“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.”

The post $20 Million+ Returned to Nevada Drivers Due to Pandemic Prohibition on Auto Insurance Penalties Based on Credit Score 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.

The post Consumer Federation of America Urges DC Insurance Department to Release Auto Insurance Report and Protect Consumers From Risks of Climate Change appeared first on Consumer Federation of America.

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.

The post Consumer Federation of America and Consumer Reports Oppose Weak Telematics Bill That Would Not Protect Consumers appeared first on Consumer Federation of America.

The post Consumer Federation of America Urges Support for S553, Which Would Regulate Auto Insurance Telematics Programs 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.

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.

The post Women Pay More: Auto Insurance Gender Discrimination in Louisiana appeared first on Consumer Federation of America.

The post Report: The Thousand Dollar Insurance Penalty: How Insurance Companies’ Credit Scoring and ZIP Code Rating Push Up Premiums for Safe Drivers in New York appeared first on Consumer Federation of America.

The report is prompting calls from CFA and New Yorkers for Responsible Lending for state lawmakers to protect drivers from discriminatory auto insurance pricing. The groups are supporting legislation introduced by Assembly Majority Leader Crystal Peoples-Stokes that would prohibit insurers from using a driver’s credit history and other socioeconomic factors to determine how much they pay for auto coverage.

“On average, New Yorkers with poor credit are charged almost three times as much for auto insurance as residents with excellent credit, even if they have the exact same driving history, and the credit penalties are most severe in the state’s majority Black and Latino ZIP codes,” said Douglas Heller, CFA’s Director of Insurance. “State law requires every driver to buy auto insurance, so the Legislature and Governor have a special obligation to ensure that pricing is fair and reasonable and they should take action to address the unfairness of credit-based premium hikes for good drivers.”

CFA acquired auto insurance premium data for every ZIP code in New York from Quadrant Information Services LLC for ten New York auto insurers, representing about 80% of the state insurance market. Analysis of the data found significant differences in premiums for New Yorkers solely due to their credit history. The data below show the average premium (weighted by company market share) charged for the minimum required auto insurance coverage to residents with clean driving records. 

In percentage terms, the penalty for having fair credit rather than excellent credit is a 57% premium hike.  Drivers with poor credit pay 187% more on average.

“People have poor credit for a lot of reasons—including medical crises, job losses, poverty, and the legacy and persistence of systemic bias in financial services – and the price they pay for mandatory auto insurance should not be impacted by their credit history,” said Michael DeLong, CFA’s Research and Advocacy Associate. “With this report, we hope state officials will come to understand just how harsh the insurance industry’s credit penalties are on financially vulnerable New Yorkers.” 

In certain cities and boroughs, credit surcharges are even worse than the statewide average. For example, Buffalo drivers with poor credit pay on average $2,259 for auto insurance. Queens drivers with poor credit pay an average of $5,152. And Brooklyn drivers with poor credit face premiums averaging $5,971 annually. 

As the study reveals, average premiums are already much higher in New York’s communities of color due to the ZIP code pricing that companies use. Since Black and Latino consumers are more likely to have poorer credit than white consumers, as other research demonstrates, the combination of the credit penalty and the impact of ZIP code pricing brings into stark relief the severity of credit-based insurance premiums. 

“Using socioeconomic and non-driving factors that are not inherently related to a person’s ability to operate a car safely forces good drivers who are of lower socioeconomic status to pay more for our state’s obligatory auto insurance,” said Assembly Majority Leader Crystal Peoples-Stokes.  “I am deeply concerned that the use of credit history is having a highly negative impact on low and moderate income drivers, especially Black and Latino drivers who live in neighborhoods where auto insurance is already very expensive.”

In addition to its own data analysis, CFA highlights the findings of a 2015 study by Consumer Reports, which shows that the credit penalty on low credit safe drivers serves to subsidize the premiums currently charged to more dangerous drivers who happen to have high credit scores.  The Consumer Reports study found that New York drivers with poor credit and a clean driving record were charged $589 more on average than drivers with excellent credit and a drunk driving conviction.

“It makes absolutely no sense that a good driver with a poor credit record can end up paying hundreds of dollars more for insurance than someone with a DUI conviction who happens to have excellent credit,” said Chuck Bell, advocacy program director for Consumer Reports.  “Insurance should be priced fairly based on a person’s driving record, not on credit scores that result in higher premiums for low income drivers and communities of color.” 

While New York law currently allows insurance companies to incorporate consumer credit history into insurance pricing, it prohibits insurers from unfairly discriminating against any customer.  In 2017, the New York Department of Financial Services adopted new rules aimed at preventing unfair discrimination by insurers that sought to vary auto insurance premiums based on drivers’ level of education or their occupation. 

“Auto insurance is already extremely costly in many low- and moderate-income neighborhoods and communities of color, and the use of credit scoring is making it worse,” said David R. Jones, President and CEO of the Community Service Society. “We strongly support bill A843 which will ban the use of credit history and other socioeconomic factors like gender and housing status for auto insurance pricing.” 

Consumer Federation of America, noting that three states (California, Hawaii, and Massachusetts) prohibit the use of credit in insurance pricing, urges lawmakers, the Governor, and the Department of Financial Services to review its report and take action to eliminate the use of credit history in auto insurance pricing.

The post Report Finds New York Drivers Pay Far More for Auto Insurance Solely Based on Their Credit Scores and Black and Latino Drivers Face Steepest Price Hikes appeared first on Consumer Federation of America.

Consumer Federation of America and the Center for Economic Justice, which jointly submitted an amicus curiae brief to the Supreme Court, hailed the decision as an important protection for Nevada drivers, especially as the elimination of pandemic-related financial protections puts many at risk of credit score declines. The rule that was upheld prohibits insurance companies from using credit-based insurance scores to increase premiums until May 2024. This means that drivers will be temporarily protected from insurance premium increases resulting from credit declines stemming from the financial toll the pandemic has taken on Nevadans.

“Thanks to the work of the Division and the ruling of the state Supreme Court, Nevadans who suffered during the pandemic and who may be financially vulnerable will be protected from unnecessary and unfair auto, home, and renters’ insurance rate hikes,” said Douglas Heller, Director of Insurance for Consumer Federation of America. “State law requires all drivers to carry auto insurance and banks require homeowners to maintain coverage as well. This rule will ensure that for the next year, people who are trying to get back on their feet won’t be penalized on their insurance premiums just because the pandemic created financial hardships.

“The insurance industry offered a miasma of misinformation and disingenuous arguments about unfair discrimination in insurance and the Commissioner’s authority to stop unfair practices,” said Birny Birnbaum, Director of the Center for Economic Justice. “Had the Court accepted these arguments, it would have effectively ended consumer protection in insurance in Nevada. Thankfully the Court rejected all the industry arguments. We thank Commissioner Richardson and the Nevada Attorney General for standing up to the insurance industry’s onslaught—funded by policyholder premiums!—against insurance consumer protection.”

As CFA and CEJ explained in its brief to the Court, the COVID-19 pandemic and responses caused massive disruptions, severing any link that insurers claimed to exist between a consumer’s credit history and their insurance risk.

The protections created by the Division’s rule will ensure that consumers whose credit declines over the next year will not face credit-related premium increases due to any change in their credit reports or credit-based insurance scores that occurred on or after March 1^st, 2020. The consumer groups are urging insurers to comply with the Court order immediately, and urging the Division of Insurance to take action against insurers that continue to impose credit-based penalties on Nevada customers.

The amicus brief of CFA and CEJ was submitted pro bono by Debbie Leonard at Leonard Law, PC, an attorney who focuses her work on advocacy and mediation.

Contacts:
Doug Heller, 310-480-4170
Birny Birnbaum, 512-784-7663

The post In Victory for Consumers, Nevada Supreme Court Upholds Temporary Ban on Credit-Based Insurance Price Hikes appeared first on Consumer Federation of America.

• In 2015, we found that in the densest urban communities, the average premium in predominantly African-American ZIP codes was 60% higher than the average premium in equally dense predominantly white urban ZIP codes.
• In 2018, CFA detailed racial and economic disparities in auto insurance pricing along adjacent ZIP codes.
• Between 2020 and 2022, the New York Times reported a series of stories of unfair treatment of Black customers in the claims handling process.

However, the industry has long denied even the possibility that institutional bias affects insurance markets and has fought reform efforts at every turn, usually claiming that (notwithstanding CFA’s research) there is no evidence of racially biased outcomes in the insurance market. And that leads us to the important work that is percolating in a few insurance departments around the country (and the need for other state regulators to start testing these insurance industry arguments).

The District of Columbia Department of Insurance, Securities, and Banking is expected to issue a data call requiring insurance companies to provide information on their underwriting, rating, and claims payments that could shed light on the nature and extent of unintentional bias in the auto insurance market. The Department is working with the algorithm auditors at ORCAA, founded by Weapons of Math Destruction author Cathy O’Neil, to conduct the review.

The call will collect information on the following topics:

• Insurance quotes—whether certain people or groups of people are being quoted higher prices
• Underwriting decisions—whether certain groups are more likely to be rejected for coverage, or given more expensive insurance options
• Premiums—whether certain people or groups are paying higher premiums
• Loss ratio—whether certain groups are getting unfairly charged higher premiums compared to the insurance losses they sustain

Why should consumers care about this? Because discrimination and racism are rampant in auto insurance, but so far auto insurance companies have fought hard against transparency and accountability. For years consumer advocates and racial justice groups have called for investigations of bias and discrimination in insurance. Consumer Federation of America’s investigations have found considerable bias in auto insurance premiums. Moreover, bias doesn’t have to be explicit to harm consumers. An algorithm or practice can be unintentionally biased if it uses bad data, which can result in Black consumers paying higher premiums or being unable to get affordable insurance at all. And the Department’s data call will not only allow us to look at the whole auto insurance market in Washington D.C., but determine how serious the abuse is and decide what to do about it.

While CFA offered some important suggestions for improving the data call, we applaud the Department’s efforts to collect data on unintentional bias in auto insurance, and to determine how to reduce this bias. This data call is a sign that the District of Columbia insurance regulators, like the Colorado Division of Insurance which is developing rules for bias testing of the state’s insurance companies, are taking on the challenge of rooting out the legacy of structural racism and other institutional biases from the insurance market.

Consumer Federation of America submitted comments on how the D.C. data call can be made even better. First, the Department could use the standardized data request that the National Association of Insurance Commissioners developed to collect information, which will make the process simpler and more familiar to the insurance companies when they report data. Second, the Department should collect information about various socioeconomic factors that auto insurance companies use in their business models that (according to CFA’s research) often lead to unfair discrimination against certain classes of consumers. These factors include:

• Someone’s education level (whether they graduated from high school or college);
• Employment status and their job/occupation;
• Homeownership status (whether they own or rent their home);
• Credit information (auto insurers charge people much higher premiums to safe drivers who have fair or poor credit) ;
• Whether their car was purchased new or used; and
• Whether they previously bought minimum insurance coverage or a more robust policy, among others.

Additionally, the Department should collect information about whether insurance claims were flagged for further investigations due to potential fraud, and whether that results in unfair bias.

Finally, we urged the Department to ask insurance companies if any of their divisions maintain information about the race, ethnicity, or national origin of their consumers, and if they do have that information, to provide it. The Department is using an analysis known as BISG (Bayesian Improved Surname and Geocoding) to match demographic data to the insurance data, which is considered an effective and useful way to conduct this type of analysis. However, if insurers – for example, in their marketing divisions – have precise data on the race of their customers, it would allow for an even more precise analysis of the biases in their pricing and practices.

We’ll continue advocating in support of the D.C. and Colorado regulators’ efforts to identify and reform the systems that lead to or exhibit unfair discrimination and bias in the insurance industry. But American consumers need more than two regulators working to fix this problem; there are 49 other state insurance commissioners that need to be challenging insurers in their states to eliminate the unfair and costly impacts of both internal and systemic biases in the insurance system.

The post What Might a Concerned Regulator Do About Systemic and Unintentional Biases in Insurance Markets? Collect and Test the Data appeared first on Consumer Federation of America.

In this presentation to the Consumer Liaison Committee at the 2022 fall meeting of the National Association of Insurance Commissioners, Consumer Federation of America calls on insurance regulators to adopt the following telematics reforms:

1) Laws and bulletins requiring transparency in telematics

2) Strict standards for data collected and used by insurers

3) Transparency regarding the algorithms are that are used in these programs

4) Strong measures to protect consumer privacy, and testing to weed out unfair discrimination and racism.

The post Telematics in Insurance Presentation: National Association of Insurance Commissioners appeared first on Consumer Federation of America.

Ferguson told reporters that he had opened an investigation into auto insurers’ use of consumer credit history in pricing and selling insurance. In response, PEMCO Mutual Insurance Company and Progressive Insurance filed a lawsuit in court, attempting to secretly quash this investigation. But a Thurston County Superior Court judge rejected this attempt—and the insurers’ effort to block the investigation wound up making it public!

The Attorney General also commented that unfair and discriminatory business practices are illegal and “that significant evidence shows that using credit history to price insurance disproportionately affects people of color.” He cited past studies on this by the Consumer Federation of America (CFA) and concluded, “My office has a responsibility to investigate race discrimination against Washingtonians. I intend to do that.”

Auto insurers use many non-driving related factors to unfairly discriminate against consumers and charge them higher premiums. One of the worst factors is someone’s credit history, which results in people paying far more for auto insurance and disproportionately harms Black and Latino consumers.

Last year CFA conducted a study of auto insurance in Washington State and found the following startling examples of unfair discrimination based on someone’s credit history. Washington consumers with poor credit paid, on average 79%, or $370 more, for auto insurance than consumers with excellent credit, even if both sets of consumers had a perfect driving record.

Progressive charged its consumers a more significant penalty. People with excellent credit paid an average of $311 for auto insurance, while people with poor credit paid $648—108% more!

And PEMCO charged consumers even greater credit penalties! On average, PEMCO consumers with fair credit paid 68% higher premiums, and consumers with poor credit wound up paying 183% higher premiums, almost three times more! It is important to remember that these drivers had a perfect driving record, with no tickets, crashes, or claims filed. Consumers should not be paying such outrageously high premiums—your auto insurance premium should be based on your driving behavior, not your credit history.

However, it gets worse: because of past and present discrimination, Black consumers are less likely to have access to financial services and more likely to have poor credit. Using information from the U.S. Census Bureau 2018 American Community Survey, we found that Black consumers are more likely to have a credit score below 620, meaning they experience a significant penalty. 5.4% of white consumers have a credit score below 620, but 21.3% of Black consumers have a credit score below that threshold. And Black consumers have an average credit score of 677, significantly lower than the average credit score of 734 for white consumers.

As a result, when insurance companies discriminate against consumers and charge them higher premiums based on their credit, this discrimination disproportionately harms Black consumers and perpetuates systemic racism. They often have to pay more for auto insurance even though they often earn less. And this is the case not just in Washington State, but in every state that allows auto insurers to use someone’s credit history.

But the situation gets even worse! After the Washington State Attorney General’s office opened an investigation into potential racial discrimination against drivers in general, and the use of credit histories in particular, PEMCO and Progressive decided to thwart the investigation secretly. The companies didn’t stand up and provide evidence that their using credit history wasn’t harming Black consumers, because the evidence was overwhelming. Instead, they did something far more shameful. They filed a secret court case in an effort to block the Attorney General from even gathering information. Instead of being honest with their policyholders and the general public, PEMCO and Progressive turned to the judicial equivalent of the “smoke-filled room.”

Thankfully the court slapped down the insurers’ attempt. Consumers need all the information about insurance that they can get. And since Washington State requires drivers to purchase and maintain insurance, regulators (including the Attorney General’s Office) have a responsibility to ensure that insurance is affordable and that consumers don’t encounter unfair discrimination. When consumers can’t afford auto insurance, they either can’t drive at all and are forced rely on public transportation, or they drive without insurance, breaking the law and putting themselves at risk of getting fined, having their car impounded, or going to jail.

The Washington State Attorney General’s investigation of auto insurers for potential race discrimination, especially based on credit history, is a welcome development. We look forward to seeing what the investigation finds—and the secretive attempts by PEMCO and Progressive suggest that where there’s smoke, there’s fire.

Anyone with information about PEMCO’s or Progressive’s use of credit history in auto insurance, or racial discrimination, especially people who think that this use has resulted in them being discriminated against, should contact the Attorney General’s Office at AutoInsurance@atg.wa.gov.

The post Insurance Companies Fail to Quash Investigation of Possible Racial Discrimination Against Washington Drivers appeared first on Consumer Federation of America.

“When auto insurers price drivers based on their credit history, people of color tend to pay more because of systemic bias and discrimination in our nation,” said Douglas Heller, CFA’s Director of Insurance. “The Attorney General’s investigation of racial discrimination in this market is especially important because Washington law requires all drivers to buy car insurance. Our research found that consumers with poor credit pay 79% more on average than excellent credit customers, even if the lower-credit driver has a perfect driving record. Some insurance companies charge credit-based penalties on the order of 185% surcharge on safe drivers.

“The attempt by at least two insurers to stop Attorney General Ferguson from investigating the relationship between the use of credit and drivers’ race or ethnicity suggests that these companies are concerned about what will be uncovered. Of course, the Attorney General should be allowed to investigate business practices that appear to disproportionately harm consumers based on their race or ethnicity, and he should bring legal action against any company violating Washington law. The use of credit scoring, which impacts not only insurance pricing but also marketing and claims handling, has been a tool of unfair discrimination in the insurance market for many years, and we look forward to the findings from the Attorney General’s investigation.”

The post Washington State Attorney General Investigating Possible Racial Discrimination Due to Auto Insurers’ Use of Credit Scores appeared first on Consumer Federation of America.

Progressive calls these high-value customers the Robinsons. The Robinsons represent households who own their home and car and bundle their homeowners and auto insurance with the same company. An even more ideal Robinson household for Progressive would have multiple vehicles and drivers.

Progressive considers these customers extremely profitable for several reasons:

1. The company believes they tend to remain with their insurance companies for a long time, with 45% of Robinsons having been with their insurer for eleven years or more.
2. Many Robinsons (41% according to J.D. Power’s auto insurance survey) select their insurance company in order to bundle homeowners insurance and auto insurance, so they purchase additional products.
3. Progressive has already designed and streamlined its quoting system for these bundles, in order to attract Robinsons and make their shopping and signing up as quick and painless as possible.
4. 53% of Robinsons intend to renew their insurance policies with their current company, a much higher percentage than any other category of consumers.

For Progressive, the Robinsons are its ideal insurance customers and the company devotes significant time and effort enticing them to purchase policies. Insurance Journal notes that “they all represent the ideal scenario for lifetime value;” i.e., the total worth to an insurer of a customer over the whole period of their relationship. Progressive and other companies know that it is easier and cost effective to keep existing customers than to acquire new ones. Therefore Progressive goes to extreme lengths to specifically enroll the Robinsons, offering them discounted auto rates to begin a relationship, then encouraging them to bundle that initial policy with their homeowners insurance, and then suggesting additional policies and products.

If Progressive can successfully recruit the Robinsons, entice them to bundle their policies and is able to keep them happy and loyal, the Robinsons will wind up paying auto and homeowners insurance premiums to Progressive for years. If the Robinsons are wealthy, that opens up even more opportunities for products such as life insurance, a second home, a motorcycle, an RV or even boat insurance. These ideal customers are the foundation of Progressive’s profits since they tend to remain loyal, their premiums can go up year after year, and they buy more than one policy.

If, however, you are not a Robinson, Progressive will adopt a less favorable attitude, considering you of lower value. The Wrights are similar to the Robinsons except they do not bundle their insurance policies, and so aren’t as loyal or lucrative. Below them are the Dianes, who rent their homes instead of owning them, and have auto insurance and other products. And finally there are the Sams, who only have auto insurance. These customers are more inclined to shop around for different products and less inclined to remain with one company. The Wright families renew their policies with the company at a rate of 45%, and the Dianes and Sams are sensitive to price increases. So if Progressive increases the premiums for these customers, it runs the risk that they will investigate other insurance companies and switch to them if those companies offer better deals. Progressive prefers not to invest in serving the type of customers who are too price-sensitive to buy more and more coverage or to stick around when rates rise.

Progressive values customers who stick with them for a long period of time and who buy multiple products, and so the insurance company lavishes attention on their Robinsons. But the other customers that are savvier or that buy fewer products are considered less important and deserving of less attention. What Progressive blurted out during its finance call serves as a reminder that while the insurers present their good neighbor faces in the advertisements, they are not out there to make friends: they will track you, classify you, and slice and dice you before deciding how they treat you when you knock on their door. And if you’re a Sam or Diane, well there are no Cheers for you!

Even if you are a Robinson getting the best treatment, don’t forget that what they see in you is the opportunity to make the most profit. But with escalating premiums, consumers of every category are getting increasingly frustrated. We strongly encourage all consumers, Sams, Dianes, Wrights, and Robinsons alike, to take a careful look at their insurance company and comparison shop. Your insurer, despite their claims to the contrary, only views you as a source of revenue. And you should likewise be pragmatic. If they think of us as Dianes and Sams, you should consider them a Gordon Gekko or Mr. Burns.

The post Meet the Robinsons: Progressive’s Ideal Insurance Customers—And Woe to All Others appeared first on Consumer Federation of America.

“Getting claims paid after Hurricane Ian must not become a second disaster for the policyholders who will rely on the insurance companies in the weeks and months ahead,” said Douglas Heller, CFA’s Director of Insurance. “We hope insurers will be good partners in the recovery and rebuilding to come, but history tells us that policyholders and regulators must stay vigilant to ensure fair treatment.”

“Home and flood insurance funds should be the fastest and best source of recovery help for the home and business owners who’ve been devastated by Ian,” said Amy Bach, Executive Director of United Policyholders. “Finding trustworthy repair pros and temporary living arrangements will be very hard – the last thing victims need is insurers balking at paying in full and on time. Through our Roadmap to Recovery program, UP 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: www.uphelp.org/IAN early and often.”

Many Ian 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.

The two leading national consumer groups recommend that insured property owners with damaged homes take the following steps:

1. Contact your insurance company and report your claim as soon as possible. Depending on what caused the damage to your home, your claim may be covered by wind insurance or flood insurance, or by both.
2. Document damage in photos and video 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 photo-documented.
3. Keep a daily journal, noting each time you speak or meet with insurance company adjusters, repair pros, or anyone you are considering hiring. Note their name and the date and time of the contact.
4. Maintain receipts for every cost you incur; this includes hotel and food costs when you evacuate, any alternative living arrangement 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 policies.
5. Check references and license status before you agree to hire or assign any of your insurance benefits to any professional. Post-disaster scams are common. Local help is preferable but if not available, be careful vetting out-of-the-area pros before you sign on the dotted line.
6. Contact your Insurance Department and FEMA (for flood claims) if you run into problems::

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

South Carolina Department of Insurance
803-737-6180
1201 Main St #1000, Columbia, SC 29201
consumers@doi.sc.gov
File a complaint: https://sbs.naic.org/solar-web/pages/public/onlineComplaintForm/onlineComplaintForm.jsf?state=SC&dswid=3785

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

Contacts:
Doug Heller, 310-480-4170
Amy Bach, 415-713-3040

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

However, numerous consumer advocates have pointed out that insurance has a long history of unfair discrimination, bias, and racist practices that result in unrepresentative workforces and injustices in the marketplace.

On Tuesday, September 20th, the House Subcommittee on Diversity and Inclusion held a hearing examining diversity and inclusion at the biggest insurers across the nation. They requested data from insurance companies that received direct premiums of $7 billion or more to report and comment on their practices and policies.

The results were not pretty. Despite a flurry of statements and pledges, from 2017 to 2021 there was little change in racial, ethnic, or gender representation among insurance company employees. In 2021, the largest insurers had a lower percentage of employees of color (30.5%) compared to banks or the biggest investment firms. People of color were underrepresented in executive level positions, making up only 16.2% of those positions. Women were underrepresented as well, making up only 33.5% of those positions. Both groups were underrepresented on insurance boards.

Actions speak louder than words; despite insurers proclaiming their commitment to diversity and inclusion, the Committee found that the average budget insurers allocated to these subjects was $5.3 million, or 0.24% of their average total budget. That means that out of every $100 in an insurance company’s budget, the company is spending 24 cents on promoting inclusion and recruiting diverse candidates.

Members of Congress were not impressed. Chairwoman Joyce Beatty (OH) called the report’s findings “disappointing” and told the witnesses “none of you are doing well enough.” When an Allstate representative attempted to spin these facts and claimed that the situation wasn’t too bad, Beatty sharply pointed out that 24 of 27 insurance CEOs were white men. Rep. Maxine Waters (CA) lectured the insurers that “your response is not very good. You have to do better. All the insurance companies have to do better.” Finally, Rep. Chuy Garcia (IL) called out the insurers for their abysmal record on Latino employees—Latinos make up 8.8% of the insurance workforce and only 3.1% of insurance leaders.

While strong on the problems that insurers have with internal diversity and inclusion, the House subcommittee did not specifically focus on the deep-seated inequities in the insurance marketplace that punish tens of millions of consumers of color who are required to purchase insurance products by the government, lenders, and landlords. Whether through unfair pricing practices that use socioeconomic factors to jack up premiums or built-in biases that disproportionately flag policyholders in Black communities for fraud, insurance tends to cost more and provide less to people of color in America. The only member to mention this was Rep. Rashida Tlaib of Michigan, who gave a powerful speech about how the lack of diversity in insurance companies has harmed consumers. She listed a number of harmful nondriving factors—education level, occupation, credit score, gender, homeownership status, ZIP code/neighborhood—and asked rhetorically, “What do these have to do with being a safe driver?” The Allstate representative responded that she would connect Tlaib with people who could explain this.

The House hearing demonstrated how weak and dishonest insurers’ commitment to diversity and inclusion is. But the subcommittee could and should have gone further by looking more deeply at the way this interacts with the daily injustices consumers face in the market. In comments submitted for the record, Consumer Federation of America emphasized that

Congress must also investigate the inequities and discrimination that plague the insurance industry… we cannot wait and hope that examining diversity and inclusion will change the patterns and outcomes of decades of industry practices and biases. A hearing on diversity and inclusion at large insurance companies is not enough to address the inequities that are a chief target of this subcommittee. Therefore, we urge the subcommittee to follow this D&I hearing with a subsequent hearing on the biases, discrimination, and inequities faced by consumers.

For example, in March 2022 a whistleblower at State Farm, the nation’s largest insurer, told the New York Times that she was witness to discriminatory practices aimed at Black policyholders and claimants that resulted in disproportionately large numbers of claims denials and anti-fraud investigations for Black customers. The whistleblower alleges that the company’s practices were “simply a means of denying payment of millions of dollars to African Americans and other minority policyholders.” Yet the House committee did not discuss this allegation—and it should have.

When auto insurers use socioeconomic factors to underwrite and rate their prospective customers, these factors often serve as proxies for income and race. CFA and other consumer groups have conducted many studies over the years and found overwhelming evidence that these factors consistently lead to higher rates for safe drivers who are also disproportionately people of color and who have lower incomes.

The House hearing was a good beginning. But in order to uncover the true harm caused by the lack of diversity and inclusion in insurance and the high costs paid by consumers as a result, the subcommittee will need to probe deeper.

The post A House Committee Examined Diversity and Inclusion at America’s Largest Insurers. The Results Were Not Pretty. appeared first on Consumer Federation of America.

In a letter sent to Commissioner Clark earlier this week, CFA wrote that, especially because Kentucky law requires every driver to buy insurance, “it is critical that consumers do not face unfair discrimination, and that historic, institutional, and algorithmic biases do not create disproportionate burdens on consumers according to their race, ethnicity, or socio-economic status.”

CFA acquired premium data on the cost of basic auto insurance in every ZIP code in the state of Kentucky from some of Kentucky’s largest insurers. In the data, CFA found dramatic price differences based on consumers’ credit history and the neighborhood in which they live. Statewide, Kentucky drivers with a perfect driving record and excellent credit pay an average premium of $689, but if drivers with the same driving record have fair credit, their premium climbs to $1,080. If the driver has the same driving record but has poor credit, their premium is $1,625—meaning they pay 136% more just because of their credit.

The analysis also found that this credit discrimination is compounded by auto insurers’ discrimination based on territory. In Louisville, the data show that mostly Black, low-income ZIP codes pay far higher premiums compared to mostly white, wealthy ZIP codes. Good drivers in some ZIP codes pay almost $2,000 more annually for auto insurance, as demonstrated below.

Average Good Driver Premium for Minimum Limits Auto Insurance, by ZIP and Credit History

CFA’s analysis expands upon research conducted early this month by Louisville’s WAVE 3 news, which focused on price differences among different ZIP Codes, but did not address the impact of residents’ credit history on rates. When WAVE 3 asked the Kentucky Department of Insurance what they were doing about this injustice, the Department reportedly said, “this is not a Louisville-specific issue.”

“Kentucky requires all drivers to have auto insurance, but the Department isn’t doing enough to make auto insurance affordable or to prevent unfair discrimination in the market,” said Michael DeLong, CFA’s Research and Advocacy Associate. “They should investigate this discrimination, prohibit credit-based pricing and block the kind of territorial rating that leads to the unacceptable disparities we see in Louisville. Kentucky consumers deserve better.”

Contacts:
Michael DeLong, 925-708-1135
Doug Heller, 310-480-4170

The post Kentucky Department of Insurance Should Act to Stop Discriminatory Pricing of Auto Insurance appeared first on Consumer Federation of America.

In light of the investigative report and CFA’s own research into Kentucky’s auto insurance pricing practices, CFA urged the Department to take the following actions:

1. Investigate insurance company pricing practices and customer premiums to identify any
   proxy discrimination or disparate impacts in the Kentucky auto insurance market. We
   point to investigations and actions begun by insurance regulators in Washington, D.C.,
   Colorado, and California as potential starting points;
2. Prohibit the use of non-driving socioeconomic factors, such as credit-based insurance
   scores, education level, and occupation; and
3. Work with lawmakers to establish a low-cost auto insurance program based on
   California’s model, which would provide bare bones insurance to good drivers for low
   prices.

The post CFA Urges Kentucky Department of Insurance to Investigate Discriminatory Auto Insurance Pricing appeared first on Consumer Federation of America.

Nearly everyone in Washington State deals with some type of insurance—drivers are required to purchase auto insurance, banks require homeowners insurance for mortgages, and consumers purchase numerous other products that require insurance. Often, premiums can go up for no apparent reason at all, frustrating policyholders and leaving them in the dark, grasping for information.

The Washington State Office of the Insurance Commissioner wants to counter this. They have drafted a new regulation, R 2022-01, which requires property and casualty insurance companies to provide their customers with a detailed breakdown of premium increases, the factors that affect those increases, and a breakdown of each factor and how much it impacts their premium.

Consider this case: if someone adds a new car to their insurance policy and their premium increases, the insurer has to tell them how much that affects their new premium. If a consumer is convicted of a moving violation and their premium increases, the company has to follow similar procedures. And if someone is widowed and loses their married customer discount, or sees a decline in their credit and their premium goes up, the company has to spell that out for them.

Washington consumers currently spend over $7.5 billion annually on the kinds of insurance that this rule will cover. But the lack of clarity and understandable disclosures means that consumers often have no idea what factors are causing their premiums to go up. Worse, many insurers charge people more based on characteristics that aren’t closely related to risk. And consumers have no idea that these characteristics – their job title, education level, marital status, credit history, and others – can be used for setting initial premiums and then changing premiums from one renewal to the next.

For example, auto insurers, use credit information to discriminate against certain consumers and charge them more. Consumer Federation of America found that on average, Washington consumers with excellent credit and a perfect driving record paid an average annual premium of $468. But consumers with the exact same driving record but fair credit paid an average annual premium of $633–$165 or 35% more. Consumers with poor credit paid an average annual premium of $836–$370 or 79% more.

Plus, some of Washington’s largest auto insurers charge consumers significantly more based on their credit information. Allstate charges consumers with poor credit 89% higher premiums than consumers with excellent credit. Progressive charges consumers with poor credit 108% higher premiums, and State Farm charges consumers with poor credit 185% more. These insurers have an obvious interest in keeping the impact of credit information and other factors hidden from policyholders. If most consumers don’t know about this discrimination, they can’t take steps to counter it and find better deals.

Washington State is saying: Enough! This rule will dramatically improve consumer understanding of the cost drivers impacting their insurance and give them more information. Consumers should know the reasons for auto insurance premium increases and decreases. And if their credit declines, possibly due to circumstances beyond their control, they should know its impact on how much they pay every month. If a consumer’s annual premium increases by $200, $400, $600 or more because of changes in their credit score, they deserve access to that information.

The Office has been receiving comments on this rule for over a month and is currently finishing up a second draft. Consumers have a right to know the reasons for auto insurance premium increases and decreases, and they should get a detailed description of all these characteristics. For the benefit of all Washington State residents, we hope this regulation is adopted soon.

The post Consumers are In the Dark About Reasons for Their Premium Increases, Washington State Is Proposing to Change That appeared first on Consumer Federation of America.

The consumer advocates called on Texas to conduct market conduct examinations of insurers with consumer complaints related to delayed payments, issue a bulletin stating that unfair delaying tactics are wrong and illegal, and place meaningful penalties on insurance companies that engage in this wrongdoing.

A law firm recently published an article saying that delaying claims can be a good strategy for insurers (this article was hurriedly taken down once it started receiving criticism).

The post Consumer Groups Urge Texas Department of Insurance to Investigate Possible Unfair Delaying of Claims by Insurance Companies appeared first on Consumer Federation of America.