[Federal Register Volume 60, Number 57 (Friday, March 24, 1995)]
[Rules and Regulations]
[Pages 15509-15512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7266]



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DEPARTMENT OF TRANSPORTATION
49 CFR Part 582

[Docket No. 94-73; Notice 2]
RIN 2127-AF44


Insurance Cost Information Regulation

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

ACTION: Final rule.

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SUMMARY: In this document, NHTSA adopts technical amendments to the 
insurance cost information regulations. Among the changes adopted are 
postponing, from January until March, the availability date of the 
insurance cost information booklet, and revising the term ``passenger 
motor vehicles'' to read ``passenger cars, utility vehicles, light duty 
trucks, and vans.'' NHTSA also adds language making more explicit the 
limitations of the collision loss data, and language recommending that 
prospective purchasers contact insurance agents or insurance companies 
for more information. The amendments are adopted to make the insurance 
cost information more accurate.

DATES: These amendments are effective April 24, 1995, and will apply to 
the insurance cost information to be made available in March 1996.

FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market 
Incentives, NHTSA, 400 Seventh Street, SW., Washington, DC 20590. Mr. 
Kee's telephone number is (202) 366-0846.

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. [[Page 15510]] 
    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 
that 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 made 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.

The NPRM

    In a notice of proposed rulemaking (NPRM) issued on September 13, 
1994 (59 FR 46952), NHTSA proposed to amend part 582 by making certain 
changes in Sec. 582.5, in which the text of the insurance cost 
information booklet is specified. Originally, the text specified the 
date ``January [Year to be Inserted].'' NHTSA proposed to substitute 
``March'' for ``January,'' in order to allow itself adequate time to 
publish and distribute the comparative insurance cost information 
booklet. In practice, HLDI does not send the December Insurance 
Collision Report data to NHTSA until mid-January. NHTSA then formats 
the data for printing, and arranges for the printing and distribution 
by mail of a single copy of the booklet to each of the nation's 
approximately 27,000 automobile dealers. NHTSA can thus reasonably 
expect that the booklet will be published by March of each year.
    Part 582 originally specified a comparison of insurance costs for 
``passenger motor vehicles.'' In the NPRM, NHTSA proposed to revise the 
term ``passenger motor vehicles,'' at appropriate places in Sec. 582.5, 
to read ``passenger cars, utility vehicles, light duty trucks and 
vans.'' The revisions were intended to make clear that the term 
``passenger motor vehicles'' includes many vehicle types besides 
``passenger car.''
    NHTSA also proposed to make certain changes to the required text 
that would make more explicit the limitations of the collision loss 
data. In the final rule, the text in Sec. 582.5 that explains the 
data's limitations stated 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 proposed 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.

    Also, in the final rule, the fourth paragraph in Sec. 582.5 stated 
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. Subsequently, a representative of the Insurance 
Services Organization (ISO), which recommends insurance premium rates 
to its members, 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. Accordingly, NHTSA tentatively 
concluded that it would be more accurate to state that it is unlikely 
that a consumer's total premium will vary more than ten percent.
    Finally, Sec. 582.5 originally stated that consumers should contact 
insurance companies directly to determine the actual premium that a 
consumer will be charged for insuring a particular vehicle or for 
complete information about insurance premiums. NHTSA proposed to revise 
Sec. 582.5 to advise the consumer to contact insurance company agents 
directly in order to obtain premium information. This proposal was 
intended to reflect the fact that the consumer's first point of contact 
with many insurance companies is the insurance company agent.

Summary of Comments and Agency Responses

    NHTSA received comments from three entities on the issues raised in 
the NPRM. These included Advocates for Highway and Auto Safety 
(Advocates), the National Automobile Dealers Associations (NADA), and 
Volkswagen of America (VW). Each commenter generally supported the 
proposed amendment, but raised individual suggestions concerning 
specific portions of the proposed text.
    a. Publication date: No commenter objected to the change of the 
publication date from January to March, and NADA affirmatively 
supported this change. NADA also suggested that NHTSA should 
``reconsider working towards publishing'' the insurance cost data in 
the same booklet as DOE/EPA's comparative fuel economy data. In the 
March 1993 final rule, NHTSA rejected earlier proposals (by NADA and 
others) to publish all of the data in a single document. NHTSA 
continues to believe that this proposal is unworkable. The HLDI 
insurance cost information does not become available until late 
January. This time frame is too late to permit publication of the data 
simultaneously with DOE/EPA's ``Gas Mileage Guide,'' which is made 
available at the beginning of the model year (ordinarily in the 
preceding October), when new models arrive at dealers' show rooms. 
Furthermore, the data in the Gas Mileage Guide, which are arranged 
according to criteria such as interior roominess, engine, and 
transmission, are presented differently from the HLDI data, which is 
arranged according to wheelbase and vehicle type.
    b. Covered Vehicles: Both NADA and Advocates supported the agency's 
proposal to change the description of the vehicles covered by making it 
more specific. NADA suggested that the agency use the terms ``station 
wagon/passenger van, pickup, and utility vehicle,'' throughout the 
text, to reflect the groupings into which the HLDI data is already 
broken out. NHTSA agrees that this suggestion has merit, and has 
decided to adopt it by revising the end of the first paragraph of 
Sec. 582.5 to state: ``COMPARISON OF DIFFERENCES IN INSURANCE COSTS FOR 
PASSENGER CARS, STATION WAGONS/PASSENGER VANS, PICKUPS, AND 
[[Page 15511]] UTILITY VEHICLES ON THE BASIS OF DAMAGE 
SUSCEPTIBILITY.''
    c. Discussion of the limitations of the data: Two commenters 
addressed the agency's proposal to modify the textual discussion of the 
limitations of the data. NADA requested that the agency further 
emphasize and explain those limitations. On the other hand, Advocates 
expressed its concern that consumers may infer from the proposed 
language that the insurance cost data is of little value, and suggested 
that the agency emphasize the usefulness of the data. Accordingly, it 
proposed that, in addition to the textual changes proposed in the NPRM, 
the final rule adopt language that affirmatively states that the table 
``can be used to compare insurance premiums of most vehicle makes and 
models * * *.'' In addition, it proposed dropping the reference to 
``new models'' in the description of vehicles to which the tables do 
not apply.
    NHTSA has concluded that the presentation of the insurance cost 
information is clear and adequate. The agency disagrees with Advocates' 
conclusion that the fact that the proposed revision points out the 
limitations of the data will lead consumers to conclude that the 
insurance cost information is of little value. Since the issuance of 
the final rule in March 1993, the text of the insurance cost booklet 
has always contained a description of the limitations of the data; the 
revision merely clarifies those limitations. Therefore, NHTSA has 
decided against adopting Advocates' suggested affirmative statement 
concerning the appropriate uses of the data.
    Advocates' suggestion that the reference to ``new models'' in the 
proposed revision to the third paragraph of the text should be deleted 
was based on its assertion that previous cost information is applicable 
to new models of the same vehicle make if the vehicle line has not been 
substantially redesigned. Although NHTSA believes that the term ``new 
models'' is ordinarily understood to mean an entirely new or 
substantially redesigned model, the agency has concluded that the term 
``new models'' is superfluous in this context. Accordingly, the agency 
is accepting Advocates' proposal to delete the reference.
    d. Advice about contacting insurance agents: Advocates suggested a 
change to the agency's proposed language advising consumers to contact 
insurance agents in order to obtain relevant insurance cost 
information. Advocates agreed that it was appropriate to advise 
consumers to contact insurance agents, but suggested that the 
regulatory text should provide consumers with the option of contacting 
either their insurance agent or their insurance company. NHTSA has 
concluded that this suggestion appropriately recognizes the fact that 
while in many instances, consumers contact individual agents with 
respect to their existing or prospective policies, there are other 
instances in which insurance companies do not work through individual 
agents and consumers instead must contact the company directly. 
Therefore, the agency has decided to adopt Advocates' suggestion to 
clarify the advice by referring both to insurance agents and insurance 
companies.
    e. Description of NCAP test results: VW recommended changing the 
description of the New Car Assessment Program (NCAP) test results to 
emphasize that they are based on a single, 35 mph, barrier crash test 
of a new vehicle. NHTSA does not agree with VW that a change in wording 
is necessary. The present text is consistent with the description of 
the NCAP program that appears in other NHTSA publications. VW's 
recommended change would cause the description of the NCAP program in 
the insurance cost information booklet to differ from the text that 
already appears elsewhere. Moreover, while cost considerations limit 
the NCAP testing to one test per new vehicle model, the agency has 
access to other crash test data, both from manufacturers and from its 
own compliance test programs. The agency has concluded from its review 
of all available data that the statement that ``NCAP test results 
demonstrate relative frontal crash protection in new vehicles'' is 
accurate, and has decided to retain it.
    f. Variation in premiums: No commenter addressed the agency's 
proposal to amend the statement as to the amount by which collision 
cost data could result in an insurance premium reduction. Accordingly, 
in order to increase the accuracy of the booklet, the agency is 
adopting its proposal to state that it is unlikely that a consumer's 
total premium will vary more than 10 percent.

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 
notice adopts minor amendments to the insurance cost information 
regulation, to increase the accuracy of the information provided to 
potential motor vehicle purchasers. The amount of extra text that must 
be included in the information booklet as a result of this amendment is 
minuscule.

2. Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act, NHTSA has 
evaluated the effects of this amendment on small entities. NHTSA 
estimates there are about 27,000 dealers of new passenger motor 
vehicles. Many of the dealers that may be affected by this amendment 
are considered to be small business entities. However, NHTSA believes 
that this amendment will not have a significant economic impact on any 
of these small dealers. This rulemaking adopts minor editorial changes, 
that result in the addition of a small amount of extra text to the 
insurance cost information booklet. The minimal cost increments to the 
dealers that may be associated with this amendment should have 
negligible effects on the purchase price of new passenger motor 
vehicles. For these reasons, I certify that this amendment 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 amendment 
and determined that 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 amendment 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 
[[Page 15512]] Administrative Procedure Act does not require submission 
of a petition for reconsideration or other administrative proceedings 
before parties may file suit in court.

List of Subjects in 49 CFR Part 582

    Administrative practice and procedure, Insurance, Motor vehicles.

    In consideration of the foregoing, NHTSA amends 49 CFR part 582 as 
follows:

PART 582--[AMENDED]

    1. The authority citation for part 582 is revised to read as 
follows:

    Authority: 49 U.S.C. 32303; delegation of authority at 49 CFR 
1.50(f).

    2. Section 582.5 is 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, 
STATION WAGONS/PASSENGER VANS, PICKUPS AND UTILITY VEHICLES 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, station wagons/
passenger vans, pickups, and utility vehicles 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 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 companies or their 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 companies or their 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: March 20, 1995.
Ricardo Martinez,
Administrator.
[FR Doc. 95-7266 Filed 3-23-95; 8:45 am]
BILLING CODE 4910-59-P