Insurance Premiums are Based on Risk of Loss

CHICAGO - The following statement by the Property Casualty Insurers Association of America (PCI) is in response to the recent story by ProPublica that misconstrues how auto insurance rates are set. The following statement can be attributed to David Snyder, PCI’s vice president of policy development and research.

“Consumers should be assured that auto insurance pricing is fair and objective. The ProPublica article is based on flawed research and analysis that results in false and misleading conclusions.

“Race, income, and ethnicity are never collected or used for insurance rating. Auto insurers do not tolerate unfair discrimination in their business practices and the industry is strictly regulated by state insurance departments to preclude any violations of anti-discrimination laws. 

“The ProPublica article fails to recognize that auto insurance pricing is based on risk of loss and the cost of claims.  Insurance rates are built on rigorous actuarial standards and subject to strict state regulation. Insurers use a variety of factors for underwriting and rating that have been statistically proven to help predict which consumers are less likely to have an accident or file a claim. This is the fairest way to price insurance because it reflects the level of risk for a driver. 

“Because the auto insurance market is highly competitive, consumers have a large variety of choices. If consumers are not happy with an insurance quote or the cost of insurance, we encourage them to shop around for a better price or another company that best fits their needs.

“Unfortunately, auto insurance rates are rising across the country—in every state and region—due to a historic spike in the number of auto accidents on our roads today. This also is a major public safety issue. The National Safety Council estimates that as many as 40,000 people died in motor vehicle crashes in 2016. That marks a 6 percent increase over 2015, and a 14 percent increase over 2014 - the most dramatic two-year escalation in more than 50 years. Distracted driving is a leading culprit for the increase in auto accidents across the country. Distracted driving-related accidents are even more frequent in urban areas with heavy traffic congestion.”