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Study on the Affordability of Personal Automobile Insurance (January 2017)
In brief, this Study calculates and reports the results of an Affordability Index which, following
extensive consultation and analysis, FIO has defined as the ratio of the average annual written
personal automobile liability premium in the voluntary market to the median household income
(based on U.S. Census Bureau data) for U.S. Postal Service ZIP Codes in which Affected
Persons are 50 percent or more of the population (AP ZIP Codes). For the purposes of this
analysis, personal auto insurance is presumed unaffordable within an AP ZIP Code if its
Affordability Index is above two percent.
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As described in more detail in Section VII, the
United States has 9,172 AP ZIP Codes in which Affected Persons are the majority population, or
approximately 28 percent of all of the ZIP Codes nationwide. Auto insurance has Affordability
Index values above two percent in 845 AP ZIP Codes nationwide; those 845 AP ZIP Codes have
an aggregate population of over 18.6 million. Affordability Index results for each AP ZIP Code
are available at www.treasury.gov/initiatives/fio/reports-and-notices.
Using the information provided in this Study, consumers and policymakers will be able to assess
the affordability of personal auto insurance for Affected Persons within each state and the
District of Columbia, at the ZIP Code level. Given the wide variations among states, any
interstate comparisons should be made with great caution: the Affordability Index allows for
comparison of ZIP Codes within the same state, but should not be considered for interstate
analysis. Also, the Study is limited to auto insurance affordability for Affected Persons.
Importantly, however, even for Affected Persons the Affordability Index is not intended to
provide guidance for individual insurance budgeting or affordability for specific individuals.
Due to the range of unique personal characteristic and variance among state laws and
regulations, the Affordability Index is not appropriate for measuring the affordability of an auto
insurance premium paid by any one person. Rather, the Affordability Index is designed for the
purpose of gaining a better understanding of auto insurance affordability for Affected Persons,
collectively, at the ZIP Code level.
This Study is based on premium and related data that is publicly available and/or that was
voluntarily provided by states and statistical agents.
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The underlying data, therefore, does not
include all U.S. auto insurance policies. More data will be available for the next study, when all
large auto insurers will be asked to voluntarily produce premium data through the appropriate
statistical agent.
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As more data is analyzed and year-to-year trends become visible, annual study
results are likely to provide more insights into industry trends and developments.
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Monitoring Availability and Affordability of Auto Insurance, 81 Fed. Reg. 45,372 (July 13, 2016) (July 2016
Notice). See also Monitoring Availability and Affordability of Auto Insurance, 79 Fed. Reg. 19,969 (Apr. 10, 2014)
(April 2014 Notice), and Monitoring Availability and Affordability of Auto Insurance, 80 Fed. Reg. 38,277 (Jul. 2,
2015) (July 2015 Notice).
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With some state-specific exceptions, property and casualty insurers generally are required by state law to send
premium and claims/loss data to statistical agents, who then compile the data for state insurance departments; the
states, in turn, use the reported information to ensure that insurance rates meet statutory standards and to monitor the
insurance market. See, e.g., Independent Statistical Service, Statistical reporting made simple, available at
http://www.iss-statistical.net/subscriber-home/home
; National Independent Statistical Service, About Statistical
Reporting, available at https://www.niss-stat.org/HTML/AboutStatisticalReporting.aspx; Verisk Analytics,
Statistical Service, available at http://www.verisk.com/capabilities/data-and-statistical-services/statistical-service-
reporting-insurance-data-to-iso.html.
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See Proposed Collection; Comment Request, 81 Fed. Reg. 45,381 (July 13, 2016) (Collection Request).
FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY
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