As traffic has resumed in 2021, the number of auto insurance claims has also increased. So far this year, drivers have been more inclined to go back on the road, with vehicle claims increasing by 25% to 30%.

In response to rising discrimination claims in rate-setting and underwriting, the Federal Insurance Office (FIO) announced intentions in July to investigate how non-driving characteristics are used to calculate personal auto insurance premiums.

The Federal Insurance Office (FIO) intends to investigate the role of non-driving elements in deciding personal vehicle insurance prices, such as a consumer's credit history, homeownership status, and others. In addition, officials will investigate the use of big data and technology in underwriting and pricing. This new analysis comes just a few months after President Biden questioned personal auto insurance prices inequalities during a Town Hall meeting in February 2021.

The FIO found that vehicle insurance is generally unaffordable in 845 US locations, affecting nearly 18.6 million individuals based on ZIP code-level data.

In this study, vehicle insurance expenses were considered anything that cost more than 2% of median household income.

Officials plan to conduct a comprehensive investigation of the domestic personal auto insurance market in the new study. The Treasury Department will concentrate on coverage affordability, premium pricing inequalities, and structural changes such as the usage of big data and the effects of COVID-19 on business operations.

FIO will look into issues such as:

• What role should non-driving elements play in personal auto insurance underwriting and pricing? How should these factors be evaluated? 

• What other quantitative approaches can FIO use to examine vehicle insurance affordability successfully?
   

It will be interesting to see how rate-setting evolves in the near future as the insurance sector tries to find out how to effectively manage the COVID-19 pandemic and user-based technologies in its claims handling methods.

The legitimacy of incorporating non-driving factors being questioned and deep-dived into the use of big data in the insurance industry is on the horizon. These new provisions could be the nudge that usage-based insurance needs to become the new standard.