01.25.18

Rep. Takano Introduces Legislation to Study Racial Disparities in Auto Insurance Market

Washington, D.C. – Rep. Mark Takano (D-Calif.) introduced legislation today to increase transparency and study racial disparities in the auto insurance market. The FAIR RATES Act of 2018 directs the Federal Insurance Office to collect local-level data from large auto insurance companies, publicly disclose that data, and submit an analysis to Congress on the impact of race on insurance prices. 

A recent ProPublica report found that some large insurers charge drivers in minority neighborhoods as much as 30 percent more than other areas with similar risk profiles. Much of the data used to complete the analysis came from California, Illinois, Texas and Missouri – which are currently the only four states to publicly disclose loss data by ZIP Code. This legislation would make it requirement in all 50 states.

“The lack of transparency in the auto insurance market makes it impossible to understand and address potential racial disparities,” said Rep. Takano. “This legislation is an important step to determining whether minority drivers are being unjustly overcharged for insurance premiums because of reasons unrelated to risk. Given that auto insurance is a requirement for drivers, and that driving is a necessity for many Americans, there is a strong public interest in studying and addressing discrimination in the auto insurance market.”

The Federal Insurance Office (FIO), which was established under the Treasury Department through the Dodd-Frank Wall Street Reform and Consumer Protection Act, is responsible for monitoring all aspects of the insurance sector. Its mission specifically includes monitoring the extent to which traditionally underserved communities and consumers have access to affordable non-health insurance products.

During the final hours of the Obama administration, the FIO published a report that found nearly 20 million Americans do not have access to affordable automobile insurance, and that many of them are living in minority or underserved communities. The Trump administration has not filled the FIO’s Director position, which has been vacant since January 20, 2017. It has also failed to keep the FIO’s previous commitment to collect relevant data.  

On July 13, 2016, the Treasury Department released a plan to monitor affordability in the auto insurance market, which explicitly promised: “For 2017, FIO will request that large insurers who do not already report ZIP Code-level premium data voluntarily provide that data to the statistical agents with which the insurers typically work.”

The FAIR RATES Act is supported by the NAACP, Consumer Federation of America, Consumer Action, Southern Poverty Law Center, National Association of Consumer Advocates, Center for Economic Justice, and National Consumers League.

The full text of the legislation is available here.

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