80 FR 38277 - Monitoring Availability and Affordability of Auto Insurance

DEPARTMENT OF THE TREASURY

Federal Register Volume 80, Issue 127 (July 2, 2015)

Page Range		38277-38281
FR Document		2015-16333
The Federal Insurance Office (FIO) of the Department of the Treasury (Treasury) issues this notice pursuant to its authority to monitor the extent to which traditionally underserved communities (including rural areas) and consumers, minorities, and low- and moderate-income (LMI) persons (collectively ``Affected Persons'') have access to affordable personal auto insurance. In particular, FIO seeks comments from state insurance regulators, consumer organizations, representatives of the insurance industry, policyholders, academia, and others regarding: FIO's proposed working definition of ``affordability'' in relation to personal auto insurance (which, at this stage, is solely for the purpose of inviting further comment); the key factors FIO proposes to use to calculate an affordability index for Affected Persons (e.g., premium, income, and other metrics); and how best to obtain appropriate data to monitor effectively the affordability of personal auto insurance for Affected Persons.
Federal Register, Volume 80 Issue 127 (Thursday, July 2, 2015)
[Federal Register Volume 80, Number 127 (Thursday, July 2, 2015)]
[Notices]
[Pages 38277-38281]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-16333]


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DEPARTMENT OF THE TREASURY


Monitoring Availability and Affordability of Auto Insurance

AGENCY: Federal Insurance Office, Departmental Offices, Treasury.

ACTION: Notice; Request for Information.

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SUMMARY: The Federal Insurance Office (FIO) of the Department of the 
Treasury (Treasury) issues this notice pursuant to its authority to 
monitor the extent to which traditionally underserved communities 
(including rural areas) and consumers, minorities, and low- and 
moderate-income (LMI) persons (collectively ``Affected Persons'') have 
access to affordable personal auto insurance. In particular, FIO seeks 
comments from state insurance regulators, consumer organizations, 
representatives of the insurance industry, policyholders, academia, and 
others regarding: FIO's proposed working definition of 
``affordability'' in relation to personal auto insurance (which, at 
this stage, is solely for the purpose of inviting further comment); the 
key factors FIO proposes to use to calculate an affordability index for 
Affected Persons (e.g., premium, income, and other metrics); and how 
best to obtain appropriate data to monitor effectively the 
affordability of personal auto insurance for Affected Persons.

DATES: Comments must be received on or before August 31, 2015.

ADDRESSES: Please submit comments electronically through the Federal 
eRulemaking Portal: http://www.regulations.gov or by mail (if hard 
copy, preferably an original and two copies) to the Federal Insurance 
Office, Attention: Lindy Gustafson, Room 1319 MT, Department of the 
Treasury, 1500 Pennsylvania Avenue NW., Washington, DC 20220. As postal 
mail may be subject to processing delay, it is recommended that 
comments be submitted electronically. All comments should be captioned 
with ``Monitoring Availability and Affordability of Auto Insurance.'' 
Please include your name, group affiliation, if any, address, email 
address and telephone number(s) in your comment. In general, comments 
received will be posted on http://www.regulations.gov without change, 
including any business or personal information provided. Comments 
received, including attachments and other supporting materials, will be 
part of the public record and subject to public disclosure. Do not 
enclose any information in your comment or supporting materials that 
you consider

[[Page 38278]]

confidential or inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT: Lindy Gustafson, Federal Insurance 
Office, 202-622-6245 (not a toll free number).

SUPPLEMENTARY INFORMATION: 

I. Background

    Subtitle A of Title V of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act established FIO and provides it with the 
authority to monitor the extent to which Affected Persons have access 
to affordable insurance products, other than health insurance.\1\
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    \1\ 31 U.S.C. 313 (c)(1)(B).
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    For this purpose, FIO is monitoring the availability and 
affordability of personal auto insurance for Affected Persons due to 
several factors, namely:
    1. Nearly all jurisdictions of the United States generally require 
a driver or owner of a motor vehicle to maintain auto liability 
insurance or financial security that may be satisfied by auto liability 
insurance and is applicable at the time of an accident, while operating 
a motor vehicle, or at the time of registering a motor vehicle.
    2. On a nationwide basis, the percentage of uninsured motorists was 
approximately 14 percent between 2002 and 2009 dropping to 12.3 percent 
in 2010, 12.2 percent in 2011, and 12.6 percent in 2012; however, in 
2012, a significantly higher percentage of uninsured motorists resided 
in 10 states.\2\
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    \2\ More specifically, in these 10 states the percentage of 
uninsured motorists ranged from about 16 percent to 26 percent. See 
Insurance Research Council (IRC), Uninsured Motorists: 2014 Edition, 
at 8, 10 (August 2014).
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    3. Owning an automobile gives low-income commuters greater access 
to jobs since public ``transit only enables [low-income commuters] to 
reach less than one-third of metro-wide jobs within 90 minutes while 
the automobile enables them to reach all jobs in the 51 largest 
metropolitan areas within 60 minutes.'' \3\
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    \3\ Clifford Winston, ``On the Performance of the U.S. 
Transportation System: Caution Ahead,'' Journal of Economic 
Literature, Vol. 51, No. 3 at 805 (2013).
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    4. Insurance industry representatives assert that auto insurance 
has become more affordable over time, but representatives for consumers 
assert that auto insurance has become less affordable for LMI consumers 
and for minorities.
    In April 2014, FIO issued a notice inviting comments regarding: (1) 
A reasonable and meaningful definition of affordability of personal 
auto insurance; and (2) the metrics and data FIO should use to monitor 
the extent to which Affected Persons have access to affordable personal 
auto insurance (2014 Affordability Notice).\4\ Eighteen individuals and 
organizations submitted comments in response to the 2014 Affordability 
Notice. Three respondents offered the following specific definitions of 
affordability: (1) Auto liability insurance is affordable if its price 
does not preclude a person or family from the purchase of other 
necessities; \5\ (2) auto liability insurance is affordable if its 
price does not impose any financial difficulties greater than the costs 
of other necessities; \6\ and (3) affordable means being within the 
financial means of most people.\7\
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    \4\ Monitoring Availability and Affordability of Auto Insurance, 
79 FR 19,969 (Apr. 10, 2014).
    \5\ Center for Economic Justice (CEJ), at 5, (June 9, 2014), 
available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-
2014-0001-0014.
    \6\ Property Casualty Insurers (PCI), (June 9, 2014), available 
at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-
0020.
    \7\ IRC, (June 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0007.
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    Three respondents to the 2014 Affordability Notice cautioned that 
any definition of affordable personal auto insurance is subjective.\8\ 
One respondent noted that a single, widely-accepted methodology for 
defining or determining affordability does not exist and, of the 
methods available to develop a definition, each has its drawbacks.\9\ 
For example, affordability could be defined: (1) Using a normative 
standard, establishing a specific amount or percentage of income 
individuals believe others should pay for personal auto insurance; (2) 
using an external benchmark as is done with the housing affordability 
index of the U.S. Department of Housing and Urban Development (HUD); or 
(3) based on the price at which at least 50 percent of individuals with 
certain socio-economic characteristics purchase a personal auto 
insurance policy.\10\
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    \8\ See National Association of Insurance Commissioners (NAIC), 
(June 9, 2014) available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0018; Allstate, (May 29, 
2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0006; and Insurance 
Information Institute (III), (June 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0016.
    \9\ Insurance Information Institute, (June 2014), available at 
http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-
0016.
    \10\ Id. at 3-4.
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    Others encouraged FIO, when defining affordability, to: (1) 
Recognize flexibility and consumer choice; \11\ (2) base the definition 
on premiums charged to lower income drivers; \12\ (3) base the 
definition on the cost of mandatory personal injury protection, bodily 
injury, and property damage coverages; \13\ (4) recognize that insurers 
may not charge a premium that is excessive, inadequate, or unfairly 
discriminatory; \14\ (5) include premium and finance charges; \15\ or 
(6) recognize auto insurance should not claim more than two percent of 
a low-income family's take-home pay.\16\
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    \11\ See Financial Services Roundtable (FSR), (June 6, 2014), 
available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-
2014-0001-0019 and American Insurance Association (AIA), (June 9, 
2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0015.
    \12\ Consumer Federation of America (CFA), (June 9, 2014), 
available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-
2014-0001-0011.
    \13\ PCI, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0020, III, 
(June 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0016.
    \14\ AIA, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0015.
    \15\ CEJ, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0014.
    \16\ Vehicles for Change, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0013, and 
CFA, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0011.
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    Respondents identified a number of metrics FIO could use to monitor 
the extent to which Affected Persons have access to affordable auto 
insurance. These suggested metrics include: (1) Competitiveness of the 
auto insurance market; \17\ (2) market share of the residual market, 
which is the insurance market for individuals denied a policy by one or 
more auto insurers; \18\ (3) unemployment rate; \19\ (4) injury 
compensation system; \20\ (5) uninsured motorists; \21\ (6) various 
service measures such as cancellations, retention, claims payment data, 
and agent location; \22\ (7) the ratio of average auto insurance 
expenditure (premium) to median household income; \23\ (8) the

[[Page 38279]]

ratio of premium paid by LMI drivers to household income of LMI 
drivers; \24\ (9) consumer views of affordable insurance premiums as 
measured by surveys; \25\ (10) quote prices; \26\ (11) payment options; 
\27\ and (12) percent of income spent on other goods and services.\28\
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    \17\ NAIC, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0018.
    \18\ Allstate, (May 29, 2014) available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0006; and 
IRC, available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0007.
    \19\ III, (June 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0016.
    \20\ Id.
    \21\ CEJ, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0014, and 
IRC, available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-000.
    \22\ Id.
    \23\ IRC, at 5 (June 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0007.
    \24\ CFA, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0011; Ways 
to Work, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0010; IRC, (June 2014), 
available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-
2014-0001-0007; and AIA, (June 9, 2014) available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0015.
    \25\ CFA, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0011.
    \26\ CEJ, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0014.
    \27\ Id.
    \28\ AIA, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0015; III, 
available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-
2014-0001-0016; and National Association of Mutual Insurance 
Companies (NAMIC), (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0009.
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    State insurance regulators and industry representatives generally 
suggested that FIO rely on existing data sources to monitor the extent 
to which Affected Persons have access to affordable auto insurance. 
Existing data sources include: the Bureau of Labor Statistics Consumer 
Expenditure Survey (CES); the National Association of Insurance 
Commissioners (NAIC); statistical agents that collect and aggregate 
data from insurers; and data collected by certain states, such as 
California. In addition, these respondents noted that FIO should review 
studies conducted by others such as the NAIC, individual states, the 
Insurance Research Council (IRC), and the Insurance Information 
Institute (III).
    By contrast, consumer organizations urged FIO to collect 
transactional data directly from insurers relating to auto insurance 
policies or, indirectly, from price information on the insurers' Web 
sites and/or from third-party vendors. Consumer organizations also 
noted that state insurance regulators could collect from insurers the 
premiums charged by those insurers, and organize that premium data 
based on the ZIP codes of the insureds.

II. Proposed Working Definition of Affordable Personal Auto Insurance

    This section sets out to derive a proposed working definition of 
affordable personal auto insurance based on an affordability index. To 
do so, it sets out in sequence: (1) A definition of affordability; (2) 
a definition and calculation of an affordability index; (3) a 
calculation of average premium; (4) a definition of the market scope 
for an affordability index; and (5) a definition of Affected Persons.
    At this time, FIO does not have access to information sufficient to 
establish a final definition of affordable personal auto insurance for 
Affected Persons based on a normative standard, external benchmark, or 
percentages of individuals purchasing personal auto insurance. However, 
a working definition of affordability is needed to guide further 
analysis of the cost of personal auto insurance in order to monitor 
access to that line of insurance for Affected Persons.
    FIO considered the definitions of affordability submitted by three 
respondents to the 2014 Affordability Notice and proposes adopting the 
definition of affordable derived from a dictionary and submitted by one 
respondent: Affordable means being within the financial means of most 
people. As the respondent observed, this common sense definition may be 
used to develop ``a practical and effective approach to monitoring 
access to affordable personal auto insurance.'' \29\ Developing a 
complete working definition of affordable personal auto insurance also 
involves identification of ``the criteria used to measure the 
affordability of auto insurance and the standard applied to determine 
whether auto insurance is or is not affordable.'' \30\
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    \29\ PCI (June 9, 2014), at 1.
    \30\ Id., at 2.
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    Two respondents recommended that FIO use an affordability index to 
measure the affordability of personal auto insurance. These respondents 
suggested different calculations for an affordability index: (1) The 
ratio of the average insurance expenditure (premium) to national and 
state median household income \31\; or (2) the ratio of average premium 
paid by LMI drivers (presumably in geographic areas where LMI drivers 
reside) to median household income of LMI drivers.\32\
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    \31\ IRC, (June 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0007.
    \32\ CFA, (June 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0011.
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    Some federal agencies use an index to measure other kinds of 
affordability. For example, HUD has a publicly available location 
affordability index that estimates the percentage of a family's income 
dedicated to the combined cost of housing and transportation in a given 
location.\33\ The Consumer Financial Protection Bureau recently defined 
a qualified mortgage based, in part, on the ratio of the consumer's 
total monthly debt to total monthly income.\34\ Given the use of 
indices by other federal agencies and FIO's statutory authority to 
monitor affordability for Affected Persons, FIO endorses the concept of 
an affordability index for personal auto insurance and proposes to 
calculate an affordability index for personal auto insurance for each 
type of Affected Persons.
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    \33\ Location Affordability Portal available at http://www.locationaffordability.info/lai.aspx.
    \34\ 12 CFR 1026.43(e)(2)(iv).
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    An affordability index for Affected Persons may be derived from a 
broad set of criteria, such as the average premium for personal 
liability insurance, personal injury protection, comprehensive 
insurance, collision insurance, uninsured motorist insurance, and 
underinsured motorist insurance; or more narrow criteria, such as the 
average premium for personal auto liability insurance for a given 
year.\35\ Two respondents suggested FIO only consider personal auto 
liability insurance when monitoring the affordability of personal auto 
insurance as states generally require only the purchase of personal 
auto liability insurance as a condition of driving or owning a motor 
vehicle. FIO proposes to accept this suggestion and limit the 
calculation of an affordability index to the average annual personal 
auto liability insurance premium for Affected Persons.
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    \35\ For a detailed discussion of the calculation of an 
affordability index, see IRC, ``Auto Insurance Affordability,'' 
(November 2013).
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    Studies of the affordability of personal auto insurance may 
calculate the average premium in one of the following ways: (1) The 
total annual written premium for all insurers writing personal auto 
insurance divided by the total number of policies; \36\ or (2) the 
total annual premium quoted by a sample of insurers writing personal 
auto insurance divided by the number of insurers in the sample.\37\ FIO 
proposes to use one or both of these metrics for annual premium, 
depending on the data sources FIO may use in future analysis (as 
discussed in more detail in section

[[Page 38280]]

III). Given FIO's proposed working definition of affordable personal 
auto insurance (provided below), the metric of annual premium should be 
solely based on an annual price quote for personal auto liability 
insurance or the annual written premium for personal auto liability 
insurance.
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    \36\ See IRC, ``Auto Insurance Affordability,'' (November 2013) 
and Missouri Department of Insurance, ``Affordability and 
Availability of Personal Lines Insurance in Underserved 
Communities,'' (December 2004).
    \37\ See Paul M. Ong and Michael A. Stoll, ``Redlining or Risk? 
A Spatial Analysis of Auto Insurance Rates in Los Angeles,'' Journal 
of Policy Analysis and Management, Vol. 26, No. 4, 811-829 (2007) 
and CFA Supplemental Comments (June 9, 2014) available at http://www.regulations.gov/#!documentDetail;D=TREAS-DO-2014-0001-0012.
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    An affordability index may be calculated for the entire market for 
personal auto liability insurance or a specific market within personal 
auto insurance. Historically, the auto insurance market has been 
divided into three segments: (i) The standard market; (ii) the non-
standard market; and (iii) the residual market. The residual market is 
generally comprised of the highest risk drivers, i.e., drivers who do 
not qualify for personal auto insurance offered in the standard market 
or non-standard market. The non-standard market is comprised of high 
risk drivers, such as new drivers, drivers with moving violations, 
drivers with a rare or unusual motor vehicle, or drivers with a high 
auto insurance policy cancellation or non-renewal rate. The standard 
market is comprised of all other drivers. Generally, annual premiums 
for personal auto insurance are highest in the residual market, 
followed by the non-standard market, and the standard market.\38\ FIO 
proposes to limit the calculation of an affordability index for 
personal auto liability insurance to the standard market in order to 
diminish the impact of the annual premiums charged to the highest risk 
drivers.
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    \38\ In 2011, of the 330 insurers that wrote personal auto 
insurance in either the standard and non-standard market, 95 wrote 
personal auto insurance in the non-standard market. Of the 95 
insurers in the non-standard market, 15 also wrote in the standard 
market. See StoneRidge Advisors, LLC, ``Non-Standard Auto Insurance 
Market Overview & M&A Trends,'' View from the Ridge, August 2012, at 
1, available at http://www.stoneridgeadvisors.com/Content/View_From_The_Ridge_August_2012.pdf.
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    In addition, any definition of affordability must include 
parameters that adequately account for Affected Persons (i.e., 
traditionally underserved communities and consumers, minorities, and 
LMI persons). In the 1990s, the NAIC studied the availability and 
affordability of personal auto insurance and noted ``[t]here is 
considerable evidence that residents of some urban communities, 
particularly low-income and minority neighborhoods, face greater 
difficulty in obtaining high quality auto and homeowners insurance 
coverage through the voluntary market than residents of other areas.'' 
\39\ FIO proposes to use ``urban area'' as the proxy for traditionally 
underserved communities and consumers, following the U.S. Census Bureau 
(Census Bureau) definition of urban area, as densely developed 
territory that encompasses at least 2,500 people of which at least 
1,500 reside outside institutional group quarters.\40\
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    \39\ NAIC, ``Improving Urban Insurance Markets: A Handbook on 
Available Options,'' NAIC Insurance Availability and Affordability 
Task Force, June 4, 1996.
    \40\ See Census Bureau, ``2010 Census Urban Area FAQs,'' 
available at https://www.census.gov/geo/reference/ua/uafaq.html.
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    The Federal Deposit Insurance Corporation (FDIC) defines low-income 
as ``individuals and geographies having a median family income less 
than 50 percent of the area median income'' and moderate income as 
``individuals and geographies having a median family income of at least 
50 percent and less than 80 percent of the area median income.'' \41\ 
The area median income is: (1) The median family income for the 
[metropolitan statistical area]; or (2) the statewide non-metropolitan 
median family income, if a person or geography is located outside a 
[metropolitan statistical area].'' \42\ FIO proposes to adapt this 
definition based on the general use of median household income, as 
defined and identified by the Census Bureau,\43\ in studies of 
affordability of personal auto insurance. For the purposes of FIO's 
working definition, LMI persons are individuals living in areas where 
the annual income of the geographic area is less than 80 percent of the 
median household income of a metropolitan statistical area or 
state.\44\
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    \41\ FDIC, ``Community Reinvestment Act (CRA) Performance 
Ratings,'' available at https://www2.fdic.gov/crapes/peterms.asp.
    \42\ Id.
    \43\ Household income includes income received on a regular 
basis by the householder and all other individuals 15 years of age 
and older in the household, whether related to the householder or 
not. It does not include capital gains or noncash benefits. 
According to the Census Bureau, ``respondents report income earned 
from wages or salaries much better than other sources of income and 
that the reported wage and salary income is nearly equal to 
independent estimates of aggregate income.'' See ``About Income'' 
available at https://www.census.gov/hhes/www/income/about/.
    \44\ As with other aspects of the working definition for 
monitoring the affordability of auto insurance, FIO may adjust the 
threshold for defining LMI persons to a lower figure, such as 65 
percent of the median household income of the relevant area.
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    The term ``minorit[y]'' is defined, by law, as ``Black American, 
Native American, Hispanic American, or Asian American.'' \45\ FIO 
proposes to use ZIP codes in which the minority population exceeds 50 
percent as the standard for majority minority geographic areas.
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    \45\ 31 U.S.C. 313(c)(1)(B) (incorporating by reference the 
definition established in 12 U.S.C. 1811, note).
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    Using these parameters, a definition of affordability can be 
constructed. One respondent suggested personal auto insurance is 
affordable if personal auto insurance does not claim more than two 
percent of a low-income family's take-home pay. A recent study of the 
affordability of personal auto insurance found the national average 
insurance expenditures divided by national median income has been under 
two percent since 1995.\46\ CES reports the average expenditure for all 
households for auto insurance and the average income after taxes for 
all households and the data for 2013 indicate all consumers spent about 
1.6 percent of average income after taxes on auto insurance. FIO 
proposes to presume personal auto liability insurance is affordable if, 
for Affected Persons, the affordability index is less than or equal to 
two percent of household income.
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    \46\ IRC, ``Auto Insurance Affordability,'' (November 2013), at 
7.
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    Combining these elements, FIO proposes the following working 
definition of affordable personal auto liability insurance for Affected 
Persons:
    A personal auto liability insurance policy is affordable if the 
annual premiums are within the financial means of most people as 
measured by an affordability index for Affected Persons in the standard 
market. Personal auto liability insurance is presumed to be affordable 
if, with respect to household income, the affordability index does not 
exceed two percent for Affected Persons in urban areas, for LMI persons 
within a specific geographic area (including rural areas), or for all 
individuals in majority minority geographic areas.

III. Data

    For purposes of further analysis of the cost of personal auto 
insurance data is needed to calculate the affordability index for 
Affected Persons.
    FIO has considered the currently available data relating to 
premiums for personal auto insurance and, at this time, concludes that 
these data are inadequate for FIO to monitor the extent to which 
Affected Persons have access to affordable personal auto insurance. For 
example, CES data allows FIO to monitor changes in the ratio of the 
average expenditure for personal auto insurance (including liability 
coverage, uninsured motorist coverage, personal injury protection, 
comprehensive coverage, and collision coverage in all three market 
segments for personal auto insurance) to average annual income

[[Page 38281]]

before or after taxes for urban consumer units, race of reference 
person, and consumer units by income quintiles for the nation as a 
whole.\47\ However, the average expenditure for personal auto insurance 
is not limited to personal auto liability insurance. The NAIC (not 
state regulators) collects insurers' premium and exposure data by type 
of coverage, and the NAIC reports the average premium by state, but 
does not report the average premium by urban area or areas where the 
majority of residents are minorities or LMI persons.
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    \47\ See Consumer Expenditure Survey Annual Calendar Year 
Tables, available at the United States Department of Labor Bureau of 
Statistics Web site, http://www.bls.gov/cex/tables.htm.
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    In 2014, the Consumer Federation of America released a study in 
which it analyzed price quotes for several insurers for mandatory 
liability coverage for a driver profile in urban areas by comparing the 
price quote after modifying the driver profile by specific socio-
economic factors (i.e., education, occupation, credit score) to 
ascertain the impact of specific socio-economic factors on price. Some 
state insurance regulators issue rate guides based on a specific driver 
profile as a tool that a consumer may use to compare the price of 
personal auto insurance of one insurer to another, but do not vary the 
profile by specific socio-economic factors to ascertain the impact of 
specific socio-economic factors on price.
    Certain states--California, Illinois, Missouri, North Carolina, and 
Texas--require insurers to submit premium data and number of policies 
for personal auto insurance, organized by the ZIP codes of the 
insureds. Publicly available sources indicate that California, 
Illinois, and Missouri use these data, in part, to assess the 
availability of personal auto insurance in certain areas or to compare 
the costs of personal auto insurance in areas with different 
demographic characteristics. California reports the market share of 
insurers writing personal auto insurance in underserved areas in 
comparison to the market share held by those insurers throughout the 
state.\48\ Illinois reports the market share of the top 10 insurers for 
the state in comparison to Chicago and the remainder of the state.\49\ 
In 2004, Missouri issued a report entitled Affordability and 
Availability of Personal Lines Insurance in Underserved Communities; no 
subsequent report has been issued.\50\ In North Carolina \51\ and 
Texas,\52\ insurers must report premium and loss data by ZIP code to a 
statistical agent for rating purposes. Such data could be used to 
calculate the average annual premium for personal auto liability 
insurance in the standard market for urban areas and areas where the 
majority of residents are LMI persons or minorities.
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    \48\ California Department of Insurance, Commissioner's Report 
on Underserved Communities, various years, available at http://www.insurance.ca.gov/0400-news/0200-studies-reports/0800-underserved-comm/.
    \49\ Illinois Department of Insurance, Cost Containment Annual 
Report to the General Assembly, various years, available at http://insurance.illinois.gov/Reports/Report_Links.asp.
    \50\ Missouri Department of Insurance, Affordability and 
Availability of Personal Lines Insurance in Underserved Communities, 
(December 2004), available at http://s3.amazonaws.com/zanran_storage/insurance.mo.gov/ContentPages/49561197.pdf.
    \51\ 11 NCAC 16.0103.
    \52\ Texas Department of Insurance, Texas Private Passenger Auto 
Statistical Plan: General Reporting Instructions, (1994) available 
at http://www.tdi.texas.gov/company/documents/ta_ppasp.pdf.
---------------------------------------------------------------------------

    Insurers have the most complete and accurate information that would 
allow FIO to perform its function of monitoring the extent to which 
Affected Persons have access to affordable auto insurance. Insurers can 
provide accurate price quotes for a given profile of a driver, 
including for a specific geographic area. In addition, insurers have 
the information to calculate the average annual premium for liability 
coverage for personal auto liability insurance in the standard market 
for urban areas and areas where the majority of residents are 
minorities or LMI persons.

IV. General Solicitation for Comments

    FIO hereby solicits comments, including supporting and illustrative 
information in support of such comments where appropriate and 
available, regarding:
    1. FIO's proposed working definition of ``affordability'' in 
relation to personal auto insurance;
    2. The key factors FIO proposes to use to calculate an 
affordability index for Affected Persons (e.g., premium, income, and 
other metrics); and
    3. How FIO could best obtain appropriate data to monitor 
effectively the affordability of personal auto insurance for Affected 
Persons.

Michael T. McRaith,
Director, Federal Insurance Office.
[FR Doc. 2015-16333 Filed 7-1-15; 8:45 am]
BILLING CODE 4810-25-P
Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices 38277

Director for Regulatory Affairs, tel.: 202– Estimated Total Annual Burden DEPARTMENT OF THE TREASURY
622–4855, Assistant Director for Hours: Because the § 561.504(b)
Sanctions Compliance & Evaluation, reporting requirement applies to those Monitoring Availability and
tel.: 202–622–2490, Office of Foreign U.S. financial institutions that operate Affordability of Auto Insurance
Assets Control, or Chief Counsel correspondent or payable-through
(Foreign Assets Control), tel.: 202–622– AGENCY: Federal Insurance Office,
accounts for a foreign financial Departmental Offices, Treasury.
2410, Office of the General Counsel, institution whose name is added to the
Department of the Treasury (not toll free ACTION: Notice; Request for Information.
part 561 List, OFAC cannot predict the
numbers). response rate for the § 561.504(b) SUMMARY: The Federal Insurance Office
SUPPLEMENTARY INFORMATION: reporting requirement at this time. Since
Title: Iranian Financial Sanctions (FIO) of the Department of the Treasury
the date this reporting requirement was (Treasury) issues this notice pursuant to
Regulations Report on Closure by U.S.
added to the IFSR (February 27, 2012) its authority to monitor the extent to
Financial Institutions of Correspondent
through June 18, 2015, the number of which traditionally underserved
Accounts and Payable-Through
Accounts. respondents to this collection has been communities (including rural areas) and
OMB Number: 1505–0243. zero. For future notices, OFAC will consumers, minorities, and low- and
Abstract: Section 561.504(b) of the continue to report retrospectively on the moderate-income (LMI) persons
Iranian Financial Sanctions Regulations, response rate during the previous (collectively ‘‘Affected Persons’’) have
31 CFR part 561 (the IFSR), specifies reporting period. access to affordable personal auto
that a U.S. financial institution that insurance. In particular, FIO seeks
The following paragraph applies to all
maintained a correspondent account or comments from state insurance
of the collections of information covered
payable-through account for a foreign regulators, consumer organizations,
by this notice:
financial institution whose name is representatives of the insurance
added to the part 561 List on OFAC’s An agency may not conduct or industry, policyholders, academia, and
Web site (www.treasury.gov/ofac) as sponsor, and a person is not required to others regarding: FIO’s proposed
subject to a prohibition on the respond to, a collection of information working definition of ‘‘affordability’’ in
maintaining of such accounts must file unless the collection of information relation to personal auto insurance
a report with OFAC that provides full displays a valid Office of Management (which, at this stage, is solely for the
details on the closing of each such and Budget (OMB) control number. purpose of inviting further comment);
account within 30 days of the closure of Books or records relating to a collection the key factors FIO proposes to use to
the account. This collection of of information must be retained for five calculate an affordability index for
information assists in verifying that U.S. years. Affected Persons (e.g., premium,
financial institutions are complying income, and other metrics); and how
with prohibitions on maintaining Request for Comments best to obtain appropriate data to
correspondent accounts or payable- monitor effectively the affordability of
Comments submitted in response to
through accounts for foreign financial personal auto insurance for Affected
this notice will be summarized and/or
institutions listed on the part 561 List. Persons.
included in the request for OMB
The reports will be reviewed by the U.S. DATES: Comments must be received on
approval. All comments will become a
Department of the Treasury and may be or before August 31, 2015.
used for compliance and enforcement matter of public record. Comments are
invited on: (a) Whether the collection of ADDRESSES: Please submit comments
purposes by the agency.
Current Actions: There are no changes information is necessary for the proper electronically through the Federal
being made to the notice at this time. performance of the functions of the eRulemaking Portal: http://
Type of Review: Extension of a agency, including whether the www.regulations.gov or by mail (if hard
currently approved collection. information has practical utility; (b) the copy, preferably an original and two
Affected Public: U.S. financial accuracy of the agency’s estimate of the copies) to the Federal Insurance Office,
institutions operating correspondent or burden of the collection of information, Attention: Lindy Gustafson, Room 1319
payable-through accounts for foreign including the validity of the MT, Department of the Treasury, 1500
financial institutions. methodology and assumptions used; (c) Pennsylvania Avenue NW., Washington,
Estimated Number of Respondents: ways to enhance the quality, utility, and DC 20220. As postal mail may be subject
The likely respondents and record- clarity of the information to be to processing delay, it is recommended
keepers affected by this collection of that comments be submitted
collected; (d) ways to minimize the
information in § 561.504(b) are U.S. electronically. All comments should be
burden of the collection of information
financial institutions operating captioned with ‘‘Monitoring Availability
on respondents, including through the and Affordability of Auto Insurance.’’
correspondent accounts or payable
use of automated collection techniques Please include your name, group
through accounts for foreign financial
institutions. Since the date this or other forms of information affiliation, if any, address, email address
reporting requirement was added to the technology; and (e) estimates of capital and telephone number(s) in your
IFSR (February 27, 2012) through June or start-up costs and costs of operation, comment. In general, comments
18, 2015, OFAC added the names of two maintenance, and purchase of services received will be posted on http://
foreign financial institutions to the part to provide information. www.regulations.gov without change,
asabaliauskas on DSK5VPTVN1PROD with NOTICES

561 List, of which one remains. The John E. Smith, including any business or personal
number of respondents to this collection information provided. Comments
Acting Director, Office of Foreign Assets
has been zero. For future notices, OFAC received, including attachments and
Control.
will continue to report retrospectively other supporting materials, will be part
[FR Doc. 2015–16370 Filed 7–1–15; 8:45 am]
on the number of respondents during of the public record and subject to
the reporting period. BILLING CODE 4810–AL–P public disclosure. Do not enclose any
Estimated Time per Respondent: 2 information in your comment or
hours per response. supporting materials that you consider

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Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices 38279

ratio of premium paid by LMI drivers to definition and calculation of an location.33 The Consumer Financial
household income of LMI drivers; 24 (9) affordability index; (3) a calculation of Protection Bureau recently defined a
consumer views of affordable insurance average premium; (4) a definition of the qualified mortgage based, in part, on the
premiums as measured by surveys; 25 market scope for an affordability index; ratio of the consumer’s total monthly
(10) quote prices; 26 (11) payment and (5) a definition of Affected Persons. debt to total monthly income.34 Given
options; 27 and (12) percent of income At this time, FIO does not have access the use of indices by other federal
spent on other goods and services.28 to information sufficient to establish a agencies and FIO’s statutory authority to
State insurance regulators and final definition of affordable personal monitor affordability for Affected
industry representatives generally auto insurance for Affected Persons Persons, FIO endorses the concept of an
suggested that FIO rely on existing data based on a normative standard, external affordability index for personal auto
sources to monitor the extent to which benchmark, or percentages of insurance and proposes to calculate an
Affected Persons have access to individuals purchasing personal auto affordability index for personal auto
affordable auto insurance. Existing data insurance. However, a working insurance for each type of Affected
sources include: the Bureau of Labor definition of affordability is needed to Persons.
Statistics Consumer Expenditure Survey An affordability index for Affected
guide further analysis of the cost of
(CES); the National Association of Persons may be derived from a broad set
personal auto insurance in order to
Insurance Commissioners (NAIC); of criteria, such as the average premium
monitor access to that line of insurance
statistical agents that collect and for personal liability insurance, personal
for Affected Persons.
aggregate data from insurers; and data injury protection, comprehensive
collected by certain states, such as FIO considered the definitions of insurance, collision insurance,
California. In addition, these affordability submitted by three uninsured motorist insurance, and
respondents noted that FIO should respondents to the 2014 Affordability underinsured motorist insurance; or
review studies conducted by others Notice and proposes adopting the more narrow criteria, such as the
such as the NAIC, individual states, the definition of affordable derived from a average premium for personal auto
Insurance Research Council (IRC), and dictionary and submitted by one liability insurance for a given year.35
the Insurance Information Institute (III). respondent: Affordable means being Two respondents suggested FIO only
By contrast, consumer organizations within the financial means of most consider personal auto liability
urged FIO to collect transactional data people. As the respondent observed, insurance when monitoring the
directly from insurers relating to auto this common sense definition may be affordability of personal auto insurance
insurance policies or, indirectly, from used to develop ‘‘a practical and as states generally require only the
price information on the insurers’ Web effective approach to monitoring access purchase of personal auto liability
sites and/or from third-party vendors. to affordable personal auto insurance as a condition of driving or
Consumer organizations also noted that insurance.’’ 29 Developing a complete owning a motor vehicle. FIO proposes to
state insurance regulators could collect working definition of affordable accept this suggestion and limit the
from insurers the premiums charged by personal auto insurance also involves calculation of an affordability index to
those insurers, and organize that identification of ‘‘the criteria used to the average annual personal auto
premium data based on the ZIP codes of measure the affordability of auto liability insurance premium for Affected
the insureds. insurance and the standard applied to Persons.
determine whether auto insurance is or Studies of the affordability of personal
II. Proposed Working Definition of is not affordable.’’ 30 auto insurance may calculate the
Affordable Personal Auto Insurance average premium in one of the following
Two respondents recommended that
This section sets out to derive a FIO use an affordability index to ways: (1) The total annual written
proposed working definition of premium for all insurers writing
measure the affordability of personal
affordable personal auto insurance personal auto insurance divided by the
auto insurance. These respondents
based on an affordability index. To do total number of policies; 36 or (2) the
suggested different calculations for an
so, it sets out in sequence: (1) A total annual premium quoted by a
affordability index: (1) The ratio of the
definition of affordability; (2) a sample of insurers writing personal auto
average insurance expenditure
insurance divided by the number of
(premium) to national and state median
24 CFA, (June 9, 2014), available at http:// insurers in the sample.37 FIO proposes
household income 31; or (2) the ratio of
www.regulations.gov/#!documentDetail;D=TREAS- to use one or both of these metrics for
DO-2014-0001-0011; Ways to Work, (June 9, 2014), average premium paid by LMI drivers
annual premium, depending on the data
available at http://www.regulations.gov/ (presumably in geographic areas where
sources FIO may use in future analysis
#!documentDetail;D=TREAS-DO-2014-0001-0010; LMI drivers reside) to median (as discussed in more detail in section
IRC, (June 2014), available at http:// household income of LMI drivers.32
www.regulations.gov/#!documentDetail;D=TREAS-
DO-2014-0001-0007; and AIA, (June 9, 2014) Some federal agencies use an index to 33 Location Affordability Portal available at
available at http://www.regulations.gov/ measure other kinds of affordability. For http://www.locationaffordability.info/lai.aspx.
#!documentDetail;D=TREAS-DO-2014-0001-0015. 34 12 CFR 1026.43(e)(2)(iv).
25 CFA, (June 9, 2014), available at http://
example, HUD has a publicly available
35 For a detailed discussion of the calculation of
www.regulations.gov/#!documentDetail;D=TREAS- location affordability index that an affordability index, see IRC, ‘‘Auto Insurance
DO-2014-0001-0011. estimates the percentage of a family’s Affordability,’’ (November 2013).
26 CEJ, (June 9, 2014), available at http:// income dedicated to the combined cost 36 See IRC, ‘‘Auto Insurance Affordability,’’
www.regulations.gov/#!documentDetail;D=TREAS- of housing and transportation in a given (November 2013) and Missouri Department of
asabaliauskas on DSK5VPTVN1PROD with NOTICES

DO-2014-0001-0014. Insurance, ‘‘Affordability and Availability of
27 Id. Personal Lines Insurance in Underserved
29 PCI
(June 9, 2014), at 1.
28 AIA, (June 9, 2014), available at http:// Communities,’’ (December 2004).
30 Id.,
at 2.
www.regulations.gov/#!documentDetail;D=TREAS- 37 See Paul M. Ong and Michael A. Stoll,
31 IRC, (June 6, 2014), available at http://
DO-2014-0001-0015; III, available at http:// ‘‘Redlining or Risk? A Spatial Analysis of Auto
www.regulations.gov/#!documentDetail;D=TREAS- www.regulations.gov/#!documentDetail;D=TREAS- Insurance Rates in Los Angeles,’’ Journal of Policy
DO-2014-0001-0016; and National Association of DO-2014-0001-0007. Analysis and Management, Vol. 26, No. 4, 811–829
Mutual Insurance Companies (NAMIC), (June 9, 32 CFA, (June 9, 2014), available at http:// (2007) and CFA Supplemental Comments (June 9,
2014), available at http://www.regulations.gov/ www.regulations.gov/#!documentDetail;D=TREAS- 2014) available at http://www.regulations.gov/
#!documentDetail;D=TREAS-DO-2014-0001-0009. DO-2014-0001-0011. #!documentDetail;D=TREAS-DO-2014-0001-0012.

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38280 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices

III). Given FIO’s proposed working proposes to use ‘‘urban area’’ as the exceeds 50 percent as the standard for
definition of affordable personal auto proxy for traditionally underserved majority minority geographic areas.
insurance (provided below), the metric communities and consumers, following Using these parameters, a definition
of annual premium should be solely the U.S. Census Bureau (Census Bureau) of affordability can be constructed. One
based on an annual price quote for definition of urban area, as densely respondent suggested personal auto
personal auto liability insurance or the developed territory that encompasses at insurance is affordable if personal auto
annual written premium for personal least 2,500 people of which at least insurance does not claim more than two
auto liability insurance. 1,500 reside outside institutional group percent of a low-income family’s take-
An affordability index may be quarters.40 home pay. A recent study of the
calculated for the entire market for affordability of personal auto insurance
personal auto liability insurance or a The Federal Deposit Insurance found the national average insurance
specific market within personal auto Corporation (FDIC) defines low-income expenditures divided by national
insurance. Historically, the auto as ‘‘individuals and geographies having median income has been under two
insurance market has been divided into a median family income less than 50 percent since 1995.46 CES reports the
three segments: (i) The standard market; percent of the area median income’’ and average expenditure for all households
(ii) the non-standard market; and (iii) moderate income as ‘‘individuals and for auto insurance and the average
the residual market. The residual market geographies having a median family income after taxes for all households
is generally comprised of the highest income of at least 50 percent and less and the data for 2013 indicate all
risk drivers, i.e., drivers who do not than 80 percent of the area median consumers spent about 1.6 percent of
qualify for personal auto insurance income.’’ 41 The area median income is: average income after taxes on auto
offered in the standard market or non- (1) The median family income for the insurance. FIO proposes to presume
standard market. The non-standard [metropolitan statistical area]; or (2) the personal auto liability insurance is
market is comprised of high risk drivers, statewide non-metropolitan median affordable if, for Affected Persons, the
such as new drivers, drivers with family income, if a person or geography affordability index is less than or equal
moving violations, drivers with a rare or is located outside a [metropolitan to two percent of household income.
unusual motor vehicle, or drivers with statistical area].’’ 42 FIO proposes to Combining these elements, FIO
a high auto insurance policy adapt this definition based on the proposes the following working
cancellation or non-renewal rate. The general use of median household definition of affordable personal auto
standard market is comprised of all income, as defined and identified by the liability insurance for Affected Persons:
other drivers. Generally, annual Census Bureau,43 in studies of A personal auto liability insurance
premiums for personal auto insurance affordability of personal auto insurance. policy is affordable if the annual
are highest in the residual market, For the purposes of FIO’s working premiums are within the financial
followed by the non-standard market, definition, LMI persons are individuals means of most people as measured by
and the standard market.38 FIO proposes living in areas where the annual income an affordability index for Affected
to limit the calculation of an of the geographic area is less than 80 Persons in the standard market.
affordability index for personal auto percent of the median household Personal auto liability insurance is
liability insurance to the standard income of a metropolitan statistical area presumed to be affordable if, with
market in order to diminish the impact or state.44 respect to household income, the
of the annual premiums charged to the The term ‘‘minorit[y]’’ is defined, by affordability index does not exceed two
highest risk drivers. law, as ‘‘Black American, Native percent for Affected Persons in urban
In addition, any definition of areas, for LMI persons within a specific
American, Hispanic American, or Asian
affordability must include parameters geographic area (including rural areas),
American.’’ 45 FIO proposes to use ZIP
that adequately account for Affected or for all individuals in majority
codes in which the minority population
Persons (i.e., traditionally underserved minority geographic areas.
communities and consumers,
minorities, and LMI persons). In the Availability and Affordability Task Force, June 4, III. Data
1996.
1990s, the NAIC studied the availability 40 See Census Bureau, ‘‘2010 Census Urban Area For purposes of further analysis of the
and affordability of personal auto FAQs,’’ available at https://www.census.gov/geo/ cost of personal auto insurance data is
insurance and noted ‘‘[t]here is reference/ua/uafaq.html. needed to calculate the affordability
considerable evidence that residents of 41 FDIC, ‘‘Community Reinvestment Act (CRA)
index for Affected Persons.
Performance Ratings,’’ available at https:// FIO has considered the currently
some urban communities, particularly www2.fdic.gov/crapes/peterms.asp.
low-income and minority 42 Id.
available data relating to premiums for
neighborhoods, face greater difficulty in 43 Household income includes income received personal auto insurance and, at this
obtaining high quality auto and on a regular basis by the householder and all other time, concludes that these data are
homeowners insurance coverage individuals 15 years of age and older in the inadequate for FIO to monitor the extent
household, whether related to the householder or to which Affected Persons have access
through the voluntary market than not. It does not include capital gains or noncash
residents of other areas.’’ 39 FIO benefits. According to the Census Bureau, to affordable personal auto insurance.
‘‘respondents report income earned from wages or For example, CES data allows FIO to
38 In 2011, of the 330 insurers that wrote personal salaries much better than other sources of income monitor changes in the ratio of the
auto insurance in either the standard and non- and that the reported wage and salary income is average expenditure for personal auto
standard market, 95 wrote personal auto insurance nearly equal to independent estimates of aggregate
asabaliauskas on DSK5VPTVN1PROD with NOTICES

in the non-standard market. Of the 95 insurers in income.’’ See ‘‘About Income’’ available at insurance (including liability coverage,
the non-standard market, 15 also wrote in the https://www.census.gov/hhes/www/income/about/. uninsured motorist coverage, personal
standard market. See StoneRidge Advisors, LLC, 44 As with other aspects of the working definition injury protection, comprehensive
‘‘Non-Standard Auto Insurance Market Overview & for monitoring the affordability of auto insurance, coverage, and collision coverage in all
M&A Trends,’’ View from the Ridge, August 2012, FIO may adjust the threshold for defining LMI
at 1, available at http:// persons to a lower figure, such as 65 percent of the
three market segments for personal auto
www.stoneridgeadvisors.com/Content/ median household income of the relevant area. insurance) to average annual income
View_From_The_Ridge_August_2012.pdf. 45 31 U.S.C. 313(c)(1)(B) (incorporating by
39 NAIC, ‘‘Improving Urban Insurance Markets: A reference the definition established in 12 U.S.C. 46 IRC, ‘‘Auto Insurance Affordability,’’

Handbook on Available Options,’’ NAIC Insurance 1811, note). (November 2013), at 7.

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Document Created: 2015-12-15 13:15:13
Document Modified: 2015-12-15 13:15:13
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Notice; Request for Information.
Dates		Comments must be received on or before August 31, 2015.
Contact		Lindy Gustafson, Federal Insurance Office, 202-622-6245 (not a toll free number).
FR Citation		80 FR 38277