FIO Adopts Auto Insurance Availability Benchmark

Earlier this week, the Federal Insurance Office (FIO) released the methodology it will use to examine and determine the affordability of automobile insurance across the country.

According to a press release from the Department of Treasury, “the affordability index to be used by FIO will be calculated by dividing the average annual personal auto liability premium by the median household income for zip codes identified as mostly minority or low- and moderate-income areas.” FIO will use these metrics and release a study annually on the cost of auto insurance.

The FIO was created as part of the Dodd-Frank Wall Street Reform Act (Dodd-Frank) as an information-gathering body for the insurance industry. In accordance with the statute, the FIO has the power to “monitor the extent to which traditionally underserved communities and consumers, minorities and low- and moderate-income persons have access to affordable insurance products regarding all lines of insurance, except health insurance.” The FIO began collecting data on auto affordability from stakeholders in 2014 and again in 2015 after it concluded that available data was inadequate for the office to comply with the directive in Dodd-Frank.

The Big “I” met with the FIO to discuss the affordability study and argued that auto insurance is generally affordable. Additionally, the association pointed to the highly competitive auto markets in each state to stress the product’s accessibility to consumers across the country. However, representatives for consumers assert that auto insurance has become less affordable for low- and moderate-income consumers and for minorities. These representatives have also urged the FIO to establish a set of metrics to execute this annual study.

Jen McPhillips is Big “I” assistant vice president of federal government affairs.