[Federal Register Volume 86, Number 101 (Thursday, May 27, 2021)]
[Notices]
[Pages 28681-28683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11167]


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DEPARTMENT OF THE TREASURY


Monitoring Availability and Affordability of Auto Insurance; 
Assessing Potential Evolution of the Auto Insurance Market

AGENCY: Federal Insurance Office, Departmental Offices, Department of 
the Treasury.

ACTION: Request for information.

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SUMMARY: The Federal Insurance Office (FIO) of the U.S. Department of 
the Treasury (Treasury) is issuing this Request for Information (RFI) 
to solicit input regarding FIO's future work relating to monitoring the 
availability and affordability of automobile (auto) insurance. Building 
upon its prior work, FIO will undertake a holistic analysis of the 
domestic personal auto insurance business, focusing on: (1) 
Affordability of coverage and disparities in premium pricing, with 
particular attention to traditionally-underserved communities and the 
impact of non-driving factors; and (2) market evolution and structural 
shifts in the conduct of the business, including the effects of 
technology and the use of big data, as well as changes related to the 
COVID-19 pandemic. Additionally, FIO seeks feedback on updating its 
prior work on auto insurance, including its January 2017 Study on the 
Affordability of Personal Automobile Insurance (2017 FIO Affordability 
Study).

DATES: Submit written comments on or before July 26, 2021.

ADDRESSES: Submit comments electronically through the Federal 
eRulemaking Portal at http://www.regulations.gov, in accordance with 
the instructions on that site, or by mail to the Federal Insurance 
Office, Attn: Alex Hart, Room 1410 MT, Department of the Treasury, 1500 
Pennsylvania Avenue NW, Washington, DC 20220. Because postal mail may 
be subject to processing delays, it is recommended that comments be 
submitted electronically. If submitting comments by mail, please submit 
an original version with two copies. Comments should be captioned ``FIO 
Auto Insurance Study.'' In general, Treasury will post all comments to 
www.regulations.gov without change, including any business or personal 
information provided such as names, addresses, email addresses, or 
telephone numbers. All comments, including attachments and other 
supporting materials, are part of the public record and subject to 
public disclosure. You should submit only information that you wish to 
make available publicly.

FOR FURTHER INFORMATION CONTACT: From the Federal Insurance Office: 
Alex Hart, Senior Insurance Regulatory Policy Analyst, 202-213-6850, 
[email protected]; Daniel McKnight, Policy Advisor, 202-631-1979, 
[email protected], or Andrew Shaw, Senior Policy Advisor, 
(202) 304-4532, [email protected]. Persons who have difficulty 
hearing or speaking may access these numbers via TTY by calling the 
toll-free Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

The Personal Auto Insurance Market

    The U.S. personal auto insurance sector is a significant part of 
the U.S. economy, both in terms of its aggregate size and its impact on 
individual consumers and their economic well-being. In 2020, this line 
of business accounted for approximately $247 billion of direct premiums 
written, or

[[Page 28682]]

about 35% of the domestic property & casualty (P&C) insurance sector's 
total premiums of $711 billion. Auto ownership is associated with 
greater opportunity for economic well-being, such as better access to 
employment opportunities.\1\ All U.S. states except for New Hampshire 
require a driver or owner of a motor vehicle to have auto liability 
insurance or financial security, which may be satisfied by auto 
liability insurance, when registering or while operating a motor 
vehicle. However, in 2019 nearly 13% of drivers in the United States 
were uninsured.\2\
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    \1\ FIO's previous work on auto insurance affordability 
discusses these issues in greater depth. See Federal Insurance 
Office, U.S. Department of the Treasury, Study on the Affordability 
of Automobile Insurance (2017), https://home.treasury.gov/system/files/311/FINAL%20Auto%20Affordability%20Study_web.pdf.
    \2\ Insurance Research Council, ``One in Eight Drivers 
Uninsured,'' news release, March 21, 2021, https://www.insurance-research.org/sites/default/files/downloads/UM%20NR%20032221.pdf.
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    The domestic personal auto insurance business has been evolving 
throughout the 21st century. New consumer preferences and recent 
technological innovations--including the increased use of big data and 
artificial intelligence--have led to changes in nearly all aspects of 
the business, including availability of products, pricing, 
underwriting, distribution, claims adjudication and processing, and 
risk management. Additionally, developments in the sharing economy 
(such as ride-sharing and delivery services) and automation are likely 
to further reshape the business in the future. The COVID-19 pandemic 
accelerated some of these changes, such as an increased consumer 
preference for usage-based insurance and telematics, which could 
permanently alter the sector.

FIO's Previous Work on Auto Insurance

    Title V of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 established FIO within Treasury and authorizes 
FIO to, among other things, monitor the extent to which traditionally 
underserved communities and consumers, minorities, and low- and 
moderate-income (LMI) persons have access to affordable insurance 
products regarding all lines of insurance other than health 
insurance.\3\
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    \3\ FIO Act, 31 U.S.C. 313(a), (c)(1)(B). Title V also 
designates the Secretary as advisor to the President on ``major 
domestic and international prudential policy issues in connection 
with all lines of insurance except health insurance.'' Id. at sec. 
321(a)(9).
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    In 2014 and 2015, FIO issued two public notices soliciting comments 
relating to monitoring the affordability of personal auto insurance for 
traditionally underserved communities and consumers, minorities, and 
LMI persons (collectively, ``Affected Persons'').\4\ FIO then issued a 
notice in 2016 detailing a proposed methodology for examining the 
affordability of personal auto insurance (2016 FIO Notice).\5\ The 2016 
FIO Notice also indicated that FIO would use available data from the 
Census Bureau, statistical agents, and certain states for an initial 
affordability study, the 2017 FIO Affordability Study.\6\ In addition, 
FIO indicated that for a subsequent study in 2017 following the 2017 
FIO Affordability Study, FIO would request large auto insurers (i.e., 
those having a statutory surplus greater than $500 million and annually 
collecting more than $500 million of premium for personal auto 
insurance) to voluntarily provide to the statistical agents with which 
the insurers typically work the following information: (i) ZIP Code-
level premium data; (ii) for liability coverage at the financial 
responsibility limit; and (iii) for the voluntary market.\7\ Although 
FIO did not proceed with this voluntary data call to large auto 
insurers, it has continued to monitor auto insurance market 
developments, as noted in its recent Annual Reports.\8\ Additionally, 
FIO's Federal Advisory Committee on Insurance (FACI) has considered 
issues related to personal auto insurance.\9\
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    \4\ 79 FR 19969 (Apr. 10, 2014), 80 FR 38277 (Jul. 2, 2015).
    \5\ 81 FR 45372 (July 13, 2016).
    \6\ 81 FR at 45381.
    \7\ 81 FR at 45381.
    \8\ See, e.g., Federal Insurance Office, U.S. Department of the 
Treasury, Annual Report on the Insurance Industry (2020), 26-27, 31-
32, 35, https://home.treasury.gov/system/files/311/2020-FIO-Annual-Report.pdf.
    \9\ See, e.g., Federal Advisory Committee on Insurance, Minutes 
of the Federal Advisory Committee on Insurance (September 29, 2020), 
https://home.treasury.gov/system/files/311/FACI-Minutes-9-20.pdf.
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    The 2017 FIO Affordability Study sought to provide quantifiable 
information on auto insurance affordability for Affected Persons. The 
data examined by FIO for the 2017 FIO Affordability Study did not 
include all U.S. auto insurance policies. Instead, it was based on ZIP 
Code-level premium data that was voluntarily provided by several U.S. 
states and a statistical agent.\10\ The 2017 FIO Affordability Study 
calculated and reported data based on an Affordability Index, which is 
the ratio of the average annual written personal auto liability premium 
in the voluntary market to the median household income (based on U.S. 
Census Bureau data) for U.S. Postal Service ZIP Codes in which Affected 
Persons were 50% or more of the population. The 2017 FIO Affordability 
Study indicated that approximately 18.6 million Americans live where 
auto insurance costs more than 2% of median household income.
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    \10\ With some state-specific exceptions, P&C insurers generally 
are required by state law to send premium, claims, and loss data to 
statistical agents, who then compile the data for state insurance 
departments. The states, in turn, use the reported information to 
ensure that insurance rates meet statutory standards and to monitor 
the insurance market.
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Recent Attention on Auto Insurance

    In 2020, the House Appropriations Committee recommended that FIO 
``examine the impact of non-driving related factors, such as a 
consumer's credit history, homeownership status, census tract, marital 
status, professional occupation, and educational attainment, on the 
affordability of auto insurance premiums for traditionally underserved 
communities.'' \11\ President Biden also noted differences in personal 
auto insurance pricing in a televised Town Hall meeting on February 16, 
2021.\12\
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    \11\ U.S. House of Representatives Committee on Appropriations, 
Report together with Minority Views to Accompany H.R. 7668 (116th 
Congress, 2nd Session), https://www.congress.gov/116/crpt/hrpt456/CRPT-116hrpt456.pdf.
    \12\ President Joseph R. Biden, Jr., ``Remarks by President 
Biden in a CNN Town Hall with Anderson Cooper,'' (remarks, CNN Town 
Hall, Milwaukee, WI, February 16, 2021), https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/17/remarks-by-president-biden-in-a-cnn-town-hall-with-anderson-cooper/.
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FIO's Upcoming Analysis of Auto Insurance

    Building upon its past work, FIO is issuing this RFI as part of a 
holistic analysis of the domestic personal auto insurance business, 
focusing on the following key themes:
    (1) Affordability of coverage and premium pricing disparities--with 
particular attention to traditionally underserved communities and 
considering the impact of non-driving factors--including an analysis of 
available data and an update of FIO's past work on auto insurance, and
    (2) market evolution and structural shifts in the conduct of 
business, including the effects of technology and the use of big data, 
as well as changes related to the COVID-19 pandemic.

II. Request for Comments

    FIO invites comments on the following questions:

Data Analysis

    1. Please provide your views on FIO updating its 2017 FIO 
Affordability Study. How could the 2017 FIO

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Affordability Study methodology and reporting be improved? What time 
period should be covered in an updated study? Should FIO update the 
study on a periodic basis, and if so, how frequently?
    2. What data should FIO use to update the 2017 FIO Affordability 
Study? For example, should FIO proceed with the proposed data 
collection outlined in the 2016 FIO Notice (i.e., a request for 
voluntary production of ZIP Code-level premium data limited to large 
insurers that have a statutory surplus greater than $500 million and 
that annually collect more than $500 million of premium for personal 
auto insurance)? Why or why not? What alternate criteria, if any, would 
you propose if FIO administers a data collection?
    3. Some recent auto insurance affordability analyses have leveraged 
rating databases to study how quoted policy pricing varies based on 
demographic and geographic inputs. Should FIO consider an analysis of 
affordability using premium quotations? Why or why not? If yes, what 
data sources are available?
    4. Are there other quantitative approaches that FIO could take to 
effectively study auto insurance affordability? If yes, what are the 
approaches and their corresponding, available data sources?

Non-Driving Related Factors in Personal Auto Insurance Underwriting and 
Pricing

    5. What should be the role of non-driving related factors (such as 
a consumer credit history, homeownership status, census tract, marital 
status, professional occupation, and educational attainment) in 
personal auto insurance underwriting and pricing?
    6. How should FIO assess the use of such non-driving related 
factors? What principles should be used to distinguish between 
appropriate and inappropriate use of non-driving related factors in 
personal auto insurance underwriting and pricing? What metrics could 
FIO use to assess the impact of non-driving related factors on the 
affordability and accessibility of auto insurance? What data sources 
are available to help assess these factors?

Structural Market Changes in Personal Auto Insurance

    7. What drivers of change (e.g., specific technology advances, 
consumer preferences, the entrance of auto manufacturers in 
underwriting and issuing insurance policies, etc.) are currently 
having, or likely to have, significant effects on the structure of the 
personal auto insurance business? Please describe these likely impacts 
and why they are occurring.
    8. What responses to the COVID-19 pandemic--whether by consumers, 
the insurance industry, or insurance regulators--have the greatest 
likelihood of leading to long-term structural change in auto insurance? 
How can FIO evaluate the potential long-term or permanent effects of 
the pandemic on the personal auto insurance business?
    9. What are the biggest challenges and opportunities for the 
personal auto insurance business resulting from current and anticipated 
structural changes? How are ongoing structural changes affecting 
underwriting and pricing practices?
    10. Please describe how big data is being used in the personal auto 
insurance business. What are the benefits and risks to both consumers 
and insurers in the use of big data, particularly as it relates to auto 
insurance underwriting and pricing?
    11. Please provide your views on how FIO can quantify structural 
changes to the personal auto insurance market and their potential 
effects.

General

    12. Please provide any additional comments or information on other 
issues or topics that may be relevant to FIO's work on personal auto 
insurance, the 2017 FIO Affordability Study, or other related matters.

Steven Seitz,
Director, Federal Insurance Office.
[FR Doc. 2021-11167 Filed 5-26-21; 8:45 am]
BILLING CODE 4810-AK-P