Lisa Brown, Sr. Counsel & Director, Compliance Resources for the American Insurance Association (AIA), issued the following statement in response to the Federal Insurance Office's (FIO) announcement of the adoption of methodology for monitoring the affordability of auto insurance. Under Title V of Dodd-Frank, FIO is authorized to monitor the availability and affordability of auto insurance for low and moderate income users. AIA submitted comments to FIO in June 2014 and August 2015, emphasizing the need for clear regulatory guidelines and definitions in defining "affordable" with regard to relativity and consumer choice. FIO's methodology will use an affordability index derived from dividing the average annual personal automobile liability premium by the median household income for ZIP Codes located in identified low and moderate income neighborhoods.
Ms. Brown's statement follows:
"AIA appreciates the opportunity to work with FIO as it continues to monitor the availability and affordability of personal lines insurance. However, we remain concerned that the methodology fails to provide a relevant definition of the term 'affordable.' Factors such as state-based tort reform laws, consumer choice in levels of coverage, and state minimum insurance requirement laws do not appear to have been taken into account while FIO devised this methodology.
It is essential that we have an effective and efficient system of insurance supervision that fosters the growth of vibrant private, competitive insurance markets. We believe that government regulation should be employed in ways that support the growth of the auto insurance market and look forward to working with FIO to address these concerns."