that result in safe drivers being charged unfairly high premiums which can lead to unfair bias throughout the insurance process, from marketing and selling to claims handling and fraud fighting. These factors include a customer’s education level, job or occupation, gender, marital status, homeownership status, and credit information—and they disproportionately harm Black, Latino, Indigenous, and low-income residents.

Several years ago, Consumer Reports found that a District of Columbia driver with a perfect driving record but a low credit score would pay 33% more on average for auto insurance compared to a driver who has excellent credit but also a drunk driving conviction on their record. When drunk drivers pay less than safe drivers, an investigation of industry practices and algorithmic biases is the minimum that can be done.

Over the past year and a half, the Department has held multiple public sessions and meetings with both consumer advocates and insurance companies, collected information about unfair bias in auto insurance, and assembled the findings into a report. The consulting firm ORCAA, led by Weapons of Math Destruction author Cathy O’Neil, has been assisting the Department with the analysis. During the public sessions, the Department has explained that the report would review auto insurance premium quotes, underwriting, and pricing, and use sophisticated methodologies to determine the impact of harmful discrimination on consumers of various demographics.

However, the report has yet to be released; we have been told that it has been sent to the Mayor’s Office for review in order to answer any questions they might have. In our testimony, Consumer Federation of America  expressed concern that the report isn’t public yet, and urged the Department to issue the report without any further delays.

Consumer Federation of America also joined three other organizations, urging that the District of Columbia make sure insurance companies don’t contribute to climate change and rising insurance costs. Currently, insurance companies provide coverage to fossil fuel projects including oil pipelines and coal-fired power plants, which contribute to climate change and result in stronger and more frequent natural disasters and weather condition. These climate events, in turn, drive up home insurance premiums. These fossil fuel plants rely on the insurance protection to operate, meaning the insurers’ underwriting decisions play a key role related to the growth or reduction in emissions which are also pushing up homeowner premiums.

To make matters worse, many insurance companies take the premiums they collect from consumers and invest them back into the fossil fuel industry. Rather than investing in risk reducing activities that would help mitigate the worst effects of climate change, insurers are turning consumer premiums against policyholders by investing them in firms that exacerbate the insurance crisis, making a bad situation even worse.

At the hearing, a number of public interest advocates highlighted the harmful business practices of Travelers Insurance, the largest homeowners insurance company in the District of Columbia, which has resisted calls to phase out its underwriting of fossil fuel projects. U.S. PIRG has launched a campaign demanding that Travelers stop underwriting and investing in the fossil fuel projects that are responsible for driving up consumer premiums. The campaign points out that “according to an August 2023 analysis of 2019 data collected by the California Department of Insurance, of the top 16 U.S. property & casualty insurers ranked by assets under management, Travelers was the 4th largest holder of fossil fuel-related investments.”

Consumer Federation of America, U.S. PIRG, Americans for Financial Reform, and Public Citizen testified that insurance companies need to be held accountable when the decisions they make to foster fossil fuel projects harm our climate and increase insurance costs for everyone. Together, we urged the Committee to work with the Department to protect consumers from the risks of climate change posed by the insurance industry and to demand that insurance companies stop financing and facilitating fossil fuel projects.

The post Insurance Costs Are Rising. But the District of Columbia’s Insurance Regulators Can Take Action to Help Consumers appeared first on Consumer Federation of America.

Auto insurers use numerous socioeconomic factors, such as credit scores, education, and occupation, to unfairly discriminate against consumers and charge them higher premiums. DISB has written a report on unfair bias in auto insurance, but it has not yet been released and has been sent to the Mayor’s Office for questions and approval. CFA is eager to review the impending report and calls on DISB to issue the report without delay.

CFA also urged the Department Committee to work with the DISB to protect DC residents from the risks of climate change posed by the insurance industry. Insurance companies should not be funding fossil fuel projects that increase climate change and harm consumers, and Travelers Insurance especially should not be funding them. They should play a constructive, not a destructive role in solving this crisis.

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Telematics, or usage-based insurance, are insurance programs that capture consumers’ driving data via devices, built-in technology, and mobile phones. The programs use that data to assess consumers’ driving behavior, driving patterns, and sometimes additional data, to calculate insurance premiums.

While telematics holds potential for both encouraging safer driving and increasing fairness in pricing, telematics needs thorough oversight and guardrails for consumers. Instead of A7614, the legislature should pass a different telematics bill, S553. Sponsored by Senator Kevin Thomas, S553 provides a framework to allow telematics to offer benefits to consumers while ensuring fair pricing and protecting consumers from unfair and unnecessary exploitation of the data collected by insurers.

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How is this happening? Florida has a state-backed insurance company of last resort, called Citizens, which will insure consumers’ homes if they cannot find private insurance coverage. Citizens currently covers about 1.26 million policyholders in Florida, and Florida politicians are attempting to reduce the number of people getting coverage through this program. As a result, Florida has “takeouts,” where insurance companies can get thousands of policyholders and millions of dollars in premium without any costs. The policyholders get transferred from Citizens to a private insurance company; however, a lot of these companies that have received policyholders from Citizens have later gone bankrupt.

Slide Insurance, founded in 2021 by its current CEO Bruce Lucas, has received a considerable number of takeouts. The Washington Post reported that “insurance officials have awarded him [Lucas] the opportunity to take over far more policies than any other company, data shows — either directly from Citizens or from other insurers that have gone under or pulled out of the state.” All in all, Florida has granted Slide the chance to pick up over half a million policyholders, far more than any other company.

Unsurprisingly, this has attracted a lot of criticism. Slide Insurance responds to critics by saying that they bring stability and solvency to the market. And Florida regulators defend the takeout practice by saying that without this approach, there wouldn’t be a private insurance market in Florida.

But the actual impacts of these deals on consumers are terrible. Florida homeowners often get bounced from insurer to insurer, only finding out after the fact that their company has gone bankrupt. When their policy got acquired by Slide, one couple found that their premium increased from $1,350 to $6,000 for almost the exact same policy—an outrageous price hike that anyone would struggle to afford. As a result, they had to postpone important surgeries and their health suffered.

For Lucas, the benefits of these deals are considerable. Insurance company CEOs tend to be lavishly rewarded and over the past eight years, he earned $78 million. Lucas also told reporters that new Florida laws, which clamp down on lawsuits by homeowners against insurance companies, will make it easier for Slide Insurance to succeed. Lucas claims he is not political and has not participated in any meetings about these new laws. But The Washington Post found that “since 2018, Lucas and his companies have donated nearly $2.6 million — about $1.17 million in the past year alone — to key Republicans, including those in the Florida legislature who spearheaded the new legislation.”

This is evidence of a very cozy, and possibly improper, relationship. And before Lucas founded Slide Insurance, he worked for another company called Heritage. In 2013 he closed a takeout deal with Citizens, where Heritage got 60,000 policies and Citizens agreed to pay the company up to $52 million in retroactive premiums. Legislators attacked the deal, calling it corporate welfare, and other insurance companies complained that it was unfair. It later emerged that Lucas’s lobbyists met with then Governor Rick Scott before the takeout went public, that Heritage donated to Scott’s campaign, and that the Citizens board member who broke the tie vote in favor of the transaction was appointed by Scott.

More recently, Slide has been accused of getting still more sweetheart deals from the Florida government. For example, Florida’s Office of Insurance Regulation helped broker a $400 million deal where Slide took over a bankrupt insurance company. Slide and Lucas benefited handsomely but many policyholders did not. Instead, Slide denied their legitimate claims, made them jump through hoops and fill out excessive paperwork, and gave them inadequate payouts. And it has increased premiums for lots of consumers, sometimes by 500% or more.

Consumer Federation of America has previously written about insurance companies and their exploitation of consumers, and urged the Florida Office of Insurance Regulation to investigate and punish alleged wrongdoing. We have also criticized the Office for being cozy with the insurance industry and often being part of the revolving door, where insurance regulators go to work for the insurance industry or regulators come from the insurance industry. But if the Florida Office of Insurance Regulation is making unfair and biased deals with Slide Insurance at the expense of consumers, the fox is guarding the henhouse.

The Florida Office of Insurance Regulation (OIR) is supposed to make insurance affordable and accessible and protect consumers. If it is failing to do its job, it must be held accountable. Florida residents deserve better—they deserve government agencies that actually help them and safeguard them against abuses by insurance companies. We hope that in the future, Florida regulators will be neutral between consumers and insurers, stand up for consumers when their rights are violated, and not unfairly privilege an individual company over policyholders.

The post Slide Insurance is Getting Sweetheart Deals from Florida Regulators—And Using Its Power to Harm Consumers appeared first on Consumer Federation of America.

In comments to the OMB supporting the approval of the data call, CFA wrote:

“At the intersection of climate change and homeowners insurance, there are millions of American families worried that they cannot afford to protect their most significant asset, their home, or that the options to buy coverage and the quality of that coverage are shrinking. The fact that spiking insurance prices, diminishing availability, and coverage gaps in the homeowners insurance market could cause significant and systemic problems cannot be ignored….

FIO’s proposed data call will provide the granular data necessary to better assess the systemic risks and related concerns that derive from climate change’s impact on homeowners insurance markets. The stakes involved in this issue are huge. It is essential that we have good data available as we determine what is to be done.”

FIO’s updated data call proposal will require the nation’s 14 largest home insurers to provide data about their premiums, claims, and overall exposure to potential losses, covering the past six years of underwriting data. This data will be collected at the ZIP code level so policymakers and regulators can better understand how climate change is affecting insurance costs community by community.  It will also help to assess whether coverage gaps are more acute in communities of color and other historically underserved communities.

A copy of CFA’s letter to OMB is available here.

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The action, involving regional insurer Erie Insurance, highlights how the company has created incentives and disincentives for agents to selectively and subjectively choose consumers in a manner that is intended to reduce Erie’s business and discourage policies in mostly Black and Hispanic neighborhoods.

Some background: Based in Pennsylvania, Erie Insurance is a $15.29 billion insurer that sells auto, homeowners, business, and life insurance through a network of independent insurance agents. It has over 6 million policies and operates in twelve states, including Maryland. Erie markets itself as offering policies that are often cheaper than those of other insurance companies. According to reporting, the company has somewhat loose underwriting standards that should make it easier for customers to qualify for coverage, but the company relies on its agents to make subjective decisions about who gets coverage in order to keep its loss ratio from getting too high. (An insurer’s loss ratio is the relationship between the claims it pays out and the premiums it collects. The higher the loss ratio, the lower the insurance company’s profits).

Recently independent agents in Maryland accused Erie of punishing them for selling insurance policies to Black and Hispanic consumers, most of whom lived in dense areas of cities like Baltimore. Erie claimed that these areas were too risky to insure. Baltimore agent Bj Borden stated that “they [Erie] had us create separate guidelines to weed out some of the people they didn’t want us to write in inner cities.” He stated that over several years, Erie managers punished him for selling policies to Black consumers in Baltimore by docking his commissions and threatening to cancel his sales contract. Other agents reported similar behavior and abuse from the company, indicating that it didn’t want Black or Hispanic people as customers.

One of Erie’s practices is called “frontline underwriting”—essentially, insurance agents have to determine, often based on subjective factors, whether a consumer is risky and should be insured. Agents evaluate a consumer and are supposed to decide if they are honest and reliable, and can be trusted to pay their premiums. This method of underwriting is especially vulnerable to unfair bias and racism, because it isn’t based on fixed data points.

Concerned by these agent reports, the Maryland Insurance Administration (MIA, Maryland’s state agency in charge of overseeing the state’s insurance market and, among other things, preventing unfair discrimination) started investigating these accusations. And in May 2023 the MIA issued four public determination letters where they found that Erie terminated its agreements with insurance agents because they were writing policies in certain areas. In the letters, MIA concluded that Erie adopted practices “designed to target agencies writing business in urban areas and to reduce the volume of business being written in those areas.” MIA also ordered Erie to pay the agents compensation that was improperly withheld.

How did Erie respond to this investigation? By digging in its heels and refusing to admit responsibility. The company filed a lawsuit against Maryland insurance regulators in federal court, claiming that the regulators made confidential business information public. This isn’t the first time Erie has been accused of racist and unfair discrimination. Federal authorities in New York and Pennsylvania accused the company of redlining—but Erie only faced minor fines as a result. But the MIA is now conducting a broader review of Erie’s underwriting methods to see if there is additional unfair bias. If it finds additional bias, Erie could face substantial penalties and have to undertake major reforms.

Insurance costs are expensive and even unaffordable for many consumers, and in certain communities it is almost impossible to get insurance. In the past, insurance companies engaged in redlining, where they would not provide insurance to communities because of the race, color, or national origin of residents in those communities. Black neighborhoods in Baltimore were especially affected by this behavior, which widened the wealth gap. Since Black and Hispanic consumers couldn’t easily get loans or insurance, they missed out on many opportunities to build wealth and accumulate equity. Anti-discrimination laws have formally banned these practices but Erie’s behavior shows how it used punitive actions against agents to achieve the same, unacceptable ends.

The MIA must, of course, continue to pursue and defend its actions to hold Erie accountable; it should consider revoking Erie’s license to do business in the state of Maryland. The Maryland findings should also be a wake-up call to other state regulators in whose jurisdiction Erie operates. And it should be a reminder that there is a lot of work to be done and investigations to be pursued if regulators and policymakers take the problem of racial discrimination in insurance markets seriously.

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CFA stated that rate hikes by insurers and announcements to limit sales or coverage in certain areas are wrecking havoc on consumers. Two of the biggest drivers of premium increases and regional availability crises are the interacting effects of climate change and the exploding cost of risk transfer in the unregulated, global reinsurance market. To address affordability and availability, insurance regulators must focus on providing and incentivizing more investments in risk reduction and loss mitigation. And to stabilize the insurance market, regulators must incorporate mechanisms that supplement the unregulated reinsurance market, such as a public mega-catastrophe reinsurance facility.

Finally, rising insurance costs do not stem from consumer protection laws that provide regulatory oversight or legal accountability for bad actors in the insurance industry. These claims–that consumer protection laws are the problem–are inaccurate and harmful.

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But it’s not just the reduced availability of affordable and useful coverage that should make consumers angry.  A recent joint report by Public Citizen and Insure Our Future shows that some insurance companies are actually contributing to and profiting from the climate change that is leading the companies to charge higher premiums to consumers.

How are insurers doing this? By investing in and providing insurance coverage to coal mining projects that contribute to greenhouse gas emissions and increase global temperatures. Several global insurance companies fund and underwrite much of coal mining and other coal projects in the United States.

The joint report found that five insurance companies—AIG, Liberty Mutual, Lloyd’s of London, Swiss Re, and Zurich—are among the top insurers of U.S. coal mining. The five insurers covered at least 41% of U.S. coal production in 2022, basically ensuring that the coal industry could keep running. AIG was the largest funder, insuring almost 30% of all U.S. coal production.

Even as AIG, Liberty Mutual, and Berkshire Hathaway continue to insure coal mines, these three companies are also starting to limit or reduce coverage for U.S. homeowners. In other words, through their investments and insurance underwriting, insurers encourage, enable, and profit from the climate crisis. They then foist the cost and increased risks of climate change onto the American consumers who live in places threatened by its effects.

In recent years some insurance companies have responded to pressure from consumer advocates and environmental organizations by ending or restricting their coverage for coal mining and coal projects. Without insurance, many coal mining and coal-powered projects would never get off the ground. But other insurance companies continue to support coal, including these bad actors analyzed in this report.

To make matters worse, these five insurance companies are saying one thing and doing another; they are violating their own public policies by continuing to insure coal. The report analyzed records from the insurance companies and found numerous examples of this behavior. AIG, for example, publicly claimed that it would no longer invest in or provide insurance for coal-fired power plants or underwrite insurance risks for clients who get over 30% of their energy production or revenue from coal. However, AIG did not actually follow through on these promises.

Other companies practiced similar deceptions. Swiss Re’s policy stated that it was implementing a total phaseout of insuring coal and that, in the meantime, it would not insure companies with more than 30% of their exposure from coal. But Swiss Re currently underwrites Buckskin Mining Company, which gets at least 90% of its revenue from coal. The company Zurich also took advantage of a loophole in its promises to insure coal mines. Lloyd’s of London made a toothless pledge to achieve net zero emissions from underwriting by 2050 but did not change its behavior at all. And Liberty Mutual pledged not to underwrite companies with over 25% of their exposure coming from coal. But the report found that Liberty Mutual is violating its own pledge by underwriting coal mines and a company that gets 90% of its revenue from the coal business.

The report concludes by calling on these insurers to stop insuring new coal mines and coal projects, stop insuring any new clients from the coal sector, and stop offering insurance services that expand coal production. Insurance companies should also phase out or divest insurance services or assets from coal companies that are not committed to reducing carbon emissions.

Insurance companies have a critical role to play in reducing greenhouse gas emissions and keeping insurance affordable in the face of rising climate change. It is past time for them to become part of the solution and not the problem; insurers should stop insuring coal mines and projects that fuel climate change. Consumers’ insurance premiums, the availability of insurance, and their ability to afford their homes and businesses all depend on it.

The post By Insuring Coal Mines, Insurance Companies Are Profiting from the Climate Crisis and Then Foisting These Costs onto Consumers appeared first on Consumer Federation of America.

According to August’s Consumer Price Index, auto insurance costs are up 19% compared to 2022. Meanwhile, six of the major insurance company CEOs each received over twelve million dollars in compensation in 2022, and in total, these ten insurance executives were paid over $130 million in 2022. The two-year haul of these ten CEOs amounted to more than a quarter billion dollars ($253,493,931) between 2021 and 2022.

“CEOs are living high on the hog while increasing insurance premiums for people living paycheck to paycheck,” said Michael DeLong, CFA’s Research and Advocacy Associate. “Insurers are telling regulators that ordinary consumers have to pay much more for auto and home insurance because the companies are struggling with inflation and climate change, but they are quietly handing CEOs gigantic bonuses. Drivers are required to buy auto insurance and homeowners have to buy coverage to satisfy their loan requirements, so there needs to be more scrutiny of the rate hikes companies are demanding and the huge CEO paydays that are funded with customer premiums.”

The chart below shows insurance executive compensation paid for both 2021 and 2022. The data come from Nebraska’s Department of Insurance, which requires insurance companies by law to provide information about the salaries, bonuses, and other compensation of their top officials. Since the data reported to the Department may exclude compensation paid to the executives by affiliated companies, it is possible that the compensation figures below underrepresent what the executives actually earned.

These exorbitant compensation packages for insurance executives come as the companies impose punishing charges on their customers and employees. For example:

• While Farmers’ executive Jeff Dailey got a nearly $2 million raise in 2022, his company increased homeowners insurance premiums by over $575 million across 42 states, limited its availability in the company’s home state of California, stopped renewing almost a third of its homeowners insurance policies in Florida, and laid off 11% of its workforce.
• Liberty Mutual paid its CEO David Long over $15 million in 2022—and recently increased its homeowners insurance rates by $729.8 million.
• State Farm paid its CEO Michael Tipsord over $24 million while hiking auto insurance rates in its home state of Illinois four times in a single year, increasing auto rates by 17% in Louisiana, and raising homeowners insurance rates by 28.1% in California while also halting new California applications for homeowners insurance.

[1] 2021 compensation to Kirt Walker is inferred from filings with the California Department of Insurance in which the Nationwide discloses the compensation of its five highest paid executives. The filings (for example, California SERFF# NWPP-133468845) do not name the executives, so the total compensation to the highest paid executive of the Nationwide insurance group is presumed to be Mr. Walker in this table.

[2] The data on Progressive’s 2022 executive compensation come from its 10-K report to the Securities and Exchange Commission, which is available here: https://www.sec.gov/ix?doc=/Archives/edgar/data/80661/000008066123000017/pgr-20230327.htm#i8fa803af503545f28c651644ccb9491b_184.

The post As Insurance Rates Skyrocket, Executives Pull in Millions appeared first on Consumer Federation of America.

“At a time of rising insurance costs, consumers need fair treatment and prompt payment of claims after Hurricane Idalia,” said Michael DeLong, Consumer Federation of America’s Research and Advocacy Associate. “After Hurricane Ian, there were many reports of insurers exploiting consumers by altering adjustments and trying to reduce payments. This must not happen again. We hope that insurance companies will be good partners in the recovery and rebuilding to come, but policyholders and regulators must stay vigilant to ensure fair treatment.”

“For home and business owners who have been devastated by Idalia, home and flood insurance funds should be the fastest and best source of recovery help,” said Amy Bach, Executive Director of United Policyholders. “Consumers need insurance companies to be fair and honest, and pay their claims in full and on time. United Policyholders and our Florida-based partners are mobilizing to deliver guidance and advocacy services aimed at making sure all available funds flow as they should. Visit United Policyholders’ Roadmap to Recovery program early and often.”

Many Idalia victims will be underinsured and uninsured for flood damage, and there will be big fights over whether the damage was caused by wind (covered in a home policy) versus flooding (excluded in a home policy). Home insurers should pay for damage from hurricane winds and falling rain.

Consumer Federation of America and United Policyholders recommend that insured property owners with damaged homes take the following steps.

• Contact your insurance company and report your claims as soon as possible. Depending on what caused the damage to your home, your claim may be covered either by wind insurance or flood insurance, or by both. Homeowners insurance policies generally do not cover flood damage.
• Document damage in photos and videos as thoroughly as possible, but only to the extent that it is safe to do so. Do not allow damaged items to be removed before they have been photographed and documented.
• Keep a daily journal with records of each time you speak or meet with insurance company adjusters, repair professionals, or anyone you are considering hiring. Note their name and the data and time of the contact.
• Maintain receipts for every cost you incur. This includes hotel and food costs when you evacuate, alternative living arrangements costs if you cannot return to your home, and anything you spend on making initial repairs to your home to prevent further damage. This may be covered under your home or private flood insurance policy. Temporary living expenses are not covered under NFIP (National Flood Insurance Program) policies.
• Check references and license status before you agree to hire or assign any of your insurance benefits to any professional. Post-disaster scams are quite common. Local help is preferable, but if it is unavailable, be careful and vet out-of-the-area pros before you sign on the dotted lines.
• If you run into problems or are mistreated by your insurer, contact your Insurance Department or the Federal Emergency Management Agency (FEMA, for flood claims). The information is below:

Florida Office of Insurance Regulation
1-877-693-5236
200 East Gaines Street
Tallahassee, FL 32399
Consumer.services@myfloridacfo.com
File a complaint: https://apps.fldfs.com/eService/Newrequest.aspx

Georgia Office of Insurance and Safety Fire Commissioner
2 Martin Luther King Jr. Drive, West Tower, Suite 702
Atlanta, GA 30334
consumer@oci.ga.gov
File a complaint: https://oci.georgia.gov/file-consumer-insurance-complaint

South Carolina Department of Insurance
803-737-6180
1201 Main Street, Suite 1000
Columbia, South Carolina, 29201
consumers@doi.sc.gov
File a complaint: https://sbs.naic.org/solar-web/pages/public/onlineComplaintForm/onlineComplaintForm.jsf?state=SC&dswid=-537

Federal Emergency Management Agency
1-800-427-4661
500 C St SW, Washington, DC 20024
https://www.fema.gov/about/contact

The post Tips to Help Consumers Get Fair Insurance Treatment After Hurricane Idalia appeared first on Consumer Federation of America.

“On average, a consumer with poor credit has to pay twice as much for auto insurance as a driver with excellent credit, even if everything else, including their driving safety history, are the same,” said Douglas Heller, CFA’s Director of Insurance and the study’s co-author. “Not only is this unfair to safe drivers, because of longstanding and institutional biases, the use of credit history for insurance pricing leads to disproportionately higher premiums for lower-income drivers and people of color.”

The report found that nationwide, American consumers with clean driving records and excellent credit pay an average annual premium of $470 for state-mandated auto insurance. But consumers with fair credit pay an average premium of $701—with the same driving record. And good drivers with poor credit pay an average premium of $1,012—a $542 or 115% increase compared to drivers with excellent credit.

“Your auto insurance premium should be based on your driving record, not your credit score,” said co-author Michael DeLong, CFA’s Research and Advocacy Associate. “You shouldn’t have to pay more in premiums because of a factor unrelated to your driving, and as long as companies are allowed to use credit this way, millions of safe drivers in America are being overcharged for their auto insurance.”

The overwhelming majority of auto insurers practice this discrimination. Only California, Hawaii, and Massachusetts prohibit the use of credit information in auto insurance pricing. In Florida, consumers with poor credit pay 143% more than drivers with excellent credit for auto insurance. In Minnesota, consumers with poor credit pay 172% higher premiums. Michigan consumers with poor credit pay 263% more for auto insurance, with an average statewide premium of $2,667, and in many ZIP codes across the country, consumers with poor credit pay even more just to comply with their state’s mandatory insurance law.

Evidence also shows that insurers, on average, consider credit information a more important rating factor than a consumer’s driving record. In most states, consumers with perfect driving records and poor credit pay more for auto insurance than drivers with a conviction of driving under the influence of alcohol.

The report concludes that state governments should put consumers first and ban the use of credit information in auto insurance. States should also devote more resources to analyzing rate filings, reject rate filings that unfairly discriminate based on credit information, and enact reforms to combat unfair discrimination and bias in information, data models, and algorithms that insurers use.

The post Report Details Severe Credit Score Penalties in Auto Insurance appeared first on Consumer Federation of America.

The post The One Hundred Percent Penalty: How Auto Insurers’ Use of Credit Information Increases Premiums for Safe Drivers and Perpetuates Racial Inequality appeared first on Consumer Federation of America.

Life Hack for Saving Time: Pass the FTC’s Auto Dealer Rule

Department of Labor ERISA Council Must Protect Retirees and Workers Pensions

CFA Report Shows That Real Estate Agent Glut Harms Both Industry and Consumers

Tips for Saving Money on Your Auto Insurance

By: Michael Delong, Research and Advocacy Associate

Auto insurance is an interesting product: we are all required to have it if we own a car, but we hope never to have to use it, and we try not to think about it. But as insurance premiums continue to skyrocket, it has probably been on your mind more.  Even though we can face stiff penalties for driving without insurance, many drivers struggle to keep up with the rate increases.  In addition to the price pain, the insurance product itself can be kind of bewildering:  what are all these different “coverages,” which do I need, and (of course) why do they cost so much?

Consumer Federation of America (CFA) and America Saves are here to help. At its most basic, auto insurance covers damage or injury you cause to another car or person while you are driving.  Depending upon your state and the coverage you choose, your insurance policy may also cover your medical bills or damage to your car when you cause a crash, when you are hit by an uninsured driver, or when your car is stolen or crushed by a tree branch.

Every state except New Hampshire requires drivers to have auto insurance—and New Hampshire still requires financial responsibility if you cause an accident, so the overwhelming majority of people there have auto insurance. If you do not have auto insurance, you are breaking the law. And if you are caught you may be fined, have your license suspended and have to pay a fee to recover it, and possibly even face jail time.

Over the next several weeks CFA and America Saves are partnering on a series of articles on auto insurance—how to save money, what consumers should know, and several myths about auto insurance. Please note that these tips are general in nature and may not reflect every reader’s personal needs and situation; you should consult financial advisors and insurance professionals as you make decisions.

You can save money on your auto insurance with these tips:

1. Shop around—and shop around using multiple options. Auto insurers use a variety of driving and non-driving socio-economic rating factors to set your premiums. Driving-related factors include your driver safety record, the number of miles driven, and whether you have been in any accidents or filed any claims. Non-driving related factors include your gender and marital status, your credit score, your education level, your job or occupation, whether and how much insurance you’ve had in the past, and whether you own a home or rent. Insurers also place a lot of emphasis on where you live, often based on your ZIP code and even on which block you live in your neighborhood.

Each auto insurer calculates these factors and their impact on your premium in different ways – some rely heavily on your credit history and never consider your job title or educational history, while others may weigh several aspects of socio-economic status when calculating your premium. It is well worth your time to sit down and get quotes from different insurance companies. If one company charges you $120 per month and you find another company that only charges you $90 per month, that $30 savings per month will add up to $360 saved per year.

Consumers can compare quotes in several different ways:

• Online: You can go to different auto insurer websites, fill out your information, and get the quotes, and you can use comparison websites such as the Zebra, Bankrate, or ValuePenguin. These websites enable you to compare a few quotes more quickly and easily. It is important to note that these companies do not scan the whole market for you, and they get paid by insurance companies.
• Through an agency. You can contact licensed insurance agents to get additional quotes and guidance about insurance generally. There are some agents – known as “exclusive” or “captive” agents who only sell one insurance brand and may have deep knowledge about the offerings of their company. Others, known as “independent” agents and brokers, can scan several insurers’ offerings for you, including some that may not be available online.

We recommend that people shop around through each of these methods to get the best set of options and find the best price.  One note, some insurance sellers, known as “brokers” may charge an additional “broker fee” if you work with them. Unless you have a particularly unique situation – such as a very bad driving record or a very expensive or custom vehicle – we recommend against purchasing auto insurance from brokers who charge a fee.

     2. Consider whether you still need comprehensive and collision coverage. These options on an insurance policy will pay to repair or replace your car if it is damaged by you (such as accidentally crashing into a pole while parking), some natural event like a falling tree branch, or if it is stolen. If you have a car loan or lease your vehicle, these coverages are required, but if you own your car outright, they are optional. “Comp and Collision” are particularly helpful if your car value is still pretty high, but if your car is not worth much anymore, it may be time to consider dropping Comp and Collision. Since these coverages usually come with a deductible – typically $500 – that you have to pay first before any insurance payments kicks in, it may be better to try and set aside a little money each month just in case you damage the vehicle, rather than pay hundreds of dollars in premiums each year for a car worth only a few thousand dollars. As a thumbnail rule, if your car value is less than ten times what you pay for Comp and Collision, you might consider dropping it. That is, if your car is worth $10,000, it might not be worth it to spend more than $1,000 a year on Comp and Collision; if it’s only worth $3,000, think twice about a policy costing more than $300 for those coverages.

     3. Check your credit score for errors and try to improve it as well. We hate to make this recommendation, because it is ridiculous that this should impact your insurance premium. But, until politicians stand up to insurance companies and stop this practice (it is already prohibited in California, Hawaii, and Massachusetts), it is one of the biggest drivers of your auto insurance premium. Our research indicates that consumers with a perfect driving record and poor credit scores pay on average at least twice as much for auto insurance compared to consumers with a poor driving record and excellent credit scores.

The first thing you can do is examine your credit report for errors, which are unfortunately quite common, and demand that any errors be corrected. You can get a copy of your credit report at this link. If you find errors, contact your insurer and demand that they re-run your “credit-based insurance score,” re-price your policy if appropriate, and refund any excess they charged by using a faulty score. Over time, you can work on improving your credit score by following the credit score improvement strategies described here.

CFA is fighting to ban auto insurers from charging consumers more based on their credit; if you are interested in learning more or getting involved, email us at mdelong@consumerfed.org.

     4. Make sure your insurer knows how much you drive. Many companies charge lower prices to low-mileage drivers. If you are driving less (because you are working from home, out-of-work, or retired) than you used to, you may be paying more than you should. Find out how many annual miles the insurer is estimating for you when they set your premium and correct them if they are rating you based on out-of-date information.

     5. Improve your driving by taking a driving improvement course. Auto insurance companies charge far higher premiums if they believe you are a risky driver, since that increases the chances of your being in a crash and the insurance company having to pay a claim. If your driving record is checkered or you would like to save on your insurance, some auto insurers will offer you a discount if you take a defensive driving course. Check with your insurance company or agent to see if you qualify for a discount if you take this course, some of which can even be taken online.

     6. Pay your auto insurance premium in full instead of monthly. If you’re struggling to cover the cost of insurance, then you are probably paying in installments. It may be hard to imagine paying it all at once, but it’s worth calling your company and asking how much you would save if you did. With some companies it can be 5-8% or even as much as 12%. If you are on a six-month policy (where the pay-in-full amount is much less than an annual policy), and you pay a significant installment fee, consider paying all at once.

     7. Look for additional discounts. Many auto insurers offer further discounts if you meet certain conditions. Possible benefits include: discounts for having a paperless policy, a student discount, a discount if your car gets an anti-theft device, an automatic payments discount, or a discount for veterans/members of the military.

Auto insurance is required in most states, and it is also a crucial tool for financial security and economic mobility (as well as actual mobility in most places). Some of the reasons for high prices have to do with unfairness in the marketplace and company greed – CFA is working on improving laws and regulations to better protect consumers from these problems – but being a savvy insurance shopper and consumer can help. We hope that this will help you save on your auto insurance.

Life Hack for Saving Time: Pass the FTC’s Auto Dealer Rule

By: Erin Witte, Director of Consumer Protection

The Federal Trade Commission sells its Motor Vehicle Dealer Rule short when it estimates that consumers will only save $30 billion over ten years. The $30 billion number is the dollar equivalent of the time savings (on average: 3 hours per transaction) for consumers because the rule would prohibit dealers from advertising deals that are not available, and from wasting consumers’ time by making them call or physically go to a dealership to haggle over the price of the car. It is hard to imagine that anyone will be unhappy about having to spend less time at a car dealership – $30 billion is just icing on the cake.

But time savings, significant as they are, are only one small fraction of the ways consumers would save money with this rule. Dealers would not be able to sell worthless add-on products or deceive consumers into buying them. If the FTC’s cases against Passport and Napleton are any indicator, the cost savings here will well exceed the $30 billion estimate. Napleton alone allegedly charged over $70 million in deceptive and unauthorized add-ons. With over 45,000 dealers in the U.S. generating hundreds of thousands of complaints to government regulators, it is safe to assume that Napleton and Passport are not simply “bad apples.” Implementing safeguards to help prevent these and other deplorable practices will only put more money back in consumers’ pockets, stimulate competition, and make the process of buying a car slightly less painful.

Enter the lobbying powerhouse National Automobile Dealers Association (NADA), smelling blood in the water for dealers’ substantial profits, and predictably dipping into its well-funded coffers to generate a fearmongering survey and report about the FTC’s rule. Before asking a single question, the survey spends three pages striking fear in the hearts of dealers about expanded liability, exposure to significant monetary penalties, and “increase[d] consumer confusion and frustration.” It is no surprise that this “representative sample” of 40 dealers (out of “roughly 60,” handpicked by NADA) who managed to fully complete the survey (and “nearly fifteen” who were interviewed) want us to believe that the rule will cost consumers more than it saves. This simply is not true.

Perhaps it’s time we asked the people who rely on and pay increasingly high amounts for cars what they would like to see. Thousands of consumers responded to the FTC’s rulemaking, sharing horror stories and pleading for its passage. The least we can give them is a measly 3 hours and $30 billion back.

Department of Labor ERISA Council Must Protect Retirees and Workers Pensions

By: Micah Hauptman, Director of Investor Protection

On July 18^th, CFA’s Director of Investor Protection Micah Hauptman testified before the Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans, known as the ERISA Advisory Council. The purpose of the hearing was to help the Department determine whether it should update its longstanding guidance for pension plan fiduciaries in order to ensure that their decisions to transfer worker and retiree pensions to annuity providers are in the sole interests of workers and retirees.

Hauptman stated that in recent years many of the largest companies in the U.S. have transferred their pension obligations to insurance companies that provide annuities to workers and retirees. When companies do this, they shift risks onto insurance companies that, if not carefully controlled for, could undermine insurance companies’ abilities to fully pay those annuities to workers and retirees.

At the same time, insurance companies’ business models are evolving in ways that may increase risks for insurers, Hauptman stated. For example, private equity firms have become increasingly involved in insurance markets, introducing new sources of risk, complexity, and opacity to insurers’ businesses — risks that may undermine insurance companies’ ability to pay annuities to workers and retirees.

While state-based insurance guarantees may offer a partial backstop against the risk that insurance companies may not pay their annuity obligations, those guarantees are not as robust as the insurance guarantees that are provided under federal law by the Pension Benefit Guaranty Corporation (PBGC), Hauptman stated. Thus, the workers and retirees whose pensions are transferred to annuities are at risk of losing valuable benefits if the insurance company providing their annuity were to fail.

Given these heightened risks to workers and retirees arising from pension risk transfers to annuity providers, Hauptman urged the Department to preserve the protections in the current guidance for pension plan fiduciaries and offered several suggestions for the Department to consider to strengthen the guidance so as to ensure that any pension risk transfer arrangements do not leave workers or retirees worse off than they would be if they stayed in the defined benefit pension.  These included:

• Preserving the requirement for fiduciaries to select the safest annuity available;
• Requiring fiduciaries to select annuities that are independently reinsured; and
• Not permitting fiduciaries to satisfy their obligations by providing disclosures about the risks associated with the transfer or by accepting written representations by an insurance company that it is complying with state insurance laws.

Hauptman reminded the Department that workers and retirees have earned their pensions and depend on them for a secure retirement. Accordingly, the Department must ensure that those benefits and the protections afforded to workers and retirees are not compromised.

CFA Report Shows That Real Estate Agent Glut Harms Both Industry and Consumers

Earlier this month CFA released a new report – “A Surfeit of Real Estate Agents: Industry and Consumer Impacts” – revealing with industry data that there are too many residential real estate agents compared to the amount of homes available for sale. The report also found that this imbalance burdens consumers with higher commission costs and leaves them vulnerable to inexperienced real estate agents.

There are more than 1.5 million residential agents who belong to the National Association of Realtors and compete for home sales, with costs totaling between $5 to $6 million annually. The costs include:

• economic inefficiencies including an inordinate time spent by agents finding clients,
• relatively low incomes of many full-time agents,
• frustration by these agents and by many consumers who must deal with inexperienced agents,
• reinforcement of relatively high and uniform commission rates, and
• damage to the reputation of the industry.

“A large majority of practicing real estate agents have recently received their license or work part-time,” said Stephen Brobeck, a senior fellow at CFA and author of the report. “These agents usually charge the same commission rates as experienced, full-time agents yet in general offer worse service and deprive experienced agents of needed clients.”

Marginal agents with fewer than five sales a year receive an estimated 25-30 percent of commission income. The report found that the median net income of all sales agents was approximately $25,000, and the median net income of sales agents with less than two years of experience was $7,800. For all brokers and associate brokers, the net median income was $57,100.

“Without 5-6 percent commission rates, even fewer agents would survive financially in today’s marketplace,” said Brobeck.  “Ironically, relatively high rates attract new entrants into the industry, increasing competition for clients and reducing individual income for all.”

A future CFA report will explore the ease with which people can obtain a real estate license compared to the difficulty for most licensees to learn how to succeed as realtors.

“To protect consumers and experienced realtors, the industry should discourage unqualified and insufficiently committed people from obtaining a license,” said Brobeck. “The industry should prioritize making it easier for capable, hard-working licensees to succeed. We look forward to expanding on this suggestion in a future report.”

The post CFAnews Update – July 27, 2023 appeared first on Consumer Federation of America.

Consumer Federation of America (CFA) and America Saves are here to help. At its most basic, auto insurance covers damage or injury you cause to another car or person while you are driving.  Depending upon your state and the coverage you choose, your insurance policy may also cover your medical bills or damage to your car when you cause a crash, when you are hit by an uninsured driver, or when your car is stolen or crushed by a tree branch.

Every state except New Hampshire requires drivers to have auto insurance—and New Hampshire still requires financial responsibility if you cause an accident, so the overwhelming majority of people there have auto insurance. If you do not have auto insurance, you are breaking the law. And if you are caught you may be fined, have your license suspended and have to pay a fee to recover it, and possibly even face jail time.

Over the next several weeks CFA and America Saves are partnering on a series of articles on auto insurance—how to save money, what consumers should know, and several myths about auto insurance. Please note that these tips are general in nature and may not reflect every reader’s personal needs and situation; you should consult financial advisors and insurance professionals as you make decisions.

You can save money on your auto insurance with these tips:

1. Shop around—and shop around using multiple options. Auto insurers use a variety of driving and non-driving socio-economic rating factors to set your premiums. Driving-related factors include your driver safety record, the number of miles driven, and whether you have been in any accidents or filed any claims. Non-driving related factors include your gender and marital status, your credit score, your education level, your job or occupation, whether and how much insurance you’ve had in the past, and whether you own a home or rent. Insurers also place a lot of emphasis on where you live, often based on your ZIP code and even on which block you live in your neighborhood.

Each auto insurer calculates these factors and their impact on your premium in different ways – some rely heavily on your credit history and never consider your job title or educational history, while others may weigh several aspects of socio-economic status when calculating your premium. It is well worth your time to sit down and get quotes from different insurance companies. If one company charges you $120 per month and you find another company that only charges you $90 per month, that $30 savings per month will add up to $360 saved per year.

Consumers can compare quotes in several different ways:

• Online: You can go to different auto insurer websites, fill out your information, and get the quotes, and you can use comparison websites such as the Zebra, Bankrate, or ValuePenguin. These websites enable you to compare a few quotes more quickly and easily. It is important to note that these companies do not scan the whole market for you, and they get paid by insurance companies.
• Through an agency. You can contact licensed insurance agents to get additional quotes and guidance about insurance generally. There are some agents – known as “exclusive” or “captive” agents who only sell one insurance brand and may have deep knowledge about the offerings of their company. Others, known as “independent” agents and brokers, can scan several insurers’ offerings for you, including some that may not be available online.

We recommend that people shop around through each of these methods to get the best set of options and find the best price.  One note, some insurance sellers, known as “brokers” may charge an additional “broker fee” if you work with them. Unless you have a particularly unique situation – such as a very bad driving record or a very expensive or custom vehicle – we recommend against purchasing auto insurance from brokers who charge a fee.

     2. Consider whether you still need comprehensive and collision coverage. These options on an insurance policy will pay to repair or replace your car if it is damaged by you (such as accidentally crashing into a pole while parking), some natural event like a falling tree branch, or if it is stolen. If you have a car loan or lease your vehicle, these coverages are required, but if you own your car outright, they are optional. “Comp and Collision” are particularly helpful if your car value is still pretty high, but if your car is not worth much anymore, it may be time to consider dropping Comp and Collision. Since these coverages usually come with a deductible – typically $500 – that you have to pay first before any insurance payments kicks in, it may be better to try and set aside a little money each month just in case you damage the vehicle, rather than pay hundreds of dollars in premiums each year for a car worth only a few thousand dollars. As a thumbnail rule, if your car value is less than ten times what you pay for Comp and Collision, you might consider dropping it. That is, if your car is worth $10,000, it might not be worth it to spend more than $1,000 a year on Comp and Collision; if it’s only worth $3,000, think twice about a policy costing more than $300 for those coverages.

     3. Check your credit score for errors and try to improve it as well. We hate to make this recommendation, because it is ridiculous that this should impact your insurance premium. But, until politicians stand up to insurance companies and stop this practice (it is already prohibited in California, Hawaii, and Massachusetts), it is one of the biggest drivers of your auto insurance premium. Our research indicates that consumers with a perfect driving record and poor credit scores pay on average at least twice as much for auto insurance compared to consumers with a poor driving record and excellent credit scores.

The first thing you can do is examine your credit report for errors, which are unfortunately quite common, and demand that any errors be corrected. You can get a copy of your credit report at this link. If you find errors, contact your insurer and demand that they re-run your “credit-based insurance score,” re-price your policy if appropriate, and refund any excess they charged by using a faulty score. Over time, you can work on improving your credit score by following the credit score improvement strategies described here.

CFA is fighting to ban auto insurers from charging consumers more based on their credit; if you are interested in learning more or getting involved, email us at mdelong@consumerfed.org.

     4. Make sure your insurer knows how much you drive. Many companies charge lower prices to low-mileage drivers. If you are driving less (because you are working from home, out-of-work, or retired) than you used to, you may be paying more than you should. Find out how many annual miles the insurer is estimating for you when they set your premium and correct them if they are rating you based on out-of-date information.

     5. Improve your driving by taking a driving improvement course. Auto insurance companies charge far higher premiums if they believe you are a risky driver, since that increases the chances of your being in a crash and the insurance company having to pay a claim. If your driving record is checkered or you would like to save on your insurance, some auto insurers will offer you a discount if you take a defensive driving course. Check with your insurance company or agent to see if you qualify for a discount if you take this course, some of which can even be taken online.

     6. Pay your auto insurance premium in full instead of monthly. If you’re struggling to cover the cost of insurance, then you are probably paying in installments. It may be hard to imagine paying it all at once, but it’s worth calling your company and asking how much you would save if you did. With some companies it can be 5-8% or even as much as 12%. If you are on a six-month policy (where the pay-in-full amount is much less than an annual policy), and you pay a significant installment fee, consider paying all at once.

     7. Look for additional discounts. Many auto insurers offer further discounts if you meet certain conditions. Possible benefits include: discounts for having a paperless policy, a student discount, a discount if your car gets an anti-theft device, an automatic payments discount, or a discount for veterans/members of the military.

Auto insurance is required in most states, and it is also a crucial tool for financial security and economic mobility (as well as actual mobility in most places). Some of the reasons for high prices have to do with unfairness in the marketplace and company greed – CFA is working on improving laws and regulations to better protect consumers from these problems – but being a savvy insurance shopper and consumer can help. We hope that this will help you save on your auto insurance.

The post Tips for Saving Money on Your Auto Insurance appeared first on Consumer Federation of America.

For the Good of Consumers, Ireland’s Alcohol Health Labeling Law Should Be Respected

Consumer Federation of America Supports Consumer Product Safety Commission Against Unwarranted Attacks

Consumer Groups Urge Congress to Support the PAID Act

Florida Student Privacy Bill Bans Educational Apps from Selling Data

Susan Grant to Retire After 15 Years as CFA’s Privacy Advocate

After 15 years with the Consumer Federation of America, long-time consumer advocate Susan Grant will be retiring as CFA’s Privacy Advocate at the end of June.

“We are so grateful to Susan for her incredible career; chock full of protecting consumers, connecting people and groups, and working diligently to make our lives better and safer,” said Janet Domenitz, CFA’s Board Chair and Executive Director of MASSPIRG.

“Susan has been an invaluable member of the CFA staff for so many years and of late has focused her talents on issues surrounding consumer privacy,” said Susan Weinstock, CFA’s CEO. “She has done a great job of working with CFA member organizations as well as other national organizations in pushing consumer privacy laws and rules at the state and federal levels. Consumers across the country and around the world have benefited from Susan’s pursuit of consumer protections throughout her career. While we will miss her, Susan has earned this well-deserved retirement.”

Grant served as CFA’s Director of Consumer Protection and Privacy from 2008 to 2021 and has served as a Senior Fellow focused on privacy advocacy issues from 2022 to June 2023. Grant launched her advocacy career in 1976 at the Consumer Protection Division of the Northwestern Massachusetts District Attorney’s Office. Prior to joining CFA, Grant also held positions at the National Association of Consumer Agency Administrators and National Consumers League.

“After working in a county consumer agency and then at one of CFA’s member organizations, joining the CFA staff was like going to the mothership,” said Grant. “It’s been a great privilege to work for such an influential group and with such smart, dedicated individuals. I’m so pleased that there is a new crop of advocates to carry on CFA’s vital mission.”

For the Good of Consumers, Ireland’s Alcohol Health Labeling Law Should Be Respected

By: Thomas Gremillion, Director of Food Policy

What do international trade agreements have to do with consumer protections? Increasingly, the answer seems to be “too much.”

Recently, the United States joined Mexico and the Dominican Republic in challenging Ireland’s regulation of alcoholic beverage labeling in the World Trade Organization. The new Irish law would require alcoholic beverage labels to disclose calories, the amount in grams of alcohol per serving and per container, and various health warning statements including, most importantly: “There is a direct link between alcohol and fatal cancers.”

For United States trade officials, these labeling rules are an “unlawful trade barrier.” For consumer and public health advocates, they are a template for how to design labels to prevent inadvertent overconsumption and raise awareness of alcohol’s role as the third most important modifiable risk factor for cancer deaths in the U.S.

How did we get here? Trade agreements were once mostly focused on lowering tariffs, or duties, on imports. For decades now, however, “free trade” has come to mean trade that is free from regulatory barriers to imports and foreign investors. No country’s democratic process is immune to the resulting pressure. In the United States, consumers lost the right to country-of-origin labeling (COOL) on beef and pork products after Mexico and Canada challenged the rules in the World Trade Organization. The countries argued that keeping track of what meat came from what animals would be so expensive that the giant meatpacking companies would simply stop buying pigs and cows from across the border. Therefore, the law was an unlawful trade barrier. The WTO’s Appellate Body agreed. After it authorized sanctions, Congress quietly repealed the law.

Ireland’s alcohol labeling law could meet a similar fate, but not if CFA can help it. Last year, CFA asked EU regulators to approve the law despite objections from industry and major alcohol exporters like Italy. More recently, CFA and its allies wrote to Commerce Secretary Gina Raimondo to ask U.S. officials not to interfere in the implementation of sound public health policies abroad, policies that should have been adopted in the United States a long time ago.

Indeed, in 2003, CFA and its allies petitioned federal regulators to require basic information on alcohol labels such as the amount of alcohol in fluid ounces per suggested serving, the number of calories, and ingredients. To this day, labeling requirements remain unchanged, although last spring, in response to a lawsuit filed by CFA and other petitioners, the Treasury Department agreed to issue proposed rules requiring standardized alcohol content, calorie, and allergen disclosures. CFA has yet to receive a response to another petition seeking to update the health warning statement on alcoholic beverages for the first time since 1988.

As with Ireland’s proposed law, a new health warning statement on alcohol in the U.S. should alert consumers to the fact that alcohol causes cancer. More than any other element of Ireland’s law, this cancer warning requirement most bothers the industry, but it is sorely needed. Researchers with the American Institute for Cancer Research (AICR) estimate that alcohol may account for as many as 7,300 breast cancer deaths annually—some 15% of all such deaths. Yet just 24.6% of women surveyed in the U.S. think that “drinking alcoholic beverages increases a woman’s chances of getting breast cancer.”

Such a gap between the harms associated with a product, and the awareness of those harms, provides fertile ground for educational policies to improve public health. Ireland is poised to take advantage. Let’s hope U.S. trade officials get out of the way!

Consumer Federation of America Supports Consumer Product Safety Commission Against Unwarranted Attacks

By: Courtney Griffin, Director of Consumer Product Safety

Attacks from regulated industries and some lawmakers are threatening the important work of the Consumer Product Safety Commission (CPSC).  The attacks against the CPSC are consistent with other efforts to weaken the federal agencies that protect consumers and workers.  CFA, with its long history of fighting for consumer protections, supports the CPSC and its critical safety mission.

Established in 1972, the CPSC’s sole mission is to “save lives and keep families safe by reducing the unreasonable risk of injuries and deaths associated with consumer products.”  So, while the CPCS is a small agency, its jurisdiction includes 15,000 types of consumer products.  To accomplish its critical work, CPSC issues and enforces mandatory standards, bans dangerous products for which no feasible standard is possible, obtains recalls of dangerous products, researches product hazards, develops voluntary standards with other groups including businesses, and educates consumers.

The CPSC’s work is important to the safety of all consumers and, in the five decades since its creation, the CPSC has reduced death and injuries from many products.  However, its focus on children’s safety is one of the most significant features of the CPSC’s work.  For example, from 1973 to 2019, crib fatalities decreased by nearly 80%, in part because of the CPSC’s important work.  The CPSC’s mandatory safety standard for cribs went into effect in 2011.  Similarly, from 1972 to 2020, pediatric poisoning for all children decreased 80% and for children under 5, decreased 83%.  This year the CPSC finalized a rule for clothing storage units (CSUs) that will protect children from tip-over-related deaths and injuries. From January 2000 through April 2022, CPSC was aware of 234 total fatalities resulting from CSUs, including 199 child fatalities.

The CPSC has also been active in announcing the recalls of dangerous products.  For example, in January 2023 the CPSC reannounced Fisher-Price’s recall of 4.7 million Rock n’ Play sleepers because the product has been linked to approximately 100 infant deaths.  In June 2023, the CPSC reissued a statement urging consumers to stop using certain recalled Boppy newborn loungers that have been linked to multiple infant deaths.  The Commission has continued to seek information from Meta about the issue of dangerous recalled consumer products, such as the Rock n’ Play sleeper and Boppy newborn lounger, sold on Facebook Marketplace.

CFA strongly believes that consumers deserve a marketplace that is just and transparent. To this end, the CPSC’s work is critical to the health and safety of American consumers.  CFA supports the CPSC’s vital mission and its important work against efforts to undermine its authority.  To support the CPSC in its mission to protect consumers from dangerous products, individuals and organizations should:

• Urge their elected officials to support the CPSC in its critical mission to make the marketplace more consumer driven. Encourage their elected officials to protect the CPSC from efforts to undermine its authority to keep consumers safe.  Let their elected officials know that consumers deserve timely information about the potential hazards in their homes.
• Exercise their rights and participate in agency rulemaking on regulations.
• Report complaints about harm or potential harm from unsafe consumer products at gov. This website can also be used to determine whether anyone has already reported injuries associated with a particular consumer product.
• Search reports and recalls/repairs of unsafe or potentially unsafe consumer products.
• Review CPSC’s safety education materials.
• Review CPSC’s injury statistics and technical reports.
• Learn about the various facets of CPSC’s work or contact the CPSC’s Consumer Ombudsman, who is dedicated to helping the public understand how the CPSC works.
• Learn more about the work of groups that have successfully advocated for safer consumer products, such as Kids in Danger (KID), Parents for Window Blind Safety, and Parents Against Tip-Overs.

The attacks on the CPSC reflect the broader goal of regulated industries and some lawmakers to undermine the authority of federal agencies whose mission it is to protect consumers. As CFA continues to advocate for a marketplace that is just and transparent, trust that we will continue to defend this critical consumer protection agency.

Consumer Groups Urge Congress to Support the PAID Act

Earlier this month Representatives Bonnie Watson Coleman (NJ-12), Rashida Tlaib (MI-12), and Mark Takano (CA-39) reintroduced the Prohibit Auto Insurance Discrimination (PAID) Act, which would ensure insurance companies use only driving-related factors when determining car insurance rates and eligibility. Nineteen consumer groups, including the Consumer Federation of America, sent a letter urging other members of Congress to support and pass this critical legislation.

Nearly every state in the country mandates the purchase of auto insurance. Currently, auto insurance companies can use these discriminatory socio-economic factors to determine a driver’s insurance rate and eligibility:

1. credit score, credit-based insurance score, or consumer report,
2. education level,
3. job or occupation, as well as their employment status,
4. home ownership status,
5. gender and marital status,
6. prior insurance coverage and previous insurers, and
7. home ZIP code or census tract.

“Many consumers are charged hundreds or even thousands of dollars more based on these variables, even though they aren’t related to driving,” said Michael DeLong, CFA’s Research and Advocacy Associate. “Your auto insurance premium should be based on your driving behavior, not your credit score or your job or whether you graduated from college.”

If the PAID Act becomes law, it would “further require all underwriting rules and rate filings by auto insurers to be made publicly available,” and would “require insurers to submit regular information to the Federal Trade Commission to demonstrate that their marketing, underwriting, rating, claims handling, and fraud investigations, and any models or algorithms used in these programs, do not have a disparate impact on consumers based on their race, color, national or ethnic origin, religion, sexual orientation, disability, or gender identity or expression.”

The organizations wrote that if passed, the PAID Act “should also serve as a model for state legislators and regulators who are serious about reducing unfair discrimination in auto insurance markets.”

“The PAID Act would strike a blow for consumers by greatly reducing auto insurance premiums and ensuring that the process is fair and transparent.” said DeLong. “We urge Congress to put consumers first and pass this bill.”

Florida Student Privacy Bill Bans Educational Apps from Selling Data

By: R.J. Cross, Director of Don’t Sell My Data Campaign, PIRG; and Bess Pierre, Intern, Don’t Sell My Data Campaign

Earlier this month, the Florida state legislature passed a new student privacy bill – the Student Online Personal Information Protection Act  – in an effort to bolster student data privacy protections at school.

How does the Florida student privacy bill protect kids? 

Many sites and apps students use for school include secretive technology that harvests student data and sells it to third parties. A 2022 study by Human Rights Watch found that 90% of educational apps do just this – turning a tool for learning into a tool for exploiting minors’ information for commercial gain, usually unbeknownst to students, teachers, and parents alike.

Florida’s bill bans educational platforms from gathering any more information from students than is reasonably necessary to deliver the primary service of being a learning tool. It also bans companies from using student data for any non-educational purposes. This means student data cannot be sold to third parties or used for targeted advertising.

Requiring companies to only gather the data that’s necessary to deliver the service a consumer is expecting to get, and using it for only that purpose, is a principle broadly known as data minimization. Data minimization is a good approach to data privacy. It’s encouraging to see Florida implement it in this law.

How effective is the new Florida student privacy bill?

The bill is a good step towards protecting kids online. There are some open questions left – like how well enforcement will work, and what companies and products the bill will apply to. The Florida Department of Legal Affairs is currently the only enforcer, which is less ideal than if consumers were able to sue offending companies themselves. The bill also only applies to platforms specifically designed for  K-12 education, leaving out a lot of other websites, apps and online tools students interact with on a daily basis.

Still, the bill is a big step forward for student privacy, while Congress considers its next steps.

What happens next? 

The bill goes into effect on July 1, 2023, and the State Board of Education may adopt rules to improve the law’s implementation at a later date.

Meanwhile, however, companies outside the EdTech space will largely continue to be able to collect, sell and use all of our data however they want. It’s essential for all companies to minimize collection for all consumers, not just children. Businesses should also take responsibility for respecting consumer privacy even before policymakers pass strong regulations.

The post CFAnews Update – June 28, 2023 appeared first on Consumer Federation of America.

The post Consumer Organizations Urge Congress to Support the PAID Act, Prohibiting Unfair Auto Insurance Discrimination appeared first on Consumer Federation of America.

The Revolving Door: How a Florida Insurance Commissioner is Going on a Lucrative Career as an Insurance Lobbyist — Likely at the Expense of Consumers

Rock n’ Play Recall Demonstrates How Secrecy Provision of Law Hides Product Dangers from Consumers

Group Letter to Chairman Gensler Spotlights Climate Risks in Private Markets

In the Face of FDA Inaction on Harmful Food Dyes, California Offers Hope of Protecting Consumers

By: Thomas Gremillion, Director of Food Policy

For far too many parents, navigating the food system feels like traversing a minefield. CFA is working to address one source of this anxiety: artificial dyes.

For decades, researchers have suspected that several artificial dyes contribute to hyperactivity and attention deficit disorder in children. These suspicions were recently confirmed by the California Office of Environmental Health Hazard Assessment. After comprehensively and systematically reviewing the evidence, the agency concluded in 2021 that several dyes “cause or exacerbate neurobehavioral problems in some children.” Specifically, the agency’s report fingers the color additives FD&C Blue No. 1, FD&C Blue No. 2, FD&C Green No. 3, FD&C Red No. 3, FD&C Red No. 40, FD&C Yellow No. 5, and FD&C Yellow No. 6.

Last year, CFA joined consumer advocacy partners in petitioning the California Department of Public Health (CDPH) to require a warning label on dye-containing foods and supplements to alert consumers about the adverse effects these dyes have on children’s neurobehavior. Earlier this month, I testified with other petitioner representatives, and experts including toxicologists, epidemiologists, and pediatricians, at a public hearing that CDPH held on the group’s petition. We sought to counter industry trade groups’ and paid consultants’ arguments against acting on the science.

One common argument was that these dyes are safe because the U.S. Food and Drug Administration (FDA) has approved them, and FDA is the expert. However, FDA’s approval of these dyes happened in the 80s or even earlier, before the dawn of the personal computer, never mind the genetic analysis technologies that have shed light on why food dyes appear to cause hyperactivity in some children, and even appear to have as large an effect on children’s behavior as lead does on children’s IQ.

Industry has argued that FDA’s ongoing market surveillance should suffice to ensure public protections against these food dyes remain up-to-date. However, FDA’s market surveillance of the harms caused by these dyes has let consumers down, in part because FDA is underfunded and under resourced. The entire FDA Office of Food Additives Safety—responsible for regulating more than 10,000 chemicals in food and a multi-billion-dollar industry—has just over 100 full-time technical staff. And it does not currently have a director.

According to a 2013 study of over 4,000 chemicals purposely added to food such as flavors, preservatives, and sweeteners, less than 22% had sufficient data to estimate how much is safe to eat, and less than 7% were tested for developmental or reproductive effects. FDA may not even know that a chemical is in the food supply, thanks to the Generally Recognized as Safe (GRAS) process, under which food companies have been allowed to determine themselves that over a thousand food chemicals are Generally Recognized as Safe.

Unfortunately, FDA is not going to stand up for consumers on food dyes, but California can. And one big reason for doing so is to establish a level playing field for companies that want to do the right thing. A few years ago, several large companies including General Mills, Kellogg, and Mars made bold pledges to remove artificial colors from their products, but most of them have not followed through. And no wonder! If a company’s competitors can save money and otherwise take advantage of using these chemicals, it’s hard to make the business case for change.

In Europe, public health authorities have required a warning label on most dyed foods for 15 years. The experience of many leading U.S. companies “across the pond” shows that reformulating foods to remove dyes is feasible and economical. If we arm American consumers with accurate information about food dye harms, we can be confident that it will move the market on this issue just as it has in Europe. Consumers have a right to make educated choices about what foods they purchase and consume. If the FDA can’t stand up to protect consumers, particularly young children, from harmful food dyes, then individual state public health departments should. California, CFA urges you to lead by example and put consumers first.

The Revolving Door: How a Florida Insurance Commissioner is Going on to a Lucrative Career as an Insurance Lobbyist — Likely at the Expense of Consumers

By: Michael DeLong, Insurance Research Advocate

The fifty-one state Insurance Departments are responsible for regulating insurance, protecting consumers, and making sure that insurance rates are not excessive, inadequate, or unfairly discriminatory. Some commissioners are determined to help consumers. Others, less so. Some regulators seem to treat their time in government as a slow-moving job interview for a high-paying positions within the insurance industry. They exit their Department of Insurance through the “revolving door” that connects the agency with the industry, taking lucrative jobs as lobbyists or “government affairs” executives in the insurance sector after they leave their public post.

As the doors are revolving, we also see former industry staff moving into the public agencies as well. The problem is not just limited to the Commissioners—top-level insurance department staff also pass through too often, and it can result in an unhealthy relationship between the insurance industry and the departments that are supposed to oversee them. Not surprisingly, the revolving door can undermine consumer protection and enforcement of the laws. If an Insurance Commissioner plans to get a job at an insurance company after they leave office, they may avoid taking actions that would upset that company. Regulators may even take actions or make decisions enabling them to cash in later, when they join insurance companies that they have regulated. Insurance companies, in turn, hire former Commissioners and regulators to gain personal access to government officials, to seek favorable legislation and regulations, and to get inside information on what Insurance Departments are doing.

A recent poster child of this phenomenon is former Florida Insurance Commissioner David Altmaier, who abruptly resigned late last year to join an insurance lobbying firm.  For fourteen years, Altmaier worked in the Florida Office of Insurance Regulation (OIR), and from 2016 to 2022 he was Florida’s Insurance Commissioner, a period marked by hostility to consumer advocates and consumer protection, and, as his last year concluded, the extraordinary lapse in regulatory oversight of insurers that were low-balling and defrauding policyholders dealing with Hurricane Ian claims.

In late 2022, Altmaier urged the Florida legislature to pass sweeping law changes, claiming that they would stabilize Florida’s troubled property insurance market. The Florida legislature held a short special legislative session in 2022 and enacted these reforms, which created a new layer of reinsurance funded by the state, banned one-way attorneys’ fees in insurance claims litigation, and made it harder for policyholders to bring litigation against insurers.

In a December 2022 letter to Governor Ron DeSantis, Altmaier praised these new laws and wrote that “we have worked with the Florida Legislature to meet historic challenges with historic reforms.” But some observers were more skeptical, doubting that the reform would reduce property insurance costs. In a Twitter post, Florida House Democratic spokesman Jackson Peel asked, “What do you think will be announced first: The next insurance company leaves Florida’s collapsing market or his new high paying job in the insurance industry?”

The answer was the latter, with a slight twist: Altmaier obtained a high paying job at a lobbying firm, as a lobbyist, excuse me, “advocate,”  for the insurance industry. His new is quite explicit about the value of the revolving door: “I leverage over a decade of experience to help insurance and insurance-adjacent entities navigate the complex world of regulation and regulatory policy.”

In that same letter mentioned earlier, Altmaier submitted his resignation, which took effect on December 28^th, 2022—only a couple of weeks later. Why did he depart so quickly? Because on January 1^st, 2023, a new anti-lobbying law took effect. Before then, former Florida agency heads (including former Insurance Commissioners) would be banned from lobbying for two years, and this law extended that lobbying ban to six years. By resigning before the law became operational, Altmaier could avoid this extended ban.

And in March 2023, Altmaier announced that he had a plum new job: he would be joining the Southern Group, the top-earning lobbying firm in Florida. Florida Politics reported that Altmaier “will be utilizing his network of contacts to build a national insurance advisory practice.” Insurance Journal reported that the former Commissioner “will be ‘an extraordinary effective advocate’ at a time that insurance companies need those skills the most.” With no sense of irony or impropriety, the Southern Group’s website announces that “Today, the sharp lines between government, business, and constituencies have blurred.”

In his new job, Altmaier is taking advantage of another loophole in Florida’s anti-lobbying law. The law bans Florida agency heads from lobbying their former agencies—but not from lobbying Florida legislators. Altmaier’s salary is not listed. But we suspect that his new position is quite a bit more lucrative than his old position as Florida Insurance Commissioner.

To summarize: former Florida Insurance Commissioner David Altmaier, in charge of regulating insurance and safeguarding consumers, abruptly resigned from his job, where he was hostile to consumers and cozy with the insurance industry. And not even three months later, he joined Florida’s largest lobbying firm to advocate for insurance companies by using his former contacts and knowledge. This case is a perfect example of the revolving door, where some insurance regulators move seamlessly from public service to very profitable lobbying and influence-peddling.

We invite Florida’s new Insurance Commissioner, Michael Yaworsky, to chart a different path and pledge not to work for the insurance industry when his time at the agency ends.

Rock n’ Play Recall Demonstrates How Secrecy Provision of Law Hides Product Dangers from Consumers

By: Courtney Griffin, Director of Consumer Product Safety

The Consumer Product Safety Commission continues to find recalled Rock n’ Play sleepers listed for sale on Facebook Marketplace, despite representations from Meta, Facebook Marketplace’s owner, that it would take steps to prevent the re-sell of recalled products on its platform.  In his second letter to Mark Zuckerberg, CEO of Meta, CPSC Chair Alex Hoehn-Saric once again urged Meta to do more to stop the illegal sale of recalled consumer products.

In another letter to Mattel and its subsidiary Fisher-Price, Hoehn-Saric also urged the company to take additional steps to protect babies from the hazards posed by recalled Rock n’ Play infant sleepers.  Hoehn-Saric called on the company to announce the recall again and do more to remove Rock n’ Play sleepers from the resell market and homes. According to the CPSC, the average listed price of a Rock n’ Play sleeper on the secondary market is $25, more than what some consumers will receive if they act on the recall.

The CPSC issued a recall on Rock n’ Play sleepers in April 2019 and again in January 2023 because of poor results.  The sleeper has been linked to the deaths of almost 100 infants, with at least 8 occurring after Fisher-Price recalled the product. In a letter to members of Congress in March 2023, Fisher-Price stated that it has “completed more than 465,000 cumulative corrections related to recalled Rock n’ Play sleepers, including product in manufacturer inventory, retailer inventory, and with consumers.”  This amounts to less than 10% of the 4.7 million recalled Rock n’ Play sleepers.

In addition to highlighting how easy it is to purchase dangerous recalled products, the Rock n’ Play saga also demonstrates how dangerous products flood the market because of the unique restrictions that govern the CPSC’s public disclosure of information.  Section 6(b), 15 U.S.C. § 2055(b), a provision of the Consumer Product Safety Act (CPSA), prohibits the CPSC from disclosing information about a consumer product that identifies a manufacturer or private labeler unless the CPSC has taken “reasonable steps” to assure that the information is accurate, the disclosure is fair and reasonably related to effectuating the purposes of the CPSC.  As such, the CPSC must provide the manufacturer or private labeler with an opportunity to comment on the accuracy of the information, and the CPSC may not disclose such information for at least 15 days after sending it to the company for comment.  The reality, however, is that the process between the CPSC and manufacturers or private labelers often takes many years before the information can be disclosed to the public.

In the case of the Rock n’ Play, it remained on the market for a decade despite infant deaths tied to the product.  The CPSC issued an alert in May 2018 regarding “infant deaths associated with inclined sleep products,” but did not identify specific products in a way that was helpful for most caregivers.  However, it was an accidental disclosure of information that prompted the events leading to the Rock n’ Play’s recall.  While reviewing data it requested from the CPSC, Consumer Reports found several infant fatalities linked to the Rock n’ Play and similar products.  Under section 6(b) that data should have been redacted but the agency had made a mistake and released the information to Consumer Reports.  By the April 2019 recall, approximately 4.7 million Rock n’ Play sleepers had flooded the market.

Recently the CPSC issued a Supplemental Notice of Proposed Rulemaking to update the regulation interpreting section 6(b).  The Supplemental Notice of Proposed Rulemaking did not in any way repeal or significantly alter the main restrictions of section 6(b), but the proposed changes would streamline and modernize the regulation interpreting the statute.  CFA submitted public comments supporting the minor changes, but stated that repeal of section 6(b) is necessary to promote consumer safety and transparency.

Senator Richard Blumenthal (D-CT) and Representative Jan Schakowsky (D-IL) reintroduced the Sunshine in Product Safety Act in March 2023. In a related press release, Senator Blumenthal said: “This measure removes the regulatory straight jacket that deprives consumers of vital product safety information. Current regulatory requirements give companies the right to veto vital CPSC warnings and deny the truth to consumers. By repealing Section 6(b), our measure would free the CPSC to swiftly warn the public about hazardous products and require companies to put people ahead of profits.”

In the same press release Congresswoman Schakowsky said, “Section 6(b) of the Consumer Product Safety Act prevents the Consumer Product Safety Commission (CPSC) from telling the public about potentially dangerous products without the company’s permission. Simply put, it protects companies over consumers. This cannot stand.” 

Blumenthal and Schakowsky previously introduced the Sunshine in Product Safety Act in April 2021 after reports that Peloton obstructed the CPSC’s investigation following injuries and a child’s death.

CFA strongly supports the Sunshine in Product Safety Act, stating in the bill’s press release: “It is time for Congress to stop allowing companies to put the lives of consumers, especially our most vulnerable, in danger.  We applaud Senator Blumenthal and Congresswoman Schakowsky for valuing transparency and the lives of consumers by introducing the Sunshine in Product Safety Act. It is past time to repeal the gag order that is Section 6(b) and allow the Consumer Product Safety Commission to do its life-saving work to the best of its ability.”

Caregivers have an expectation that the products they purchase, especially products for babies and children, are safe.  Yet the CPSC cannot share critical, sometimes life-saving information.  CFA and other product safety advocates support the Sunshine in Product Safety Act for this reason.  It is important that we let our elected officials know that companies should not be able to hide or delay critical safety information.  Consumers deserve timely information about the potential hazards in their homes and babies deserve to sleep in safe products. It is imperative that Congress passes the Sunshine in Product Safety Act to protect consumers.

Group Letter to Chairman Gensler Spotlights Climate Risks in Private Markets

By: Dylan Bruce, Financial Services Counsel

On April 4, a diverse group of organizations, including investor protection and shareholder advocates, climate advocates, and businesses, wrote to Securities and Exchange Commission Chairman Gary Gensler to highlight how private markets contribute to and exacerbate climate-related risks for investors and our financial system and what the Commission must do to meet these growing risks.

Specifically, the letter discusses the troubling and emerging trend of public companies shifting carbon-intensive, “dirty” assets from their balance sheets into private markets, a practice known as “brown spinning.” These transactions, which can effectively remove high emitting assets out of publicly available disclosures and into the shadows of private markets, are increasingly being employed in emissions-intensive industries, often to meet seemingly altruistic climate goals. Regrettably, the net effect is that the climate impacting assets and activities continue unabated while the associated climate-related risks for investors and markets become worse and more difficult to assess. As the letter states, “The ability of private companies to stay dark and of public companies to shift dirty assets into the dark could mean that the overall levels of emissions and climate impacting activities could remain the same, or perhaps even grow. If private markets become a de facto risk repository for the dirtiest assets, then despite the Commission’s best efforts to facilitate relevant climate-related information, investors would remain in the dark about these risks, unable to price these risks effectively or ascertain their true exposure to these risks.”

To address this issue, the letter urges the Commission to take decisive action to limit companies’ ability to hide climate-related risks in private markets and to promote the health and vitality of public markets generally. This can be done in part by reining in the excessive growth of private markets. Accordingly, the SEC should move forward with several regulatory proposals that are currently on the Agency’s agenda, including updating the Accredited Investor definition, making modest changes to the Regulation D framework, and making long overdue changes to Section 12(g) of the Exchange Act. The letter observes that “these updates would stem the growth of private markets and encourage companies to go public, where they would be subject to public disclosure requirements, including disclosure of their climate- and other Environmental, Social, and Governance-related risks.”

Unless the structural problems that allow companies to effectively hide dirty assets in private markets are addressed, “the Commission’s efforts to improve climate disclosures [for public issuers] will, at best, be a partial success, leaving a wide swath of investors and our markets vulnerable to the profound risks of climate change, and compounding the unhealthy imbalance between public and private markets that exists today.”

The post CFAnews Update – April 27, 2023 appeared first on Consumer Federation of America.

Aside from the unfairness of charging two good drivers different premiums solely due to their gender, insurers’ inconsistent use of gender indicates that it is not a reliable factor in risk-based pricing, as insurers do not agree on gender-based risk of loss.

The data, purchased by CFA from Quadrant Information Services, used insurers’ rate plans filed with the state to calculate the premium for a 35-year-old unmarried driver with no accidents, moving violations, license suspensions, or lapses in coverage, and who has a high school diploma and rents their home. They drive a 2011 Honda Civic LX and have a 12-mile commute, five days a week, for 12,000 miles driven annually. The premium quote is for insurance at the state minimum liability coverage requirement.

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