FIO Highlights Need for More Scrutiny of Insurance Industry Practices Including Big Data, Unfair Rating, Mandatory Arbitration
"We appreciate that the Federal Insurance Office has raised some significant consumer issues, and states need to do a better job addressing them," said
The report marks the first comprehensive governmental look at insurance consumer issues, according to the consumer groups. They note that FIO praises state insurance regulators where appropriate but, importantly, also identifies failings that impact consumers. The report also illustrates the public value of FIO, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act and given responsibility to monitor insurance markets and identify gaps in state-based regulation.
One of the more pointed critiques in the report highlighted the lack of state protections for consumers when it comes to insurers' use of Big Data in the underwriting and pricing of insurance products. FIO noted: "With rare exceptions, state insurance regulators have not asserted regulatory authority over third-party vendors that provide insurers with pricing and rating tools. This failure results in a significant regulatory gap, which should be closed to prevent potential harm to individuals, families, and businesses."
FIO also highlighted the perils of allowing insurance companies to rate drivers based on their marital status, a problem noted previously in a 2015 CFA study. FIO asked: "Is it fair for the victim of an abusive spouse who obtains a divorce to face higher auto insurance premiums for ending a dangerous relationship? Is it fair for a widow (or widower) to pay more for auto insurance after experiencing the loss of a spouse?"
The consumer groups said that they are also looking forward to FIO's first auto insurance affordability report. That report, mandated by Dodd-Frank, is expected to offer an extensive analysis of the affordability of auto insurance in low-income and communities of color around the nation. The report will be released after the agency spent two years working with consumer groups and the industry to develop a standard for analyzing affordability in auto insurance markets, establishing that liability premiums greater than two percent of the median income in low-income and communities of color are unaffordable. Dozens of consumer, civil rights and community groups jointly filed comments urging FIO to move forward with its reporting on auto insurance affordability.
"Auto insurance is required of drivers in every state except
[Category: Consumer Services]
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