[Federal Register Volume 60, Number 57 (Friday, March 24, 1995)]
[Rules and Regulations]
[Pages 15509-15512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7266]
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DEPARTMENT OF TRANSPORTATION
49 CFR Part 582
[Docket No. 94-73; Notice 2]
RIN 2127-AF44
Insurance Cost Information Regulation
AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.
ACTION: Final rule.
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SUMMARY: In this document, NHTSA adopts technical amendments to the
insurance cost information regulations. Among the changes adopted are
postponing, from January until March, the availability date of the
insurance cost information booklet, and revising the term ``passenger
motor vehicles'' to read ``passenger cars, utility vehicles, light duty
trucks, and vans.'' NHTSA also adds language making more explicit the
limitations of the collision loss data, and language recommending that
prospective purchasers contact insurance agents or insurance companies
for more information. The amendments are adopted to make the insurance
cost information more accurate.
DATES: These amendments are effective April 24, 1995, and will apply to
the insurance cost information to be made available in March 1996.
FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market
Incentives, NHTSA, 400 Seventh Street, SW., Washington, DC 20590. Mr.
Kee's telephone number is (202) 366-0846.
SUPPLEMENTARY INFORMATION:
Background
Insurance Cost Information Regulation
49 U.S.C. 32302(c) states that the Secretary of Transportation (the
Secretary) shall prescribe regulations that require passenger motor
vehicle dealers to distribute to prospective purchasers, information
developed by the Secretary and provided to the dealer, which compares
differences in insurance costs for different makes and models of
passenger motor vehicles based upon differences in damage
susceptibility and crashworthiness. By delegation from the Secretary,
NHTSA has been authorized to carry out the statute.
On January 31, 1975, NHTSA published 49 CFR part 582, Insurance
Cost Information Regulation (40 FR 4918). Part 582, as then
promulgated, required that automobile dealers ``make available to
prospective purchasers information reflecting differences in insurance
costs for different makes and models of passenger motor vehicles based
upon differences in damage susceptibility and crashworthiness.'' Part
582, however, did not specify information that dealers must provide.
On March 5, 1993 (58 FR 12545), NHTSA published a final rule
amending part 582. The rule complemented the 1975 rulemaking, and
completed implementation of section 32302(c). The March 1993 final
rule, which became effective April 5, 1993, requires dealers of new
automobiles to make collision loss experience data available in
booklets to prospective purchasers. The information to be provided in
the booklet is specified in section 582.5, which requires inclusion of
a complete explanatory text and updated data on auto insurance costs
published annually by NHTSA.
The mandatory text specified by part 582 relates to, among other
topics, the limitations of the auto insurance cost data as a predictor
of differences in insurance premiums. Essentially, those limitations
result from the fact that most of the factors that insurance companies
use to establish premiums relate to driver characteristics and, except
for the vehicle's value, are not directly related to the vehicle
itself. Thus, as the text explains, the fact that a vehicle's
historical claims experience is somewhat better or worse than that of
other vehicles in its class may not be reflected in the premium that an
insurance company establishes for that vehicle. If the claims
experience is reflected, it is likely to have only a small impact on
the premium. [[Page 15510]]
The mandatory text also urges consumers to contact insurance
companies if they wish to obtain precise information about actual
premiums for particular makes and models of vehicles. Previous studies
by NHTSA have revealed that the difference between the premiums charged
by different insurance companies for the same car and driver is greater
than the difference between the premiums charged by a given company for
comparably-valued cars that have different claims experience. NHTSA
believed the mandatory text would help to minimize consumer confusion
by providing customers with an understanding of the uses and
limitations of the auto insurance cost data.
In specifying the yearly insurance cost data that accompanied the
required text, NHTSA decided to rely on collision loss experience data
collected and reported by the Highway Loss Data Institute (HLDI), as
the best available indicator of the effect of damage susceptibility on
insurance costs. In the March 1993 final rule, NHTSA specified HLDI's
December Insurance Collision Report as the data source for part 582.
NHTSA decided to specify HLDI's December Report because it contains
more current data and covers more vehicle models than other HLDI
publications. The HLDI data is presented in a format that ranks the
vehicles in each class from best to worst (with numerical values given
for each vehicle). NHTSA specified this format because it determined
that the use of this ranking system should assist customers in
evaluating the comparative performance of comparable vehicles.
In the March 1993 final rule, NHTSA stated its belief that the HLDI
information should be made available as soon as possible after its
publication date. Therefore, NHTSA stated its intent to publish the
annual Federal Register document updating HLDI's December Insurance
Collision Report data no later than January of the calendar year that
follows HLDI's publication of the data.
The NPRM
In a notice of proposed rulemaking (NPRM) issued on September 13,
1994 (59 FR 46952), NHTSA proposed to amend part 582 by making certain
changes in Sec. 582.5, in which the text of the insurance cost
information booklet is specified. Originally, the text specified the
date ``January [Year to be Inserted].'' NHTSA proposed to substitute
``March'' for ``January,'' in order to allow itself adequate time to
publish and distribute the comparative insurance cost information
booklet. In practice, HLDI does not send the December Insurance
Collision Report data to NHTSA until mid-January. NHTSA then formats
the data for printing, and arranges for the printing and distribution
by mail of a single copy of the booklet to each of the nation's
approximately 27,000 automobile dealers. NHTSA can thus reasonably
expect that the booklet will be published by March of each year.
Part 582 originally specified a comparison of insurance costs for
``passenger motor vehicles.'' In the NPRM, NHTSA proposed to revise the
term ``passenger motor vehicles,'' at appropriate places in Sec. 582.5,
to read ``passenger cars, utility vehicles, light duty trucks and
vans.'' The revisions were intended to make clear that the term
``passenger motor vehicles'' includes many vehicle types besides
``passenger car.''
NHTSA also proposed to make certain changes to the required text
that would make more explicit the limitations of the collision loss
data. In the final rule, the text in Sec. 582.5 that explains the
data's limitations stated that the collision loss data table does not
include information about new models, models that have been
substantially redesigned, and models without enough claim experience.
In order to make clear that certain data should not be relied upon,
NHTSA proposed to revise the third paragraph in Sec. 582.5 to state:
The table is not relevant for new models or models that have
been substantially redesigned for [ YEAR TO BE INSERTED ], and it
does not include information about models without enough claim
experience.
Also, in the final rule, the fourth paragraph in Sec. 582.5 stated
that it is unlikely that a consumer's total premium will vary more than
five percent depending upon the collision loss experience of a
particular vehicle. Subsequently, a representative of the Insurance
Services Organization (ISO), which recommends insurance premium rates
to its members, indicated to NHTSA that the collision cost data could
result in an insurance premium reduction of ten percent rather than the
five percent mentioned in the booklet. Accordingly, NHTSA tentatively
concluded that it would be more accurate to state that it is unlikely
that a consumer's total premium will vary more than ten percent.
Finally, Sec. 582.5 originally stated that consumers should contact
insurance companies directly to determine the actual premium that a
consumer will be charged for insuring a particular vehicle or for
complete information about insurance premiums. NHTSA proposed to revise
Sec. 582.5 to advise the consumer to contact insurance company agents
directly in order to obtain premium information. This proposal was
intended to reflect the fact that the consumer's first point of contact
with many insurance companies is the insurance company agent.
Summary of Comments and Agency Responses
NHTSA received comments from three entities on the issues raised in
the NPRM. These included Advocates for Highway and Auto Safety
(Advocates), the National Automobile Dealers Associations (NADA), and
Volkswagen of America (VW). Each commenter generally supported the
proposed amendment, but raised individual suggestions concerning
specific portions of the proposed text.
a. Publication date: No commenter objected to the change of the
publication date from January to March, and NADA affirmatively
supported this change. NADA also suggested that NHTSA should
``reconsider working towards publishing'' the insurance cost data in
the same booklet as DOE/EPA's comparative fuel economy data. In the
March 1993 final rule, NHTSA rejected earlier proposals (by NADA and
others) to publish all of the data in a single document. NHTSA
continues to believe that this proposal is unworkable. The HLDI
insurance cost information does not become available until late
January. This time frame is too late to permit publication of the data
simultaneously with DOE/EPA's ``Gas Mileage Guide,'' which is made
available at the beginning of the model year (ordinarily in the
preceding October), when new models arrive at dealers' show rooms.
Furthermore, the data in the Gas Mileage Guide, which are arranged
according to criteria such as interior roominess, engine, and
transmission, are presented differently from the HLDI data, which is
arranged according to wheelbase and vehicle type.
b. Covered Vehicles: Both NADA and Advocates supported the agency's
proposal to change the description of the vehicles covered by making it
more specific. NADA suggested that the agency use the terms ``station
wagon/passenger van, pickup, and utility vehicle,'' throughout the
text, to reflect the groupings into which the HLDI data is already
broken out. NHTSA agrees that this suggestion has merit, and has
decided to adopt it by revising the end of the first paragraph of
Sec. 582.5 to state: ``COMPARISON OF DIFFERENCES IN INSURANCE COSTS FOR
PASSENGER CARS, STATION WAGONS/PASSENGER VANS, PICKUPS, AND
[[Page 15511]] UTILITY VEHICLES ON THE BASIS OF DAMAGE
SUSCEPTIBILITY.''
c. Discussion of the limitations of the data: Two commenters
addressed the agency's proposal to modify the textual discussion of the
limitations of the data. NADA requested that the agency further
emphasize and explain those limitations. On the other hand, Advocates
expressed its concern that consumers may infer from the proposed
language that the insurance cost data is of little value, and suggested
that the agency emphasize the usefulness of the data. Accordingly, it
proposed that, in addition to the textual changes proposed in the NPRM,
the final rule adopt language that affirmatively states that the table
``can be used to compare insurance premiums of most vehicle makes and
models * * *.'' In addition, it proposed dropping the reference to
``new models'' in the description of vehicles to which the tables do
not apply.
NHTSA has concluded that the presentation of the insurance cost
information is clear and adequate. The agency disagrees with Advocates'
conclusion that the fact that the proposed revision points out the
limitations of the data will lead consumers to conclude that the
insurance cost information is of little value. Since the issuance of
the final rule in March 1993, the text of the insurance cost booklet
has always contained a description of the limitations of the data; the
revision merely clarifies those limitations. Therefore, NHTSA has
decided against adopting Advocates' suggested affirmative statement
concerning the appropriate uses of the data.
Advocates' suggestion that the reference to ``new models'' in the
proposed revision to the third paragraph of the text should be deleted
was based on its assertion that previous cost information is applicable
to new models of the same vehicle make if the vehicle line has not been
substantially redesigned. Although NHTSA believes that the term ``new
models'' is ordinarily understood to mean an entirely new or
substantially redesigned model, the agency has concluded that the term
``new models'' is superfluous in this context. Accordingly, the agency
is accepting Advocates' proposal to delete the reference.
d. Advice about contacting insurance agents: Advocates suggested a
change to the agency's proposed language advising consumers to contact
insurance agents in order to obtain relevant insurance cost
information. Advocates agreed that it was appropriate to advise
consumers to contact insurance agents, but suggested that the
regulatory text should provide consumers with the option of contacting
either their insurance agent or their insurance company. NHTSA has
concluded that this suggestion appropriately recognizes the fact that
while in many instances, consumers contact individual agents with
respect to their existing or prospective policies, there are other
instances in which insurance companies do not work through individual
agents and consumers instead must contact the company directly.
Therefore, the agency has decided to adopt Advocates' suggestion to
clarify the advice by referring both to insurance agents and insurance
companies.
e. Description of NCAP test results: VW recommended changing the
description of the New Car Assessment Program (NCAP) test results to
emphasize that they are based on a single, 35 mph, barrier crash test
of a new vehicle. NHTSA does not agree with VW that a change in wording
is necessary. The present text is consistent with the description of
the NCAP program that appears in other NHTSA publications. VW's
recommended change would cause the description of the NCAP program in
the insurance cost information booklet to differ from the text that
already appears elsewhere. Moreover, while cost considerations limit
the NCAP testing to one test per new vehicle model, the agency has
access to other crash test data, both from manufacturers and from its
own compliance test programs. The agency has concluded from its review
of all available data that the statement that ``NCAP test results
demonstrate relative frontal crash protection in new vehicles'' is
accurate, and has decided to retain it.
f. Variation in premiums: No commenter addressed the agency's
proposal to amend the statement as to the amount by which collision
cost data could result in an insurance premium reduction. Accordingly,
in order to increase the accuracy of the booklet, the agency is
adopting its proposal to state that it is unlikely that a consumer's
total premium will vary more than 10 percent.
Regulatory Impacts
1. Executive Order 12866 and DOT Regulatory Policies and Procedures
This notice has not been reviewed under Executive Order 12866.
NHTSA has considered the impact of this rulemaking action and has
determined the action not to be ``significant'' under the Department of
Transportation's regulatory policies and procedures. The agency has
determined that the economic effects of the proposed amendments are
minimal, so that a full regulatory evaluation is not required. This
notice adopts minor amendments to the insurance cost information
regulation, to increase the accuracy of the information provided to
potential motor vehicle purchasers. The amount of extra text that must
be included in the information booklet as a result of this amendment is
minuscule.
2. Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, NHTSA has
evaluated the effects of this amendment on small entities. NHTSA
estimates there are about 27,000 dealers of new passenger motor
vehicles. Many of the dealers that may be affected by this amendment
are considered to be small business entities. However, NHTSA believes
that this amendment will not have a significant economic impact on any
of these small dealers. This rulemaking adopts minor editorial changes,
that result in the addition of a small amount of extra text to the
insurance cost information booklet. The minimal cost increments to the
dealers that may be associated with this amendment should have
negligible effects on the purchase price of new passenger motor
vehicles. For these reasons, I certify that this amendment will not
have a significant economic impact on a substantial number of small
entities.
3. National Environmental Policy Act
In accordance with the National Environmental Policy Act of 1969,
the agency has considered the environmental impacts of this amendment
and determined that it will not have a significant impact on the
quality of the human environment.
4. Federalism
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12623, and it has been determined
that the rule does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
5. Civil Justice Reform
This amendment would not have any retroactive effect, and it does
not preempt any State law. Chapter 323--Consumer Information of 49
U.S.C. does not provide for judicial review of rules issued pursuant to
49 U.S.C. 32302. The Administrative Procedure Act, 5 U.S.C. 701 et
seq., provides generally for judicial review of final agency action,
which in certain circumstances may include this proposed rule. The
[[Page 15512]] Administrative Procedure Act does not require submission
of a petition for reconsideration or other administrative proceedings
before parties may file suit in court.
List of Subjects in 49 CFR Part 582
Administrative practice and procedure, Insurance, Motor vehicles.
In consideration of the foregoing, NHTSA amends 49 CFR part 582 as
follows:
PART 582--[AMENDED]
1. The authority citation for part 582 is revised to read as
follows:
Authority: 49 U.S.C. 32303; delegation of authority at 49 CFR
1.50(f).
2. Section 582.5 is revised to read as follows:
Sec. 582.5 Information form.
The information made available pursuant to Sec. 582.4 shall be
presented in writing in the English language and in not less than 10-
point type. It shall be presented in the format set forth below, and
shall include the complete explanatory text and the updated data
published annually by NHTSA.
MARCH [YEAR TO BE INSERTED]
COMPARISON OF DIFFERENCES IN INSURANCE COSTS FOR PASSENGER CARS,
STATION WAGONS/PASSENGER VANS, PICKUPS AND UTILITY VEHICLES ON THE
BASIS OF DAMAGE SUSCEPTIBILITY
The National Highway Traffic Safety Administration (NHTSA) has
provided the information in this booklet in compliance with Federal
law as an aid to consumers considering the purchase of a new
vehicle. The booklet compares differences in insurance costs for
different makes and models of passenger cars, station wagons/
passenger vans, pickups, and utility vehicles on the basis of damage
susceptibility. However, it does not indicate a vehicle's relative
safety.
The following table contains the best available information
regarding the effect of damage susceptibility on insurance premiums.
It was taken from data compiled by the Highway Loss Data Institute
(HLDI) in its December [YEAR TO BE INSERTED] Insurance Collision
Report, and reflects the collision loss experience of passenger
cars, utility vehicles, light trucks, and vans sold in the United
States in terms of the average loss payment per insured vehicle year
for [THREE APPROPRIATE YEARS TO BE INSERTED]. NHTSA has not verified
the data in this table.
The table represents vehicles' collision loss experience in
relative terms, with 100 representing the average for all passenger
vehicles. Thus, a rating of 122 reflects a collision loss experience
that is 22 percent higher (worse) than average, while a rating of 96
reflects a collision loss experience that is 4 percent lower
(better) than average. The table is not relevant for models that
have been substantially redesigned for [YEAR TO BE INSERTED], and it
does not include information about models without enough claim
experience.
Although many insurance companies use the HLDI information to
adjust the ``base rate'' for the collision portion of their
insurance premiums, the amount of any such adjustment is usually
small. It is unlikely that your total premium will vary more than
ten percent depending upon the collision loss experience of a
particular vehicle.
If you do not purchase collision coverage or your insurance
company does not use the HLDI information, your premium will not
vary at all in relation to these rankings.
In addition, different insurance companies often charge
different premiums for the same driver and vehicle. Therefore, you
should contact insurance companies or their agents directly to
determine the actual premium that you will be charged for insuring a
particular vehicle.
Please Note: In setting insurance premiums, insurance companies
mainly rely on factors that are not directly related to the vehicle
itself (except for its value). Rather, they mainly consider driver
characteristics (such as age, gender, marital status, and driving
record), the geographic area in which the vehicle is driven, how
many miles are traveled, and how the vehicle is used. Therefore, to
obtain complete information about insurance premiums, you should
contact insurance companies or their agents directly.
Insurance companies do not generally adjust their premiums on
the basis of data reflecting the crashworthiness of different
vehicles. However, some companies adjust their premiums for personal
injury protection and medical payments coverage if the insured
vehicle has features that are likely to improve its crashworthiness,
such as air bags and automatic seat belts.
Test data relating to vehicle crashworthiness are available from
NHTSA's New Car Assessment Program (NCAP). NCAP test results
demonstrate relative frontal crash protection in new vehicles.
Information on vehicles that NHTSA has tested in the NCAP program
can be obtained by calling the agency's toll-free Auto Safety
Hotline at (800) 424-9393.
[Insert Table To Be Published Each March by the National Highway
Traffic Safety Administration]
If you would like more details about the information in this
table, or wish to obtain the complete Insurance Collision Report,
please contact HLDI directly, at: Highway Loss Data Institute, 1005
North Glebe Road, Arlington, VA 22201, Tel: (703) 247-1600.
Issued on: March 20, 1995.
Ricardo Martinez,
Administrator.
[FR Doc. 95-7266 Filed 3-23-95; 8:45 am]
BILLING CODE 4910-59-P