PCI Says CFA Study is Flawed; Compares Apples to Oranges

CHICAGO–(BUSINESS WIRE)–The following statement by the Property Casualty Insurers Association
of America (PCI) is in response to the recent study by the Consumer
Federation of America (CFA) regarding auto insurance rating. The
following statement can be attributed to David Snyder, PCI’s vice
president of policy development and research.

“The CFA’s latest study on auto insurance pricing is flawed and
misleading. The central flaw in the report is that it fails to take into
account that all the rating and underwriting factors insurers use are
proven to increase the accuracy of predicting the risk of loss.

“Additionally, the driver profiles used by the CFA provide an apples to
oranges comparison which calls into question their findings and
conclusions. Without an apples to apples comparison it is impossible to
isolate the impact of individual factors as the CFA attempts to do by
singling out a driver with a driving under the influence conviction. A
component of one profile indicated that the driver went six months
without insurance, which is a significant factor in predicting risk.

“The main factors that determine what a driver pays for insurance
include things such as the number of years of driving experience,
previous claims, miles driven, the type of vehicle and type of coverage
purchased. Insurers use a wide variety of factors that have proven to be
effective in predicting the likelihood of someone filing an insurance
claim or having a loss. By using a variety of rating factors, insurers
are able to develop a more complete picture of a driver’s potential for
filing a claim and in this way more accurately price the policy.

“Consumers should rest assured that auto insurance pricing is closely
scrutinized by state insurance regulators and is subject to rigorous
actuarial standards which ensure that all rating factors comply with the

“If consumers are not happy with an insurance quote or the cost of
insurance, they can always shop around for a better price or another
company among the dozens of competitors in each marketplace. The auto
insurance market is highly competitive and consumers have a large
variety of choices.

“Insurers use approved rating factors that accurately predict loss and
we reject CFA’s attempt to characterize factors that measure risk as
”social economic,” these factors are highly regulated and based on

PCI is composed of nearly 1,000 member companies, representing the
broadest cross section of insurers of any national trade association.
PCI members write more than $183 billion in annual premium, 35 percent
of the nation’s property casualty insurance. Member companies write 42
percent of the U.S. automobile insurance market, 27 percent of the
homeowners market, 32 percent of the commercial property and liability
market and 34 percent of the private workers compensation market.


Jeffrey Brewer