The Federal Insurance Office (FIO)

Word came out of Washington this week that the Federal Insurance Office (FIO) is looking to establish the government’s definition of “affordability” of private passenger auto insurance. The Dodd-Frank Law gave the government authority to bark up this tree.

When I hear “government” and “insurance” in the same sentence my warning bells go off.

I don’t have a firm position on whether the federal government would be a better regulator than individual states. It would seem the opportunity for stupidity would be just as pervasive on either level.

The FIO stated that auto liability is mandatory in all states except New Hampshire, and that owning an automobile is likely associated with a higher probability of employment and other factors associated with economic wellbeing.

They went on to say that, “personal auto insurance may be interpreted as affordable if it is actually purchased by individuals and/or families.”

It might be that the FIO is looking for an issue in order to assert that there’s “trouble, trouble, trouble” that only federal regulation can fix.

Or, even worse, it could be the FIO is looking to start down the road toward a federal private passenger auto insurance program.

They have a ready partner in consumer lobbyist Bob Hunter who has made a career out of misinterpreting numbers in order to be the Professor Harold Hill of our industry. His latest quote is a gem.

“With millions of low- and moderate-income Americans struggling to afford state-required auto insurance and insurers constantly adding new highly questionable factors like education, occupation and elasticity of demand that drive up the cost to those least able to afford coverage, FIO’s interest is not only necessary, it is urgent.”

It’s safe to say that Mr. Hunter has yet to meet a free enterprise driven market that he likes. “Insurance” might not rhyme with “T” but our nation’s capitol is looking for “trouble” and Mr. Hunter would seemingly like to be at the front of that parade.

I’ll agree that education might not be the strongest proxy variable for a responsible insured, but I’ll defend forever an insurance company’s right to decide under what circumstances they will establish their rates and underwriting criteria.

I would love to ask Mr. Hunter, at one of those hearings he loves to populate, what percentage of the current 14% uninsured autos would buy insurance if their rate were cut in half. My guess would be under 25% would buy the reduced-cost coverage, leaving the uninsured number still north of 10%.

I would love to ask him if he thought maybe stronger enforcement of the laws requiring auto insurance might not be a better first step?

Did you ever have an upset stomach sending you the false message that if you would just eat more your pains would go away? I wonder if D.C. isn’t going through something like that. Could it be they think the answer to the Obamacare-rollout cramps is another hardy meal of boondoogle?

James Holm

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