Michigan House Votes On Auto Insurance Rates

Published: Fri 18 Dec 2009

Larry Roth

The traditional methods of determining Michigan drivers' insurance rates would be cast out if a state House of Representatives decision becomes permanent.

Members of the legislative body approved, 57-47, a measure to outlaw using a driver's education level, type of job or credit history to decide how much he or she must pay for the insurance. A separate bill would disallow premium hikes for drivers determined to be not at fault in accidents.

The House opted not to vote on a bill that would mandate insurance companies to get the endorsement from the state insurance commissioner before any rate increases.

The Democrats who control the House contend the passed measures would lower rates while at the same time offering stronger consumer protection. The bills were introduced in early December and quickly endorsed by the House Insurance Committee.

The opposition argues the measures would force motorists to pay more while at the same time hurt Michigan's job market and economy. The legislative arguments may stop there. It's unlikely the bills will be considered by the Reublican-led Senate.

Still, one insurance trade group was on guard. The Property Casualty Insurers Association of America labeled the proposed reforms as "misguided."

Ann Weber, the group's vice president, said, "House members passed this legislation without proper deliberation or debate, despite insurance industry offers to participate in a workgroup that would allow appropriate consideration of real ways to reduce auto insurance costs in Michigan."

The association shared some facts about the condition of Michigan's auto insurance industry to refute what they consider some misrepresentations:

• Currently, insurers operating in Michigan use credit scores only to determine eligibility for discounts. The scores are not used by companies to decide whether surcharges should be added to premiums or the driver should be able to get coverage at all.

• There is no truth to supporters of the bills saying Michigan drivers pay the most in the nation for liability and physical damage coverage. Actually, policyholders pay the 12th highest premiums.

• The auto insurance companies are not raking in the profits. Insurers had a decade-long underwriting loss of 19.2 percent of earned premiums while their operating return for the period represented a 2.4 percent loss of premiums. That puts the profits lower than nationwide averages.

• Property casualty insurance companies operating in Michigan are responsible for thousands of people being employed. The support of state and community development in 2007 came from insurers paying more than $8.7 billion in claims and more than $200 million in state premium taxes.