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CFA says auto insurers establish premiums unfairly, industry responds

Posted On Wed, January 30, 2013

In an accusation that insurers are describing as baseless and without merit, a consumer watchdog recently alleged that insurers charge responsible drivers with excessively high premiums.

The assertion, which was made by the Consumer Federation of America, stems from 60 case studies wherein insurers allegedly gave higher premiums quotes to safe drivers than they assigned to motorists who had been in accidents. In fact, CFA claims that in six in every 10 cases, safe drivers were given premium quotes that were 25 percent higher than prices cited to drivers with spotty traffic records.

Robert Hunter, director of insurance at CFA, went so far as to say that insurers take factors into consideration when assessing rates that aren't germane to safety, such as income and education.

Since this report has been made public, the Insurance Information Institute issued a response, indicating that CFA's report is flawed and, frequently, policyholders are cited less costly premiums directly because of their stellar traffic safety record.

"The price is risk-based, and always will be," said Steven Weisbart, III's senior vice president and chief economist.

He added that what policyholders pay is largely within their own sphere of influence, as a highly competitive marketplace enables insurers to establish cheap insurance quotes, which customers can then choose from based on their own individual needs and interests.

The III also referred to a recent study released by the National Association of Insurance Commissioners, which found that drivers in 2010, on average, spent less than they did in 2006. NAIC data shows that the typical driver in the U.S. three years ago sent approximately $791, which is down 3 percent from the $818 spent in 2006.

"Drivers should shop around if they feel as though their current auto insurer is not meeting their needs, or is charging too high a price," said Weisbart.

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