NEW YORK (MainStreet) If you are paying more than $500 in annual premiums for car insurance, you're paying too much. So says the Consumer Federation of America (CFA) and more than three quarters (76%) of Americans agree, according to a national survey conducted for the organization. The CFA says annual premiums for basic car insurance coverage for low- and moderate-income drivers with excellent driving records should not exceed $500.
However, the consumer advocacy group claims auto insurance companies continue to price their policies based on occupation, education and credit scores rather than driving records, pushing the cost of premiums out of the reach of many good but low- or moderate-income drivers.
The CFA joined with over 30 consumer, civil rights, community and other public interest groups in writing a response to the U.S. Treasury Department's Federal Insurance Office (FIO) request for information and comment regarding affordable auto insurance.
The groups made three recommendations:
- Data collected on auto insurance should be precise enough to indicate the actual premiums insurers charge drivers, rather than average rates that obscure the wide range of premiums that companies charge to good drivers with different socio-economic characteristics
- An affordability metric should consider both the public's views on reasonable prices and programmatic efforts to make auto insurance affordable for low-income drivers
- The FIO should work with regulators and, as necessary, use its own authority to collect data directly from insurance companies in order to ensure the most accurate information is available.
"Average data won't give the public or policymakers the information needed to really understand the scope of the challenge facing lower-income Americans when it comes to buying even the most basic auto insurance policy," said J. Robert Hunter, Director of Insurance at CFA. "Average rates mask the high prices faced by millions of drivers whose incomes are below average while their premiums are much higher than it. Since forty-nine of fifty states require that drivers buy insurance, we need a research program like the one being contemplated by the FIO in order to come to grips with the scale of the affordability problem."