Federal Regulation Archives · Consumer Federation of America

Consumer Groups Applaud the Federal Insurance Office for Pushing State Insurance Regulators to Start Collecting Data About Property Insurance Markets and Climate Risk

nrubando — Fri, 08 Mar 2024 19:01:55 +0000

Washington, D.C.—The nation’s leading insurance consumer advocacy organizations, Consumer Federation of America (CFA), the Center for Economic Justice (CEJ), and Public Citizen today thanked the U.S. Department of the Treasury’s Federal Insurance Office (“FIO”) for successfully pushing state insurance regulators to start collecting the insurance company data needed to monitor property insurance markets after years of inaction at the National Association of Insurance Commissioners (“NAIC”). The data to be collected will help answer critical questions about the nation’s homeowners market, including:

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

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

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

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

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

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

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

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

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J. Robert “Bob” Hunter to Retire After 27 Years as CFA’s Director of Insurance

Consumer Federation — Tue, 01 Feb 2022 20:25:32 +0000

Washington, D.C. — Consumer Federation of America announced today that J. Robert “Bob” Hunter, the organization’s Director of Insurance since 1995, will be retiring from CFA effective immediately. He will continue to serve in an advisory role as CFA’s Insurance Director Emeritus. Prior to joining CFA, Bob created and ran the National Insurance Consumer Organization (NICO) for 13 years, served as Texas Insurance Commissioner, and as United States Federal Insurance Administrator.

“Bob built the consumer advocacy presence in the American insurance industry from scratch, and anyone who has purchased insurance owes him tremendous gratitude,” said Jack Gillis, CFA’s Executive Director. “By virtue of the problems he exposed, the reforms he spurred, and the changes to industry practices that came from his work, we calculate that his research and advocacy have saved American consumers hundreds of billions of dollars.”

“Continuing in the advocacy tradition of Bob Hunter, I’m thrilled to announce that CFA’s Insurance Advocate, Doug Heller, will take on the role of Director of Insurance,” added Gillis.

The Remarkable Career of J. Robert “Bob” Hunter

After 10 years as an insurance actuary in the private sector, Hunter was hired by the United States Department of Housing and Urban Development (HUD) in 1971 as the Chief Actuary of the Federal Insurance Administration, an agency he would lead under Presidents Gerald Ford and Jimmy Carter. His work was instrumental in achieving the flood insurance program’s early goals, creating the Liability Risk Retention Act, and making insurance available in the inner cities through the implementation of the Riot Reinsurance Program and the Federal Crime Insurance Program. He received the Award for Excellent Service from the Secretary of HUD. Hunter was later appointed by Governor Ann Richards to serve as Texas Insurance Commissioner.

As Hunter recalls, “When I got my first paycheck, it said ‘The people of the United States Pay to: J. Robert Hunter…’ When I read that, it was a deeply moving, life-changing moment. I thought to myself, ‘now I have to think about insurance from the people’s perspective.’”

In 1980, with financial support and encouragement from Ralph Nader, Hunter founded and led the National Insurance Consumer Organization, a nonprofit insurance consumer advocacy organization, for 13 years prior to joining CFA in 1995 as Director of Insurance. He viewed his role as his contribution to improving society and therefore never sought any compensation for his 40 years of work with NICO and Consumer Federation of America.

During his career, Hunter won several significant legislative and regulatory reforms of the insurance industry and led the way to changes in the way the industry operates; the trade magazine National Underwriter named him among the “25 Living Legends of Insurance.”

In the 1980s he successfully pushed for a significant change to insurance ratemaking – getting insurers to include their projected investment income in ratemaking – saving policyholders an estimated $500 billion since that time.
In one twelve-month period, Hunter testified in every state in the Union to combat the industry’s effort to use the macro-economic insurance cycle as an excuse to spike rates and diminish consumer legal rights.
In 1986, under contract with the California Legislature, he wrote a seminal paper on California’s insurance market, which served as the basis for 1988’s historic “Voter Revolt” that enacted Proposition 103. The nation’s strongest insurance consumer protection law, CFA calculates that Prop 103 has saved California drivers alone over $150 billion since enactment.
When Hurricane Andrew devastated Florida in 1992, he proposed the moratorium on cancellations and rate hikes and a series of other reforms the state adopted to protect policyholders in the storm’s wake.
Hunter helped uncover and reform abusive claims handling practices associated with the Colossus computer software program used to calculate the amount the insurer would offer for car crash injury claims.
He uncovered, in the early 2010s, the practice of price optimization, where insurers charge certain customers higher premiums based on their shopping habits, particularly harming the most loyal customers. His work spurred action against the practice in twenty states and at the National Association of Insurance Commissioners (NAIC).

Over his career, Hunter has been at the forefront of efforts to eliminate unfair and discriminatory pricing in the insurance markets, especially where those practices punish lower-income consumers. During the pandemic he has continued his fight for consumers, with calls for insurance refunds to auto insurance customers as companies reaped windfall profits while Americans were stuck at home.

Hunter also encouraged other consumer advocates to focus on insurance consumer protections, creating connections and campaigns that have expanded the reach of many of the reforms Hunter first developed. Among those advocates are Harvey Rosenfield, author of California’s Prop 103, Birny Birnbaum of The Center for Economic Justice, Amy Bach of United Policyholders, Joanne Doroshow of The Center for Justice & Democracy, and Doug Heller of Consumer Federation of America.

“Bob has been an unrelenting advocate for four decades, whose work has dramatically changed the way insurance in America is priced and how claims are paid,” said Doug Heller, who has worked with Hunter at CFA since 2013. “For the past forty years, the insurance industry has always had to ask themselves ‘what’s Bob going to say?’ whenever a consumer issue was on the table. It is impossible to quantify fully the impact Bob Hunter has had on the insurance market, its regulation, and its public policy. We are deeply grateful for his work and thankful that he will continue to provide his insights and expertise even in his retirement.”

Contact: Doug Heller, 310-480-4170

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Consumer Groups Urge Federal Insurance Office to Focus on Insurance Industry Role in Addressing Climate Change and Its Impact on Consumers, Communities

Consumer Federation — Tue, 16 Nov 2021 16:56:50 +0000

Washington D.C.— Highlighting increasingly disastrous and expensive weather-related catastrophes, consumer organizations — Consumer Federation of America, the Center for Economic Justice, the Maryland Consumer Rights Coalition, and Consumer Federation of California — urged the Federal Insurance Office (FIO) to take a leadership role in guiding the insurance industry toward a Net Zero emissions goal and increasing protections for consumers facing the double risk of more dangerous seasons and escalating insurance premiums. In response to the FIO’s request for information on insurance and climate risk, the groups submitted comments addressing how FIO can best engage issues of rising insurance costs, decreasing availability of coverage, the particular vulnerabilities of communities of color and lower-income consumers, how insurers both contribute to and can combat this crisis, and how the FIO should respond. The complete letter can be downloaded here.

“Avoiding cataclysmic results requires the global community, and highly industrialized nations particularly, to make dramatic changes that will both reduce long-run exposure to climate risk and improve resiliency in the face of persistent near-and medium-term risks. The insurance sector is central to effectuating those responses,” the consumer organizations wrote.

The advocates focus attention on the role of insurers’ investment and underwriting decisions in exacerbating climate change. Companies that provide insurance coverage for the industrial activities most directly responsible for global warming, like coal-powered plants and oil pipelines, or support those activities through investments, are partly responsible for the catastrophes wrought by climate change, the groups said. The climate-driven floods, hurricanes, wildfire, droughts, and other disasters place huge portions of the nation at increased risk of loss and leave consumers with higher insurance premiums or an inability to get coverage at all.

“The insurance industry is, in essence, down-streaming the burden of climate-change from the firms that create it to the communities that suffer under it,” the groups explained.

The organizations called on the Federal Insurance Office to develop climate risk workstreams to research and build a strategic response to the challenges found at the intersection of climate change and the insurance sector. The groups propose workstreams looking at the follow topics:

The insurance industry’s investing and underwriting practices that impact climate change;
The availability and affordability of property insurance and how climate change will impact, especially for lower-income communities and communities of color;
Coordinating a national effort to develop and implement strategies for mitigating climate risk, and reducing exposure to that risk. It should consider how insurance companies might contribute to this mitigation; and
Developing federal and regional strategies to meet expanding capital needs for insurance, especially for catastrophic risks and critical needs.

The groups concluded by calling on FIO “to develop an approach to convening thought leaders, collecting data, and developing strategies for confronting climate risk that emphasizes mitigation and resilience, affordability and availability, and accountability and encouragement. The insurance industry, its regulators, and its consumers have too much at stake to think small or avoid challenging topics.”

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

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Groups Urge FIO to Focus on Insurance Industry Role in Climate Change and Impacts on Consumers, Communities

Consumer Federation — Tue, 16 Nov 2021 15:29:19 +0000

The consumer groups Consumer Federation of America, the Center for Economic Justice, Maryland Consumer Rights Coalition, and Consumer Federation of California sent comments to the Federal Insurance Office (FIO) on climate change and its impact on insurance. FIO asked for information on the insurance sector and its climate-related financial risks.

The comments urge the FIO to take a leadership role in pressuring insurance companies to stop investing in fossil fuel projects and increasing protections for consumers facing higher insurance costs due to climate change. Insurers are partly responsible for the catastrophes wrought by climate change and should play a constructive role, not a destructive role. FIO should also establish workstreams that look at insurer projects that impact climate change, how available and affordable property insurance is and how climate change will affect costs, and coordinating a national effort and various strategies to mitigate climate risk.

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Auto Insurers Reaped Nearly $30 Billion Pandemic Windfall Profit in 2020 as State Insurance Regulators Fail to Protect Consumers

Consumer Federation — Wed, 11 Aug 2021 11:27:32 +0000

Washington, D.C. – Insurers selling personal auto insurance reaped windfall profits of at least $29 billion in 2020 as miles driven, vehicle crashes and auto insurance claims dropped because of the pandemic and related government actions. Analyzing insurers’ 2020 premium and claims results – and the limited “premium relief” offered by insurers – the Consumer Federation of America (CFA) and Center for Economic Justice (CEJ) show that insurers collected $42 billion in excess premiums while providing only $13 billion in “premium relief.”[1] Instead of returning the COVID windfall to consumers, insurers increased payouts to senior management and stockholders.

State-by-state required additional auto insurance pandemic relief is itemized in Table 2 attached to this release.

Despite analyses and warnings from CFA and CEJ starting in March 2020, when it was clear that the reduction in driving had made then-current insurance prices excessive – and in violation of the law in almost every state – the vast majority of insurance regulators took no action to compel insurers to return the illegal profits. Relying on insurers’ financial statement data for premiums and losses and additional analysis by A.M. Best regarding insurers’ “premium relief,” CFA and CEJ show insurers should have returned $42 billion of premium overcharges to consumers, but actually returned just one-third of that amount.

“In virtually every state, auto insurance premiums – by law – cannot be excessive. The inability or unwillingness of almost all state insurance regulators to enforce the law and protect consumers raises serious questions,” said J. Robert Hunter, CFA’s Director of Insurance. “As we pointed out in letter after letter to insurance regulators throughout 2020, it was crystal clear that insurers’ premium relief was woefully inadequate. The attached document lists, with links and thumbnail descriptions, all of the letters and press releases we issued urging states to take action to reduce illegally excessive auto premiums in their jurisdictions.”

According to the insurers’ financial reports reviewed by CFA and CEJ, between 2016 and 2019, auto insurers paid 67.4 cents of every premium dollar for claims. The remaining 32.6 cents – plus investment income earned from holding policyholders’ money – covered insurer expenses and profit. In 2020, the amount spent on claims dropped to 56.1 cents per dollar of total premium reported. Total premium of $250.6 billion reported by insurers is net of $7.9 billion in premium relief accounted for by some insurers as a reduction in premium.

Table 1 shows that from 2016 through 2019, insurers paid 67.4 cents of every premium dollar for claims. But claim payouts in 2020 were just 56.1 cents per net premium dollar – or $33.6 billion less than if insurers had continued to pay 67.4 cents in claims per dollar in premium. To provide some perspective, a reduction in claim payments of $33.6 billion is a per-vehicle reduction in claims of about $150.

Table 1 shows that the $33.6 billion reduction in claim payouts by insurers translates into $42.1 billion of excess premium charges out of a total of about $258.6 billion in total personal auto insurance premium.[2] Yet, according to A.M. Best, insurers returned just $13 billion in premium relief[3] – less than one-third of their pandemic windfall – while pocketing the remaining two-thirds. As a result, insurers shortchanged policyholders by an average of over $125 premium per insured vehicle.

State Insurance Commissioners Have Statutory Responsibility to Protect Consumers from Excessive Auto Insurance Premiums – But Most Failed to Act

As a result of the sudden change in exposure covered by auto insurance, premiums became excessive virtually overnight in mid-March 2020. However, most regulators did not take – and have still not taken — action to require the necessary premium relief from auto insurers. Table 2 shows the additional premium relief needed in each state.[4]

In April and May of 2020, most of the nation’s large insurers did provide refunds or credits to consumers in response to the pandemic, but very little of the excess premium was given back after last spring and our research showed that even this two-month payback to policyholders was only about half of what should have been refunded.[5]

California, Michigan, New Jersey, and New Mexico were the only states to require premium refunds during the spring of 2020. But only California continued requiring refunds beyond the first few months of the pandemic. In March 2021, California’s Insurance Commissioner Ricardo Lara determined that auto insurers still overcharged California drivers during the pandemic and ordered them to return additional premium to consumers. In June and July, respectively, Washington State and New Mexico announced industry data calls about auto insurance losses during the pandemic that will hopefully lead to additional premium refunds for consumers, but other regulators have not taken initial steps, let alone further steps, to recoup money for drivers by enforcing their states’ laws against excessive rates..

In addition to little or no action by most states, there has been no action at the National Association of Insurance Commissioners (NAIC) to examine the issue of auto insurers’ pandemic windfall profits, to collect data during 2020 to monitor the situation or to develop guidance for states to bring needed relief to consumers – again despite repeated calls by CFA and CEJ.

As the NAIC conducts its national meeting this week, CFA and CEJ call on state insurance regulators to take action to address the $30 billion overcharge to auto insurance consumers. This news release has been sent to the President and other top officials of the NAIC urging them to act immediately to begin the process of returning pandemic premium overcharges to customers.

CFA AND CEJ LETTERS AND RELEASES CALLING ON STATE REGULATORS TO ENFORCE THEIR LAWS FORBIDDING EXCESSIVE RATES DURING COVID-19

March 18, 2020 letter to Commissioners: “We write to urge you to direct auto insurers in your state to provide premium offset payments to policyholders whose driving has been affected by COVID-19.” https://consumerfed.org/wp-content/uploads/2020/03/COVID-19-Auto-Premium-Relief-Letter.pdf

March 30, 2020 letter to Commissioners: “We urge you to take action on key P&C insurance consumer protection issues arising from COVID-19 and federal and local government responses to the pandemic, particularly the excessive premiums being charged to individuals and businesses for lines of insurance that base rates on factors such as miles driven, payroll, and receipts.” https://consumerfed.org/wp-content/uploads/2020/03/COVID-19-Auto-Premium-Relief-Letter-3-30-20.pdf

April 6, 2020 Press Release: After praising Allstate and American Family for their shelter-in-place paybacks, “The groups noted that they had sent a letter to state insurance commissioners on March 18 urging the regulators to act to get industry wide premium relief for auto insurance consumers – and have seen virtually no action to date other than suggestions to insurers by the insurance commissioners in Alaska and Pennsylvania. https://consumerfed.org/press_release/consumer-groups-applaud-allstates-and-american-familys-shelter-in-place-paybacks-urge-other-auto-insurers-to-follow/

April 13, 2020 Press Release: Issued a Report Card on insurer actions in granting paybacks due to COVID. The release said: “Given that hundreds of millions of Americans pay for auto insurance and spend more on auto insurance than any other type of insurance other than health insurance – $250 billion in 2019 – we are puzzled by the lack of activity to date by insurance commissioners.” “There is still a need for the regulators to step up, as critical guidance for current and future relief is needed,” said CEJ’s Birny Birnbaum, Executive Director of the Center for Economic Justice. https://consumerfed.org/press_release/report-card-to-date-on-the-6-5-billion-promised-to-auto-insurance-customers-as-people-drive-less-due-to-covid-19/

April 23, 2020 Press Release updating the payback situation. “For those insurers providing premium relief, the relief ranges from just over 10% to 35% of two months premium with the vast majority of insurers providing only 15%. With some data showing motor vehicle accidents down 50% or more, more relief is needed for March, April and May from nearly all insurers,” said Douglas Heller, CFA’s Insurance Expert. “It’s clear that premium relief of 30% or more will be needed for these months.” But we also pointed out the failure of state regulators to act. https://consumerfed.org/press_release/auto-insurance-premium-relief-update-more-insurers-to-return-premium-as-refunds-and-credits-top-7-billion-through-may/

On May 7, 2020, CFA and CEJ issued a letter to all Commissioners, “Auto Insurance Premiums are Excessive in Your State.” The letter stated, “Consumer Federation of America and the Center for Economic Justice just released a major report detailing the current situation in auto insurance in America and the fact that, throughout every state in the country, consumers are still paying excessive premiums even after the recent voluntary relief granted by most auto insurance companies.” https://consumerfed.org/wp-content/uploads/2020/05/COVID-19-Auto-Premium-Relief-Letter-5-7-20.pdf The report attached to the letter, “Personal Auto Insurance Premium Relief in the COVID-19 Era” made clear that “State insurance regulators have largely been absent from personal auto insurance relief and the state auto insurance regulatory system has proven to be unprepared for an event like COVID- 19…Motor vehicle accident data indicate a minimum average 30% premium relief payment starting March 18, 2020 through the end of May, even after accounting for offsetting cost factors.” https://consumerfed.org/wp-content/uploads/2021/07/Auto-Insurance-Refunds-COVID-19-Update-Report-5-7-20.pdf

On May 21, 2020, we sent a letter to all Commissioners, “More State Action Needed to Address Excessive Auto Insurance rates. In it we pointed out that “other than the commissioners in California and New Jersey, no other state regulators have ordered insurers to provide any relief, let alone a minimum amount of relief… Whatever the cause of this regulatory inaction to date, consumers need – and your statutory duties demand – action now.” https://consumerfed.org/wp-content/uploads/2020/05/Auto-Insurance-Commissioner-Letter.pdf

On May 26, 2020, our Press Release stated, “While commissioners in California and New Jersey have ordered premium relief and are collecting data to ensure relief is adequate, most state insurance regulators have done nothing to secure auto insurance premium relief, even as they have often inappropriately taken credit for insurers’ actions. The inaction by state insurance regulators has particularly harmed those low-income and minority consumers forced to purchase insurance from so-called “non-standard” carriers.” https://consumerfed.org/press_release/allstate-and-usaa-show-how-insurers-should-provide-ongoing-covid-19-premium-relief/

In a June 25, 2020 letter to all Commissioners we said, “Our review of company announcements indicates that many insurers who offered premium relief for April and May are not continuing to offer relief for June and beyond – despite the reduction in miles driven and crashes from the levels assumed for rates in effect on March 1. It is no less urgent for you to take action now as it was in mid-March to meet your statutory requirements to ensure consumers do not pay excessive premiums.” https://consumerfed.org/testimonial/consumer-groups-urge-insurance-commissioners-to-follow-californias-lead-on-insurance-premium-refunds/

On July 15, 2020 we specifically called on Arizona and Texas to extend the paybacks beyond the insurer’s voluntary paybacks of April and May 2020. https://consumerfed.org/wp-content/uploads/2020/07/Arizona-Insurance-Commissioner-Letter-7-15-20.pdf https://consumerfed.org/wp-content/uploads/2020/07/Texas-Insurance-Commissioner-Letter-7-23-20.pdf

On August 6, 2020, we issued a Press Release, “Consumers Still Being Overcharged for Auto Insurance as Pandemic Continues to Reduce Claims.” We said, “While a couple of states took action to order premium relief, most state insurance commissioners took no action. As predicted, auto insurers are now reporting windfall profits.” https://consumerfed.org/press_release/consumers-still-being-overcharged-for-auto-insurance-as-the-pandemic-continues-to-reduce-claims/

On August 11, 2020 our Press Release pointed out that GEICO was pocketing windfall auto insurance profits on billions of dollars from COVID. We said, “According to CFA and CEJ, state insurance commissioners need to do more to ensure that auto insurers return more of their excess income to their policyholders and former customers. At this time California, New Mexico, Michigan and New Jersey are the only states requiring auto insurers to return pandemic-driven excess premium to customers.” https://consumerfed.org/press_release/consumer-advocates-call-on-geico-to-give-back-much-more-after-2-1-billion-earnings-bonanza-due-to-covid-19-pandemic-impacts/

On September 21, 2020, we again wrote to all Commissioners in which we said: “The pandemic has shown once again how systemic racism permeates personal auto insurance and penalizes minority consumers. Millions of Americans are currently struggling and facing economic hardship, whether due to unemployment, reduced hours and wages, business closures, or a decline in business activity. This makes it all the more important that you ensure that the insurance companies you monitor and regulate are returning consumers’ excess premium on an ongoing basis.” https://consumerfed.org/wp-content/uploads/2020/09/COVID-19-Auto-Premium-Relief.pdf

September 22, 2020 Press Release subtitled, “Insurance Commissioners are Asleep at the Wheel When It Comes to Putting this Money Back in Consumer Pocketbooks Where It Belongs.” https://consumerfed.org/press_release/auto-insurers-reap-tens-of-billions-in-covid-windfall-profits-due-to-reduction-in-miles-driven-and-crashes/

December 22, 2020 letter to all Commissioners, “Extremely High Insurer Profits and New Accident Data Show that Auto Insurance Companies Need to Provide More Pandemic Refunds; Your Constituents are Suffering by Your Inaction.” We stated: “With the economic pain that has accompanied this pandemic, the fact that most Insurance Commissioners allowed insurers to set the terms for refunds and have not ordered more has been a failure of leadership. But action on behalf of consumers today is still much better than none at all.” https://consumerfed.org/wp-content/uploads/2020/12/Auto-Insurance-Commissioner-Letter.pdf

March 11, 2021 Press Release, “California Insurance Department Ends Auto Insurers’ COVID Windfall Profits; Consumer Groups Ask Why Other States Don’t Keep Insurance Companies from Raiding Consumer Pocketbooks with their Windfall COVID Profits.” “Consumers rely on their state insurance commissioners to protect them from being ripped off by insurers, but most have let auto insurers collect massive windfall profits, while the millions of Americans struggled through the pandemic,” said CEJ Executive Director Birny Birnbaum. https://consumerfed.org/press_release/california-insurance-department-ends-auto-insurers-covid-windfall-profits/

[1] See Table 1 for analysis, methodology and data sources. The “premium relief” amounts come from the insurer rating agency A.M. Best in an April 20, 2021 report. A.M. Best compiled the “premium relief” from statutory financial statements in which insurers self-reported the amount of “premium relief.” The $13 billion of “premium relief” reported by A.M. Best includes $3 billion in claimed “premium relief” from GEICO. In fact, GEICO never paid any premium relief to existing policyholders. Rather, GEICO promised a 15% reduction upon renewal and even to new customers – an action which simply reflected lower expected claims in the future. GEICO never provided premium relief to consumers who paid premium for March, April or May 2020. In contrast, State Farm provided real premium relief though policyholder dividends to offset premiums paid by policyholders in March, April and May, 2020. State Farm also filed a prospective rate reduction in expectation of lower claims in the future which averaged nationally was 11%. Despite GEICO not providing any premium relief, we included all the amounts reported in the A.M. Best analysis, including GEICO.

[2] The $250.626 Billion in reported earned premium after premium relief plus $7.949 Billion in premium relief treated by insurers as a reduction in premium equals $258.575 Billion

[3] A portion of the $13 billion in refunds was provided to policyholders with coverage other than personal auto insurance, but Best’s does not break out the refunds by line, so our calculation likely overstates the personal auto premium relief provided by insurers and understates the additional relief due for policyholders.

[4] By using industry aggregate expense provisions across all states, the CFA / CEJ estimate of additional premium relief needed is, again, conservative. In a state with expense efficiency requirements for auto insurance rates, such as California, the additional premium relief needed would be significantly higher than indicated in Table 2. Consequently, the additional premium relief needed for California is much greater than the $3.5 Billion indicated in Table 2.

[5] “Personal Auto Insurance Premium Relief in the COVID-19 Era: A Report By the Center for Economic Justice and the Consumer Federation of America.” Center for Economic Justice and Consumer Federation of America. May 2020. Available at https://consumerfed.org/wp-content/uploads/2021/07/Auto-Insurance-Refunds-COVID-19-Update-Report-5-7-20.pdf.

Contacts:
Robert Hunter, CFA, 703-528-0062
Birny Birnbaum, CEJ, 512-912-1327
Michael DeLong, CFA, 925-708-1135

The post Auto Insurers Reaped Nearly $30 Billion Pandemic Windfall Profit in 2020 as State Insurance Regulators Fail to Protect Consumers appeared first on Consumer Federation of America.

Consumer Organizations Call on Federal Insurance Office to Update Auto Insurance Affordability Study and Dig Deeper Into Sources of Unfairness in Market

Consumer Federation — Tue, 27 Jul 2021 14:00:15 +0000

Washington, D.C. — In a comment letter sent to the agency on Monday, July 26, Consumer organizations urged the Department of Treasury’s Federal Insurance Office (FIO) to update a 2017 study on the affordability of auto insurance in historically underserved communities and to conduct a deep and thorough investigation of unfair discrimination in auto insurance markets. While state laws in all states but New Hampshire require drivers to purchase auto insurance, it is often unaffordable for lower-income drivers. Industry pricing practices that rely on non-driving, socio-economic characteristics of customers disproportionately penalize people of color with higher premiums and fewer choices in the market.

Citing President Biden’s note from a February 2021 town hall that “[i]f you live in a black neighborhood, you’re going to pay a higher premium on your car,” the 22 consumer and community organizations submitting the comments wrote:

As the only product that most Americans are required to purchase by law, it is particularly important that auto insurance is available, affordable, and priced fairly in the marketplace…Even drivers with unblemished driving records may find that the cost of coverage in their community and for people with their socio-economic characteristics far exceeds their family budget…

The comments are available here.

The groups argue that FIO should prioritize an immediate update of its 2017 study that found that about 18 million Americans live in ZIP codes where auto insurance is unaffordable, and they urged FIO to produce this report annually as was originally proposed. The report, however, was not updated at all during the prior administration. In addition to updating the 2017 study, the groups urged FIO to produce additional complementary research, including:

collecting data about uninsured drivers, drivers with force-placed auto insurance coverage, and enforcement of mandatory insurance laws;
analysis of insurers’ use of socio-economic factors — including employment status and occupation, level of education, homeownership status, credit history, and marital status — and other non-driving data in auto insurance marketing and pricing as well as claims handling and anti-fraud efforts; and
testing underwriting and rating factors for disparate impacts on communities of color.

The comments were submitted by the following local, state, and national organizations:

Center for Economic Justice

Center for Justice & Democracy

CPAN

Consumer Action

Consumer Federation of America

Consumer Federation of California

Consumer Reports

Consumers for Auto Reliability and Safety

Demos

Georgia Watch

Latino Action Network

Los Angeles County Department of Consumer and Business Affairs

National Community Reinvestment Coalition

New Yorkers for Responsible Lending

Oregon’s Stop the Debt Trap Alliance

Texas Appleseed

The One Less Foundation

United Policyholders

U.S. Public Interest Research Group

Vehicles for Change

Contacts:

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

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Consumer Orgs Call on Federal Insurance Office to Investigate Auto Insurance Affordability and the Sources of Unfairness in the Market

Consumer Federation — Tue, 27 Jul 2021 13:55:19 +0000

Twenty-two consumer organizations sent comments to the Department of Treasury’s Federal Insurance Office (FIO) on making auto insurance more affordable and accessible. They noted that ‘As the only product that most Americans are required to purchase by law, it is particularly important that auto insurance is available, affordable, and priced fairly in the marketplace.’

The groups called on the FIO to update a 2017 auto insurance study using improved methods and to conduct additional research on uninsured drivers, socioeconomic factors in auto insurance pricing, and how these factors have a disparate impact on people of color.”

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Senate’s Booker Bill Will Go A Long Way to Prohibit Unfair Discrimination in Auto Insurance

Consumer Federation — Thu, 24 Sep 2020 19:28:49 +0000

Washington, D.C.—The United States Senate should hold hearings on auto insurance reform legislation introduced today by Senator Cory Booker (D-NJ), the Consumer Federation of America (CFA) said in a statement of support for the bill. The Prohibit Auto Insurance Discrimination (PAID) Act would prohibit insurers from using certain socio-economic characteristics of drivers when determining eligibility for and the price of auto insurance. The reform takes on the key elements of insurance rating and underwriting that have perpetuated systemic racism in the auto insurance marketplace, according to CFA, which, earlier this year, highlighted the correlation of several rating factors used by auto insurers to race and ethnicity.

Under the proposed legislation, which is a companion to H.R. 3693 (Watson-Coleman, NJ; Tlaib, MI), insurance companies would not be allowed to use “income proxies such as a driver’s education level, occupation, employment status, home ownership status, credit score, consumer report, previous insurer, and prior purchase of insurance” when setting rates or deciding whether or not to provide coverage to consumers.

CFA’s insurance expert Doug Heller said,

“Senator Booker’s introduction of the PAID Act is an important step in the direction of addressing the unfair practices and systemic biases that make auto insurance more expensive for drivers of color and lower-income Americans. Almost every state in the nation requires that all drivers buy insurance, but most states have done little to ensure that good drivers get a fair price regardless of their socio-economic status. Because of the mandate to purchase coverage, government has a special obligation to ensure that the market for auto insurance is fair and affordable.

“Insurers across the nation use a variety of personal and economic factors that unfairly discriminate against people for reasons that have nothing to do with their driving records. This makes auto insurance more expensive and less accessible to millions of Americans and has the additional effect of increasing the number of uninsured motorists, which raises premiums for everyone on the roads. People should be rated on how they drive, not their job title or if they lost their job; not whether or not they went to college; or whether they rent or own their home; or if their credit score has fallen. The legislation by Senator Booker and Representatives Tlaib and Watson-Coleman will make auto insurance fairer and more affordable for good drivers everywhere. The PAID Act should be a priority for Congress, and it can also serve as a model for state lawmakers and regulators who are serious about taking on the persistent systemic bias in insurance markets.”

In March, CFA’s Heller testified before the House Financial Services Subcommittee on Housing, Community Development, and Insurance on the subject “Drivers of Discrimination: An Examination of Unfair Premiums, Practices, and Policies in the Auto Insurance Industry.” That hearing is archived here and Mr. Heller’s testimony is here.

Contact: Doug Heller, 310-480-4170

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Government Must Protect Consumers’ Health And Pocketbooks During COVID-19 Crisis

Consumer Federation — Fri, 20 Mar 2020 16:55:25 +0000

Washington, DC – Today the Consumer Federation of America provided the President and Congress with a Comprehensive Consumer Agenda to address the COVID-19 crisis, beginning with the need for a wide-ranging paid sick leave policy as a critical step in reducing the spread of the disease. “While government entities including Congress, State Governors, Mayors, and Federal agencies are taking steps to address the virus, in order to truly protect consumers health and pocketbooks, there needs to be a comprehensive approach to public policy,” said Jack Gillis, CFA’s Executive Director. “Protecting consumers’ health must be the priority, but protecting their pocketbooks is critically important to protecting their wellbeing. In spite of the Administration’s very recent admonition that our economy is strong, most Americans are a paycheck or two away from financial disaster. Staying financially healthy is critical to staying physically healthy,” added Gillis.

Our nation’s comprehensive COVID-19 response must include a strong paid sick leave policy and protecting consumers by ensuring affordable access to communications services, preventing utility shutoffs, mortgage foreclosures, student loan defaults, negative credit reporting effects, overpriced insurance, and making sure that airline and hotel customers’ rights are protected in any financial bailout of these industries.

The Consumer Federation of America has identified critical consumer protection issues that must be addressed as part of a comprehensive response to this crisis. Many of these items are focused on protecting those hardest hit by the economic fallout. Doing so is not just a matter of economic justice; it is the best way to stabilize the economy.

CFA and it’s over 250 national, state and local organizations are committed to working with policymakers at all levels to implement a “Comprehensive Consumer Agenda to Address the COVID-19 Crisis”. For the details behind the following agenda, please see our LINK March 20, 2020 letter to the President and Congress.

A Comprehensive Consumer Agenda to Address COVID-19

Create a comprehensive national paid sick leave policy to reduce the spread of the disease. Lack of paid sick leave encourages tens of millions of workers to continue working when they are sick, which can nullify the critically important benefits of social distancing.

Protect those hardest hit from economic hardship by:

Providing forbearance to economically distressed mortgage borrowers. Any homeowner experiencing economic hardship because of the virus must have access to 180 days of forbearance on mortgage payments.
Halting evictions and foreclosures. There must be a 180 day moratorium on evictions of tenants experiencing economic hardship because of the virus, with support provided to property owners who suffer rental income losses.
Canceling student loan payments for the duration of the crisis. It is not enough to pause monthly payments, the government must make tax free payments on holder’s behalf so millions of Americans can continue to make progress reducing their student debt as the economy struggles.
Suspending debt collection. Debt collection activities, including legal proceedings, garnishments, repossessions, and debt selling, must be prohibited during the state of emergency.
Curtailing high-cost lending schemes: A rate cap of 36% must apply to high-cost credit, such as payday loans, refund anticipation loans, and car title pawns to ensure that vulnerable consumers aren’t trapped by overpriced debt.
Placing a moratorium on negative credit reporting. To protect consumers’ credit records during the pandemic, there must be, at least, a four month moratorium on negative credit reporting.
Maintaining consumers’ access to affordable communications services. As remote communications become critically important, service providers must abandon pricing practices that maximize revenues, suspend overcharges for “excess” data usage, terminate service cut-offs, and increase network availability to the public.
Requiring big data platforms to promote the public interest. Big data platforms must remove misleading information. Their big microphones must promote the public interest, not the corporate bottom lines. Non-commercial pandemic information from public health, safety and governmental entities must be given a prime location on all screens.
Preventing misleading advertising and price-gouging. Advertisers, and the media carrying ads, must ensure that claims related to the coronavirus are completely accurate. Online marketplaces must reject products and services making misleading claims or that offer basic necessities at unfairly inflated prices.

Ensure that consumers’ interests are protected as industries seek federal financial support by:

Mandating fairness in the skies. Airlines must waive cancelation and change fees for all consumers during the federal state of emergency. As a condition of an airline bailout, Congress must require price transparency, make future fees for cancelations, changing flights, and checking bags proportionate to actual costs, lift state preemption, and provide consumers with private rights of action.
Accommodate hotel customers. As organizations and individuals heed requests to limit non-essential travel and cancel events, some hotels have continued to charge consumers and organizations. As a condition of a hotel bailout, Congress must require hotels to honor requests for room and event cancelations without penalty and to refund deposits until the federal state of emergency is suspended or travel limit recommendations are lifted. Going forward they must provide full price transparency on charges and extra fees.
Reduce auto insurance premiums to reflect reduced driving. Insurers should be required to offer discounts to people driving less due to COVID-19. Miles driven, a key factor in claims costs, will drop dramatically as workers are laid off, switch to telework, or self-isolate. This should be a consumer benefit, not an insurer windfall. See CFA’s letter to Insurance Commissioners.

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Advocates Urge Federal Government to Step in and Address Auto Insurance Unaffordability

Consumer Federation — Wed, 04 Mar 2020 14:48:58 +0000

CFA presented testimony before the House Financial Services Committee’s subcommittee on Housing, Community Development and Insurance regarding auto insurance industry practices. CFA’s research over the past decade has looked into the pricing of auto insurance and has provided recommendations for addressing the problem of unaffordability and unfairness confronting
millions of drivers throughout the country. The testimony urges the Federal government to take important steps to investigate the affordability of auto insurance and identifying discrimination and disparate impacts in the marketplace.

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CFA Supports H.R. 4523, the Nonprofit Property Protection Act

Consumer Federation — Tue, 26 Nov 2019 16:12:31 +0000

CFA supports H.R. 4523, the Nonprofit Property Protection Act, introduced by Representative Green. CFA urges the passage of this legislation, which would address an impending and critical problem facing nonprofits that rely on Risk Retention Groups (RRGs) for their liability insurance by allowing organizations to also obtain their property and auto physical damage policies from … Continued

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Huge Insurance Industry Surplus Eliminates Need for Renewal of Taxpayer-Backed Terrorism Insurance Program Originally Created As Temporary Response to 9/11

Consumer Federation — Tue, 15 Oct 2019 18:11:30 +0000

Washington, D.C. – As Congress considers the future of the nation’s terrorism insurance program – the Terrorism Risk Insurance Act (TRIA), which expires on December 31, 2020 – the Consumer Federation of America (CFA) urged Members of the House Financial Services Committee, in a letter sent Monday, to review the extraordinary growth and levels of the property/casualty insurance industry’s surplus capital as they contemplate the next steps for TRIA. The industry has the capacity to insure properties against terrorism losses without continuing the massive taxpayer subsidies it has been provided under the program that was originally enacted as a temporary response to 9/11, CFA wrote.

On Wednesday, the House Financial Services Subcommittee on Housing, Community Development, and Insurance and the Subcommittee on National Security, International Development, and Monetary Policy will hold a hearing on the question of reauthorizing TRIA.

“We believe the program is no longer needed, and this public subsidy of the overcapitalized insurance industry should be wound down,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner and Federal Insurance Commissioner. “If Congress wants to extend TRIA, it should no longer be as a corporate welfare program, instead, it should require insurance companies to pay a fair, actuarially sound premium for any federal backup of private coverages that Congress authorizes.”

By the end of 2018, the surplus of the property/casualty insurance industry (the amount of money backing up the business the insurers write) was $742 billion, according to data released by the Insurance Services Office and American Property Casualty Insurance Association. That surplus rose to $780 billion by the end of the first quarter of 2019, according to industry reports. Prior to the 9/11 attacks, the industry’s surplus was $326 billion, or only 44 percent of the 2018 surplus. TRIA was not, of course, in effect at the time of 9/11 and the industry survived that large claim in 2001 without much difficulty.

In its letter, CFA wrote,

The [2018] industry surplus of $742 billion dwarfs the $21 billion of [after-tax] insurer losses from 9/11. In 2019 dollars, the amount a 9/11 event would cost insurers would be $30.6 billion [after taxes]. Even in the extremely unlikely event of a claim or series of claims totaling three times larger than 9/11, the industry is financially positioned to handle the losses. Under the current rules of TRIA, we estimate that insurers would be responsible for about $85 billion of losses before the federal reinsurance kicked in. Without TRIA, the industry would be responsible for an additional $7 billion, the full $92 billion of such an extraordinary event or series of events. That is well within the capacity of the insurance industry without any need for a federal bailout.

The key measure of the safety and soundness of the property/casualty industry is its ratio of net written premiums to policyholder surplus. In recent years, because of the increase in weather-related catastrophic events and fear of terrorism, the ratio considered to be safe by experts has been lowered from 2.00 to 1.50. However, at the end of last year, the industry’s ratio stood at an extremely safe level only 0.82. The after-tax effects of $85 billion of industry losses from a terrorist event equivalent to three 9/11s would only increase this ratio to a still extremely safe level of 0.93. If TRIA expired, the ratio, after paying $92 billion claims from three 9/11 size events would be a mere, and still overcapitalized, 0.94. Indeed, the industry could sustain a series of claims 10 times the size of 9/11 and still maintain a safe premium to surplus ratio of 1.40.

In addition to calling on Congress to end the TRIA program, CFA offered two alternative proposals that would protect taxpayers while also recognizing the potential for a catastrophic series of acts of terror. One proposal is to eliminate TRIA and replace it with a mechanism in FEMA designed to react to the details of any such extreme event and provide taxpayer funded coverage for an act of terror only if and after the industry surplus is diminished by 30%. A second alternative is to renew TRIA’s backstop for insurance companies but require companies to pay an actuarial sound premium for the reinsurance provided by American taxpayers.

“It is not surprising that insurance giants want to keep a free reinsurance program and further expand their profits, but at a time of record-breaking federal budget deficits and all-time high insurer surpluses, we question the wisdom of providing multi-billion dollar subsides to an industry that can easily afford to insure several terrorist events even larger than 9/11,” wrote CFA. “If there are instances where it has been difficult to obtain insurance coverage, the Federal Insurance Office should work with appropriate state insurance departments to examine and efficiently mitigate these deficiencies.”

CFA concluded that “the December 31, 2020 expiration of TRIA allows ample time to craft a more taxpayer- and public-interest approach to terrorism insurance than merely extending this massive giveaway to an industry that is flush with surplus.”

Contacts:

J. Robert Hunter, 703-528-0062

Doug Heller, 310-480-4170

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CFA Urges Congress to Eliminate the Terrorism Risk Insurance Act

Consumer Federation — Mon, 14 Oct 2019 14:23:02 +0000

CFA urges the U. S. House Financial Services Committee to review the extraordinary growth and level of the property/casualty insurance industry’s surplus capital as Congress contemplates the next steps for the temporary Terrorism Risk Insurance Act (TRIA). It is CFA’s assessment that industry has the capacity to insure properties against terrorism losses without continuing the massive taxpayer subsidies it has been provided under TRIA, and believe the program should not be renewed. As the letter discusses, an alternative to ending TRIA would be to charge an actuarially sound premium to insurers for the federal backstop that TRIA makes available. In the event of any extension, a 10-year extension is excessive and will not allow for the private reinsurance market to develop to handle this manageable risk.

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Consumer Groups Call For Essential Consumer Protection Amendment to Help Retirees

mdeLong — Thu, 23 May 2019 19:42:47 +0000

The Consumer Federation of America (CFA) and Center for Economic Justice (CEJ) sent a letter requesting an amendment to the Retirement Enhancement and Savings Act. The amendment would modify the annuity safe harbor provision (Section 204) to reflect the reality of the current state of complex and confusing annuity products and the evolving, in-process regulation … Continued

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CFA Opposes the Federal Insurance Office Reform Act of 2018

Consumer Federation — Mon, 16 Jul 2018 20:13:52 +0000

In a letter to members of Congress, CFA expresses opposition to H.R. 3861, the “Federal Insurance Office Reform Act of 2018,” which seeks to gut the Federal Insurance Office (FIO). FIO was created in the wake of the financial crisis as a means to provide a resource for federal policymakers and the public regarding insurance markets and to assess the affordability and availability of insurance for American consumers.

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Public Interest Groups Oppose the “State Insurance Regulation Preservation Act”

Consumer Federation — Tue, 10 Jul 2018 20:21:23 +0000

In a letter to members of Congress, Americans for Financial Reform, Center for Economic Justice, US PIRG, and CFA urge representatives to oppose HR 5059, the “State Insurance Regulation Preservation Act.” The bill creates a new category of “Insurance Savings and Loan Holding Companies” (ISLHCs) that qualify for wide-ranging exemptions from Federal Reserve prudential supervision. The groups fundamentally disagree with this kind of carve-out from consolidated Federal prudential supervision of banking institutions, including those that are subsidiaries of insurance companies.

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Jack Gillis Testifies on the Impact of Autonomous Vehicles on the Future of Insurance

Consumer Federation — Wed, 23 May 2018 16:02:42 +0000

In testimony to the U.S. House Subcommittee on Housing and Insurance, CFA Public Affairs Director Jack Gillis explains that the need for adequate, comprehensive and fairly priced insurance will increase with the introduction of autonomous vehicles to American roads. This is not only the case on the personal front, but also on the commercial liability front as vehicle and technology manufacturers assume liability for the performance of their products. It is too early to know the full financial, economic or social impacts of AVs, but insurance coverage will remain an essential protection in the era of driverless vehicles.

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CFA Calls on Department of Justice to Stop Fidelity-Stewart Merger

Consumer Federation — Mon, 26 Mar 2018 17:42:02 +0000

On March 19, 2018, Fidelity National Financial announced it had signed a merger agreement to acquire Stewart Information Services. As Housing Wire reported the merger, “Fidelity is already one of the nation’s largest title insurance and settlement services provider, and now, it’s set to acquire one of its biggest competitors.” In a letter to Assistant Attorney General Makan Delrahim of the Department of Justice Antitrust Division, CFA is calling upon the Department to undertake careful analysis of this merger. We believe it should be stopped.

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CFA, Public Interest Groups Suggest Improvements to New York State Department of Financial Services’ Proposed Best Interest Standard

Consumer Federation — Mon, 26 Feb 2018 18:01:05 +0000

CFA and other public interest organizations have submitted a letter in response to the New York State Department of Financial Services’ request for comment on its proposal to create a best interest standard for life insurance and annuities recommendations. The organizations appreciate the NY State Department of Financial Services’ leadership in seeking to adopt a best interest standard for these recommendations that matches the strong protections provided by the U.S. Department of Labor’s conflict of interest rule for retirement accounts. In particular, they strongly support the decision to apply the strengthened standard to all life insurance products, not just annuities, as well as the proposal of a best interest standard that generally matches the wording of both the DOL rule and Section 913 of the Dodd-Frank Act. Despite these and other significant improvements over the NAIC’s proposal, however, the groups expressed concern that, as currently drafted, the proposed rule may not fully achieve the stated goal of requiring that insurance producers consistently recommend those life insurance and annuities products that are best for the investor, rather than those that are most profitable to the seller. The letter outlines several suggested changes to help ensure that the proposed standard achieves its intended
purpose.

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Principles for Reforming the National Flood Insurance Program

Consumer Federation — Wed, 29 Nov 2017 19:51:17 +0000

In a letter to the Senate, CFA has outlined principles by which consumers of flood insurance will measure the acceptability of any draft bill to reform the National Flood Insurance Program (NFIP). CFA requests that Congress carefully consider our comments in this letter, and we trust that our ideas will help Congress avoid several serious problems that some of the draft bills we have reviewed would create.

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CFA Opposes H.R. 2874, the 21st Century Flood Reform Act

Consumer Federation — Tue, 07 Nov 2017 22:19:06 +0000

CFA strongly supports Congress taking steps during this reauthorization process to allow private insurers to assume a significant amount of flood risk. However, involving the private insurance market on flood insurance requires careful planning. H. R. 2874 would expose consumers to unfair insurance practices and expose taxpayers to more risk for reasons we explain in this letter. Any increase in the role of private insurers must be accompanied with robust consumer protections. Therefore, we strongly oppose H.R. 2874.

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CFA Opposes Consideration of Private Flood Insurance Outside the Reauthorization of the National Flood Insurance Program

Consumer Federation — Mon, 25 Sep 2017 16:43:04 +0000

The House of Representatives is considering legislation promoting development of private flood insurance as part of a bill to reauthorize the FAA for six months and provide hurricane tax relief. The bill is scheduled to be taken up under suspension this week. In a letter to members of Congress, CFA strongly objected to consideration of private flood insurance outside the reauthorization of the National Flood Insurance Program.

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Insurance Commissioners and FEMA Should Adopt Accountability Measures to Ensure Fair, Timely Claims Settlements

Consumer Federation — Fri, 15 Sep 2017 13:44:31 +0000

Washington, D.C. — Today the Consumer Federation of America (CFA) called on the Federal Emergency Management Agency (FEMA) and the insurance commissioners of states impacted by Hurricanes Harvey and Irma to initiate a public accountability program. These programs will improve insurance company claims handling services as hundreds of thousands of Americans begin the process of rebuilding after the storms. CFA also urged Commissioners to seek public commitments from insurance executives that their companies will provide fair and fast claims services.

“As families rebuild, they deserve a public commitment from the nation’s insurance companies to hold up their end of the insurance bargain and pay claims quickly and fairly,” said J. Robert Hunter, Director of Insurance for CFA and former Administrator of the National Flood Insurance Program and Texas Insurance Commissioner. “Insurance Commissioners and FEMA must play a central role in holding these companies to account by keeping a public spotlight on their customer service over the next several months.”

Commissioners and FEMA Should Get the Data Consumers Need to See How Their Insurer is Doing in Settling Claims

The insurance commissioners of the impacted states (Texas, Louisiana, Alabama, Florida, Georgia, South Carolina and North Carolina) should immediately issue a claims servicing-related data call from each of the top 20 homeowners insurance companies in their state writing wind coverage under a homeowners insurance policy, CFA said FEMA should do the same in these states for the top 20 Write Your Own (WYO) flood insurance servicing companies. The data collected, at least once a week, should include:

number of claims filed;
number of claims closed without payment;
number of claims closed with payment;
number of claims denied;
number of claims in suit;
total dollar amount of disaster claims paid;
total number of complaints filed.

The Commissioners and FEMA should prominently post the data on their websites and update it weekly, so consumers, policymakers, and the media can assess the efficacy of each insurer in their state.

“This action will hold insurance companies accountable to the public and allow consumers to see the performance of their insurance company compared to other companies,” said Hunter. “Allowing consumers to see how their insurer is doing compared to other insurers is very important information. If their company is doing well overall, the consumer should be more patient before filing complaints with the commissioners or FEMA or initiating a lawsuit. If their insurer is performing poorly, that signals to consumers that they should not wait to start action against the company,” Hunter said.

CFA pointed out that a similar process was instituted in New York State after Superstorm Sandy for wind claims. There were few problems with these claims. FEMA did not institute a report card for WYO flood claims, however, and it has been well documented that the WYO flood insurance companies handled Sandy claims poorly. Many Sandy WYO flood claims remained unresolved for several years.

Governors, Insurance Commissioners and FEMA Should Insist that Insurance Executives Publicly Commit to Fair, Fast Claims Service

Commissioners and FEMA should ask all major insurers to commit to fair and fast claims service, and company executives should join Commissioners in news conferences making these commitments public. CFA also suggested that the governor of each state should meet with the CEOs of insurance companies and exchange promises concerning the claims process. For example, the governors should promise to hold down demand surge price gouging by suppliers of materials and labor during the aftermath of these storms. The CEOs should explain to the governor and the public exactly what they are doing to expedite claims resolution and to make sure that claims payments are fair and monitored from the top. The insurers should commit to best practices of claims handling publically.

“Insurance executives must understand that they are personally accountable, as the face of their company, for the handling of these disaster claims,” said Hunter.

Contact: J. Robert Hunter, 207-864-3953; Doug Hunter, 310-480-4170

The Consumer Federation of America is a national organization of more than 250 nonprofit consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.

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CFA Testifies Before US Senate Commerce Committee on Insurance Fraud

Consumer Federation — Thu, 03 Aug 2017 17:08:22 +0000

CFA is concerned about insurance fraud; we are aware of numerous types of fraudulent activity by a few insurers and by a few consumers using the insurance market, both of which harm the vast majority of consumers who are honest and ethical. We would welcome Congress undertaking research to document and to minimize these types of harmful actions that put consumers at great economic disadvantage, so long as the effort is deployed in such a way that considers the whole range of frauds being committed in the insurance market, as we have outlined here. We support efforts to control these types of fraud, with the important warning that the prospect of fraud should not be used as a device to justify an unscrupulous attack on innocent consumers seeking claims payments.

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Principles for National Flood Insurance Program Reauthorization

Consumer Federation — Tue, 18 Jul 2017 16:15:52 +0000

CFA strongly supports Congress taking steps during the National Flood Insurance Program (NFIP) reauthorization process to allow private insurers to assume a significant amount of flood risk. However, involving the private insurance market on flood insurance requires careful planning since some proposals we have seen would expose consumers to extremely unfair practices and expose taxpayers to more risk for reasons we explain in this letter. Any increase in the role of private insurers must be accompanied with robust consumer protections.

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