Low-risk drivers should pay less for car insurance, and premiums have closely tracked broader U.S. economic trends for decades, Triple-I told the U.S. Treasury Department & # 39 ;s Federal Insurance Office (FIO) this week.
In a letter in response to a federal request for information, Triple-I stated that US car insurance companies price their insurance accurately using a variety of rating factors. All of these factors must comply with the laws and regulations of the state where the car insurance is sold.
“There is no credible evidence that insurance companies charge more than they should, either in the broad market or in specific sub-segments, e.g. as neighborhood, race, income, education or profession, ”stated Triple-I. The letter also stated that the rating factors that US car insurance companies use to price their insurance not only serve their purpose but are constantly being tested to ensure their accuracy and reliability. "People and quite expensive for others," the letter said. “In both cases, the assessment is correct. Drivers who present less risk pay less for coverage.
The response to FIO's information request highlighted how the right price for an insurance policy varies greatly from customer to customer and from state to state. Insurance is regulated by state governments.
"Insurance companies and their actuaries have focused on finding factors that ensure that each customer pays the right price," says Triple-I. Prices are based on historical losses for similar risks. Premiums are the price customers pay for insurance coverage.
Critics of US car insurance pricing have expressed concern that certain rating factors, such as credit-based insurance scores and the geographical location of the customer's home, discriminate against lower-income drivers and minority groups. Triple-I explained that eliminating any rating factor — for whatever reason — forces them at less risk to pay too much for car insurance and allows those at greater risk to pay less than they should for car insurance.
Interventions can backfire
"Elimination factors do not affect the truth they reveal, and if factors reveal that costs must be high for a customer, then nothing forbids them to change the underlying costs that are the cause to the fact that the price is high, "Triple-I explained.
Regulators sometimes intervene in the grading process to make insurance cheaper for certain groups, citing the need to make insurance "affordable." a spectacular way, ”says the Triple-I letter,“ increase overall costs and greatly reduce availability, as well as hinder innovations that can solve the problem.
Real problems need real solutions
Real solutions exist to make insurance more affordable, says Triple-I: "These solutions do not come from tinkering with how insurers determine prices but by taking deal with the costs covered by the insurance. "
To improve the transport environment and address societal issues that often force minorities and low- and moderately disabled people to live and drive in circumstances where car insurance costs are highest among the proposed solutions.
Extensive Triple-I research shows that rising claims costs have been the main factor in rising car insurance prices.
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