Insurance Cost Information Regulation

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 582

[Docket No. 94-73; Notice 1]

RIN 2127-AF44

Insurance Cost Information Regulation

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, NHTSA proposes technical amendments to the

insurance cost information regulations. Among the proposed changes are

revising the term ``passenger motor vehicles'' to read ``passenger

cars, utility vehicles, light duty trucks, and vans,'' and revising

from January to March, the availability date of the insurance

information. NHTSA also proposes making more explicit the limitations

of the collision loss data, and proposes recommending that prospective

purchasers contact insurance agents for more information. The technical

amendments are proposed to make the insurance cost information more

accurate.

DATES: Comments on this notice of proposed rulemaking must be received

by this agency not later than November 14, 1994.

ADDRESSES: Comments should refer to the docket number referenced in the

heading of this notice, and be submitted to: Docket Section, NHTSA,

Room 5109, 400 Seventh Street, S.W., Washington, D.C. 20590. (Docket

hours are 9:30 am to 4:00 pm, Monday through Friday.)

FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market

Incentives, NHTSA, 400 Seventh Street, S.W., Washington, D.C. 20590.

Mr. Kee's telephone number is (202) 366-4936.

SUPPLEMENTARY INFORMATION:

Background

Insurance Cost Information Regulation

49 U.S.C. 32302(c) states that the Secretary of Transportation (the

Secretary) shall prescribe regulations that require passenger motor

vehicle dealers to distribute to prospective purchasers information

developed by the Secretary and provided to the dealer which compares

differences in insurance costs for different makes and models of

passenger motor vehicles based upon differences in damage

susceptibility and crashworthiness. By delegation from the Secretary,

NHTSA has been authorized to carry out the statute.

On January 31, 1975, NHTSA published 49 CFR part 582, Insurance

Cost Information Regulation (40 FR 4918). Part 582, as then

promulgated, required that automobile dealers ``make available to

prospective purchasers information reflecting differences in insurance

costs for different makes and models of passenger motor vehicles based

upon differences in damage susceptibility and crashworthiness.'' Part

582, however, did not specify information that dealers must provide.

On March 5, 1993 (58 FR 12545), NHTSA published a final rule

amending part 582. The rule complemented the 1975 rulemaking, and

completed implementation of section 32302(c). The March 1993 final

rule, which became effective April 5, 1993, requires dealers of new

automobiles to make collision loss experience data available in

booklets to prospective purchasers. The information to be provided in

the booklet is specified in section 582.5, which requires inclusion of

a complete explanatory text and updated data on auto insurance costs

published annually by NHTSA.

The mandatory text specified by part 582 relates to, among other

topics, the limitations of the auto insurance cost data as a predictor

of differences in insurance premiums. Essentially, those limitations

result from the fact that most of the factors that insurance companies

use to establish premiums relate to driver characteristics and, except

for the vehicle's value, are not directly related to the vehicle

itself. Thus, as the text explains, the fact that a vehicle's

historical claims experience is somewhat better or worse than that of

other vehicles in its class may not be reflected in the premium that an

insurance company establishes for that vehicle. If the claims

experience is reflected, it is likely to have only a small impact on

the premium.

The mandatory text also urges consumers to contact insurance

companies if they wish to obtain precise information about actual

premiums for particular makes and models of vehicles. Previous studies

by NHTSA have revealed that the difference between the premiums charged

by different insurance companies for the same car and driver is greater

than the difference between the premiums charged by a given company for

comparably-valued cars that have different claims experience. NHTSA

believed the mandatory text would help to minimize consumer confusion

by providing customers with an understanding of the uses and

limitations of the auto insurance cost data.

In specifying the yearly insurance cost data that accompanied the

required text, NHTSA decided to rely on collision loss experience data

collected and reported by the Highway Loss Data Institute (HLDI), as

the best available indicator of the effect of damage susceptibility on

insurance costs.

In the March 1993 final rule, NHTSA specified HLDI's December

Insurance Collision Report as the data source for part 582. NHTSA

decided to specify HLDI's December Report because it contains more

current data and covers more vehicle models than other HLDI

publications. The HLDI data is presented in a format that ranks the

vehicles in each class from best to worst (with numerical values given

for each vehicle). NHTSA specified this format because it determined

the use of this ranking system should assist customers in evaluating

the comparative performance of comparable vehicles.

In the March 1993 final rule, NHTSA stated its belief that the HLDI

information should be available as soon as possible after its

publication date. Therefore, NHTSA stated its intent to publish the

annual Federal Register document updating HLDI's December Insurance

Collision Report data no later than January of the calendar year that

follows HLDI's publication of the data.

Proposed Amendments

In this notice of proposed rulemaking, NHTSA proposes to amend part

582 by making certain changes in section 582.5, that specifies the text

of the insurance cost information booklet. At present, the text

specifies the date ``January [Year to be Inserted].'' In this NPRM,

NHTSA proposes to revise ``January'' to ``March.'' The change to a

later month will allow NHTSA adequate time to publish the comparative

insurance cost information booklet. HLDI sends the December Insurance

Collision Report data to NHTSA in mid-January. The data is then

formatted for printing and distributed to automobile dealers by mail.

NHTSA can thus expect that the booklet will be published by March of

each year.

Part 582 presently specifies a comparison of insurance costs for

``passenger motor vehicles.'' In this NPRM, NHTSA proposes to revise

``passenger motor vehicles,'' at appropriate places in Sec. 582.5, to

read ``passenger cars, utility vehicles, light duty trucks and vans.''

The proposed revisions would make clear that ``passenger motor

vehicles'' includes many vehicle types besides ``passenger car.''

In this NPRM, NHTSA also proposes to make certain changes to the

required text that would make more explicit the limitations of the

collision loss data. At present, the text in Sec. 582.5 explaining the

data's limitations states that the collision loss data table does not

include information about new models, models that have been

substantially redesigned, and models without enough claim experience.

In order to make clear that certain data should not be relied upon,

NHTSA proposes to revise the third paragraph in Sec. 582.5 to state:

The table is not relevant for new models or models that have

been substantially redesigned for [YEAR TO BE INSERTED], and it does

not include information about models without enough claim

experience.

At present, the fourth paragraph in Sec. 582.5 states that it is

unlikely that a consumer's total premium will vary more than five

percent depending upon the collision loss experience of a particular

vehicle. Upon further review, NHTSA believes it would be more accurate

to state that it is unlikely that a consumer's total premium will vary

more than ten percent. This notice proposes that change.

The reason for the change to ten percent is that the Insurance

Services Organization (ISO) recommends insurance premium rates to its

members. An ISO representative indicated to NHTSA that the collision

cost data could result in an insurance premium reduction of ten percent

rather than the five percent mentioned in the booklet ``Comparison of

Differences in Insurance Costs for Passenger Motor Vehicles on the

Basis of Damage Susceptibility,'' made available to motor vehicle

purchasers.

Finally, at present, Sec. 582.5 states that to determine the actual

premium that a consumer will be charged for insuring a particular

vehicle or for complete information about insurance premiums, the

consumer should contact insurance companies directly. In this proposed

rule, NHTSA proposes that Sec. 582.5 be revised to advise the consumer

to contact insurance company agents directly. Amending the text to

advise the consumer to contact the insurance company agents directly,

reflects the fact that the consumer's first point of contact with

insurance companies is the insurance company agent.

Regulatory Impacts

1. Executive Order 12866 and DOT Regulatory Policies and Procedures

This notice has not been reviewed under Executive Order 12866.

NHTSA has considered the impact of this rulemaking action and has

determined the action not to be ``significant'' under the Department of

Transportation's regulatory policies and procedures. The agency has

determined that the economic effects of the proposed amendments are

minimal, so that a full regulatory evaluation is not required. This

NPRM proposes minor amendments to the insurance cost information

regulation, so that the information to be provided to potential motor

vehicle purchasers is more accurate. Assuming these proposals are

adopted, any extra text that must be included in the information

booklet would be minuscule.

2. Regulatory Flexibility Act

In accordance with the Regulatory Flexibility Act, NHTSA has

evaluated the effects of this notice of proposed rulemaking on small

entities. NHTSA estimates there are about 24,000 dealers of new

passenger motor vehicles. Many of the dealers would be considered small

entities, that may be affected by this proposed rule. However, NHTSA

believes that this proposed rule would not have a significant economic

impact on a substantial number of these small dealers. The rationale is

that this rulemaking proposes minor editorial changes, resulting in a

small amount of extra text in the insurance cost information booklet.

The potential cost increments associated with this proposed rule should

have negligible effects on the purchase price of new passenger motor

vehicles. For these reasons, I certify that the proposed rule will not

have a significant economic impact on a substantial number of small

entities.

3. National Environmental Policy Act

In accordance with the National Environmental Policy Act of 1969,

the agency has considered the environmental impacts of this proposed

rule and determined that if made final, it will not have a significant

impact on the quality of the human environment.

4. Federalism

This action has been analyzed in accordance with the principles and

criteria contained in Executive Order 12623, and it has been determined

that the rule does not have sufficient federalism implications to

warrant the preparation of a Federalism Assessment.

5. Civil Justice Reform

This proposed rule would not have any retroactive effect, and it

does not preempt any State law. Chapter 323--Consumer Information of 49

U.S.C. does not provide for judicial review of rules issued pursuant to

49 U.S.C. 32302. The Administrative Procedure Act, 5 U.S.C. 701 et

seq., provides generally for judicial review of final agency action,

which in certain circumstances may include this proposed rule. The

Administrative Procedure Act does not require submission of a petition

for reconsideration or other administrative proceedings before parties

may file suit in court.

Procedures for Filing Comments

NHTSA solicits public comments on the issues presented in this

notice. It is requested, but not required, that 10 copies be submitted.

All comments must not exceed 15 pages in length. (49 CFR 553.21.)

Necessary attachments may be appended to these submissions without

regard to the 15 page limit. This limitation is intended to encourage

commenters to detail their primary arguments in a concise fashion.

If a commenter wishes to submit certain information under a claim

of confidentiality, three copies of the complete submission, including

purportedly confidential business information, should be submitted to

the Chief Counsel, NHTSA, at the street address given above, and seven

copies from which the purportedly confidential information has been

deleted should be submitted to the Docket Section. A request for

confidentiality should be accompanied by a cover letter setting forth

the information specified in the agency's confidential business

information regulation. 49 CFR part 512.

All comments received before the close of business on the comment

closing date indicated above for this notice will be considered, and

will be available for examination in the docket at the above address

both before and after that date. To the extent possible, comments filed

after the closing date will also be considered. Comments received too

late for consideration in regard to the final rule will be considered

as suggestions for further rulemaking action. Comments on this notice

will be available for inspection in the docket. NHTSA will continue to

file relevant information as it becomes available for inspection in the

docket after the closing date, and it is recommended that interested

persons continue to examine the docket for new material.

Those persons desiring to be notified upon receipt of their

comments in the rules docket should enclose a self-addressed, stamped

postcard in the envelope with their comments. Upon receiving the

comments, the docket supervisor will return the postcard by mail.

List of Subjects in 49 CFR Part 582

Administrative practice and procedure, Insurance, Motor Vehicles.

In consideration of the foregoing, NHTSA proposes to amend 49 CFR

part 582 as follows:

PART 582--[AMENDED]

1. The authority citation for part 582 would be revised to read as

follows:

Authority: 49 U.S.C. 32302, 32303; delegation of authority at 49

CFR 1.51.

2. Section 582.5 would be revised to read as follows:

Sec. 582.5 Information form.

The information made available pursuant to Sec. 582.4 shall be

presented in writing in the English language and in not less than 10-

point type. It shall be presented in the format set forth below, and

shall include the complete explanatory text and the updated data

published annually by NHTSA.

MARCH [YEAR TO BE INSERTED]

COMPARISON OF DIFFERENCES IN INSURANCE COSTS FOR PASSENGER CARS,

UTILITY VEHICLES, LIGHT DUTY TRUCKS, AND VANS ON THE BASIS OF DAMAGE

SUSCEPTIBILITY

The National Highway Traffic Safety Administration (NHTSA) has

provided the information in this booklet in compliance with Federal law

as an aid to consumers considering the purchase of a new vehicle. The

booklet compares differences in insurance costs for different makes and

models of passenger cars, utility vehicles, light trucks and vans on

the basis of damage susceptibility. However, it does not indicate a

vehicle's relative safety.

The following table contains the best available information

regarding the effect of damage susceptibility on insurance premiums. It

was taken from data compiled by the Highway Loss Data Institute (HLDI)

in its December [YEAR TO BE INSERTED] Insurance Collision Report, and

reflects the collision loss experience of passenger cars, utility

vehicles, light trucks, and vans sold in the United States in terms of

the average loss payment per insured vehicle year for [THREE

APPROPRIATE YEARS TO BE INSERTED]. NHTSA has not verified the data in

this table.

The table represents vehicles' collision loss experience in

relative terms, with 100 representing the average for all passenger

vehicles. Thus, a rating of 122 reflects a collision loss experience

that is 22 percent higher (worse) than average, while a rating of 96

reflects a collision loss experience that is 4 percent lower (better)

than average. The table is not relevant for new models or models that

have been substantially redesigned for [YEAR TO BE INSERTED], and it

does not include information about models without enough claim

experience.

Although many insurance companies use the HLDI information to

adjust the ``base rate'' for the collision portion of their insurance

premiums, the amount of any such adjustment is usually small. It is

unlikely that your total premium will vary more than ten percent

depending upon the collision loss experience of a particular vehicle.

If you do not purchase collision coverage or your insurance company

does not use the HLDI information, your premium will not vary at all in

relation to these rankings.

In addition, different insurance companies often charge different

premiums for the same driver and vehicle. Therefore, you should contact

insurance company agents directly to determine the actual premium that

you will be charged for insuring a particular vehicle.

Please Note: In setting insurance premiums, insurance companies

mainly rely on factors that are not directly related to the vehicle

itself (except for its value). Rather, they mainly consider driver

characteristics (such as age, gender, marital status, and driving

record), the geographic area in which the vehicle is driven, how

many miles are traveled, and how the vehicle is used. Therefore, to

obtain complete information about insurance premiums, you should

contact insurance company agents directly.

Insurance companies do not generally adjust their premiums on the

basis of data reflecting the crashworthiness of different vehicles.

However, some companies adjust their premiums for personal injury

protection and medical payments coverage if the insured vehicle has

features that are likely to improve its crashworthiness, such as air

bags and automatic seat belts.

Test data relating to vehicle crashworthiness are available from

NHTSA's New Car Assessment Program (NCAP). NCAP test results

demonstrate relative frontal crash protection in new vehicles.

Information on vehicles that NHTSA has tested in the NCAP program can

be obtained by calling the agency's toll-free Auto Safety Hotline at

(800) 424-9393.

[INSERT TABLE TO BE PUBLISHED EACH MARCH BY THE NATIONAL HIGHWAY

TRAFFIC SAFETY ADMINISTRATION]

If you would like more details about the information in this table,

or wish to obtain the complete Insurance Collision Report, please

contact HLDI directly, at: Highway Loss Data Institute, 1005 North

Glebe Road, Arlington, VA 22201, Tel: (703) 247-1600.

Issued on September 6, 1994.

Barry Felrice,

Associate Administrator for Rulemaking.

[FR Doc. 94-22545 Filed 9-12-94; 8:45 am]

BILLING CODE 4910-59-P