PCI Says Consumer Federation of America Report Distorts How Auto Insurance Works for Consumers

CHICAGO, IL – The following statement by the Property Casualty Insurers Association of America (PCI) is in response to the latest study by the Consumer Federation of America (CFA) regarding auto insurance rating.  The following statement can be attributed to David Snyder, PCI’s vice president of policy development and research.

“The central flaw in the Consumer Federation of America’s report is that all factors, including the ones they focus on, are used because they are proven to increase the accuracy of predicting risk of loss. It is important for consumers to understand that insurance pricing must be based on actuarial science and is subject to ongoing and rigorous regulation which ensure that all rating factors comply with the law.

“Consumers want insurance to be based on the likelihood of someone having an accident or filing a claim. Rather than just relying on state motor vehicle records which are plagued by many omissions and unreported events insurers use a wide variety of factors that have proven to be associated with risk of loss in order to draw the most accurate picture of each driver.

“Another flaw in the CFA’s report is that their premium calculations do not include many variables that can bring down rates such as miles driven and usage based insurance.

“Rather than rehashing the same old critiques regarding the lawful practice of risk based pricing, we urge the CFA to join with insurers and work with us to reduce accidents, and cost factors that drive auto insurance costs for all consumers such as distracted walking and driving and drugged driving. Consumers benefit from risk classification factors that distinguish lower-risk policyholders from higher-risk policyholders. The more risk assessment tools available to insurers, the more accurately risks can be priced.  In this way, premiums paid by insured drivers are more equitable.  However, we do agree with the authors who stated that insurers do not use income in pricing nor would regulators permit that.”

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PCI promotes and protects the viability of a competitive private insurance market for the benefit of consumers and insurers. PCI is composed of nearly 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write more than $183 billion in annual premium, 35 percent of the nation's property casualty insurance. Member companies write 42 percent of the U.S. automobile insurance market, 27 percent of the homeowners market, 32 percent of the commercial property and liability market and 34 percent of the private workers compensation market.

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It is important for consumers to understand that insurance pricing must be based on actuarial science and is subject to ongoing and rigorous regulation which ensure that all rating factors comply with the law
David Snyder