New federal insurance bill would require racial disparity study in premiums calculations

driver auto pickup truck federal insurance bill

Congressman from California cites ProPublica and consumer reports auto coverage industry analysis.

U.S. Rep. Mark Takano (D-CA) introduced a federal insurance bill last week which requires authorities across the country to take a closer look at auto insurance premiums calculations. The bill cites an April 2017 article co-published between Consumer Reports and ProPublica pointing to racial disparities.

The auto insurance racial disparity legislation boasted six Democratic co-sponsors.

The federal insurance bill was created partially as a reproach to the Trump administration when it sought to alter the Treasury Department’s Federal Insurance Office purpose as an industry watchdog agency. The changes would have shifted its mission from being an agency of which one of its responsibilities was to monitor auto insurance pricing in favor of becoming an industry booster.

This new bill would require the Federal Insurance Office to collect claims data based on ZIP codes. The data would be acquired from insurance companies across the United States for the purpose of understanding whether the higher premiums paid in minority neighborhoods are justified by the level of risk they present.

The federal insurance bill is designed to help to add transparency regarding potential racial disparities.

“The lack of transparency in the auto insurance market makes it impossible to understand and address potential racial disparities,” Takano was quoted to say in the bill’s press release announcement. “This legislation is an important step to determining whether minority drivers are being unjustly overcharged for insurance premiums because of reasons unrelated to risk.”

He also stated that since drivers are required to carry auto insurance when they get behind the wheel and because many adult Americans must be able to drive in order to live their lives, “there is a strong public interest in studying and addressing discrimination in the auto insurance market.”

The insurance industry denied the presence of a problem of this nature and stated that the federal insurance bill’s requirement for a study is unnecessary. “ This [legislation] is a solution in search of a problem,” said Property Casualty Insurance Association of America vice president David Snyder. He added that “There is no need for this duplicative and costly layer of federal involvement.” Snyder also explained that the United States have effectively regulated insurance companies for a century and a half in order to provide consumers with adequate protection, to encourage competition within the markets and to make certain that unfair discrimination is prevented.

On the other hand, Southern Poverty Law Center deputy legal director, Sam Brooke, explained that minorities disproportionately struggle in obtaining affordable coverage. “We see time and again, people—especially in communities of color—have trouble finding and keeping mandatory insurance because it is so expensive.” He added that this trend forms a “vicious cycle” in which, because these Americans are unable to afford the required coverage, they are penalized with tickets and rising fees.

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