Affordable insurance is a necessity for consumers so they can protect themselves against accidents and disasters. But too often, insurance is expensive or unaffordable for consumers, who struggle to pay their premiums and find basic coverage. Yesterday morning, Consumer Federation of America (CFA), along with several other advocates, called on the District of Columbia Council’s Committee on Business and Economic Development to alleviate these problems for Washingtonians.
In testimony before the Committee, CFA urged the Insurance Department to release its report on unfair bias in auto insurance and urged the Committee to demand that insurance companies stop underwriting the fossil fuel projects that are driving climate change and increased home insurance premiums.
The Committee on Business and Economic Development conducts oversight of the Department of Insurance, Securities, and Banking (DISB), and can ask questions, demand answers, and make recommendations of that agency. Committee chair Kenyan McDuffie stated that this week’s January 31st hearing was intended to get concerns and input from members of the public, in order to raise its concerns with the Insurance Department at the upcoming oversight hearing on February 7th.
Currently, the Department is finalizing a report on unfair bias in auto insurance and what factors contribute to inequities faced by communities of color. Auto insurers use numerous socioeconomic factors that result in safe drivers being charged unfairly high premiums which can lead to unfair bias throughout the insurance process, from marketing and selling to claims handling and fraud fighting. These factors include a customer’s education level, job or occupation, gender, marital status, homeownership status, and credit information—and they disproportionately harm Black, Latino, Indigenous, and low-income residents.
Several years ago, Consumer Reports found that a District of Columbia driver with a perfect driving record but a low credit score would pay 33% more on average for auto insurance compared to a driver who has excellent credit but also a drunk driving conviction on their record. When drunk drivers pay less than safe drivers, an investigation of industry practices and algorithmic biases is the minimum that can be done.
Over the past year and a half, the Department has held multiple public sessions and meetings with both consumer advocates and insurance companies, collected information about unfair bias in auto insurance, and assembled the findings into a report. The consulting firm ORCAA, led by Weapons of Math Destruction author Cathy O’Neil, has been assisting the Department with the analysis. During the public sessions, the Department has explained that the report would review auto insurance premium quotes, underwriting, and pricing, and use sophisticated methodologies to determine the impact of harmful discrimination on consumers of various demographics.
However, the report has yet to be released; we have been told that it has been sent to the Mayor’s Office for review in order to answer any questions they might have. In our testimony, Consumer Federation of America expressed concern that the report isn’t public yet, and urged the Department to issue the report without any further delays.
Consumer Federation of America also joined three other organizations, urging that the District of Columbia make sure insurance companies don’t contribute to climate change and rising insurance costs. Currently, insurance companies provide coverage to fossil fuel projects including oil pipelines and coal-fired power plants, which contribute to climate change and result in stronger and more frequent natural disasters and weather condition. These climate events, in turn, drive up home insurance premiums. These fossil fuel plants rely on the insurance protection to operate, meaning the insurers’ underwriting decisions play a key role related to the growth or reduction in emissions which are also pushing up homeowner premiums.
To make matters worse, many insurance companies take the premiums they collect from consumers and invest them back into the fossil fuel industry. Rather than investing in risk reducing activities that would help mitigate the worst effects of climate change, insurers are turning consumer premiums against policyholders by investing them in firms that exacerbate the insurance crisis, making a bad situation even worse.
At the hearing, a number of public interest advocates highlighted the harmful business practices of Travelers Insurance, the largest homeowners insurance company in the District of Columbia, which has resisted calls to phase out its underwriting of fossil fuel projects. U.S. PIRG has launched a campaign demanding that Travelers stop underwriting and investing in the fossil fuel projects that are responsible for driving up consumer premiums. The campaign points out that “according to an August 2023 analysis of 2019 data collected by the California Department of Insurance, of the top 16 U.S. property & casualty insurers ranked by assets under management, Travelers was the 4th largest holder of fossil fuel-related investments.”
Consumer Federation of America, U.S. PIRG, Americans for Financial Reform, and Public Citizen testified that insurance companies need to be held accountable when the decisions they make to foster fossil fuel projects harm our climate and increase insurance costs for everyone. Together, we urged the Committee to work with the Department to protect consumers from the risks of climate change posed by the insurance industry and to demand that insurance companies stop financing and facilitating fossil fuel projects.