Thanks to the recent turn in economic events there are thousands of Michigan families struggling to make ends meet. Unemployment is on the rise. Raises and bonuses are all but nonexistent in many firms. Outsourcing and downsizing are the order of the day. Yet car insurance companies continue to send insurance rates climbing.
Michigan members of the House of Representatives have had enough. A new ten bill package was designed and proposed that would require Michigan car insurance companies to establish a low income insurance plan like that which currently exists in California for struggling families with good driving records-a program which insurers claim will eventually be fronted by the premiums of other policyholders.
The bill also states that insurers would no longer be able to use circumstantial data to determine a driver’s car insurance rates. That includes their occupation, their level of education and, most significantly, their personal credit score. Insurance providers claim that credit scores are a reliable predictor of how a person will behave once they get behind the wheel-a laughable proposition during a time when foreclosure and economic stress have sent credit ratings plunging across the country. Here’s what Michigan Democratic representative Bert Johnson of Detroit had to say about it:
“Families across Detroit have suffered the worst in this economic recession, yet the insurance companies have taken every opportunity to charge Detroit residents the highest rates in the state. When people are doing everything they can to stay in their homes and keep the heat on, it’s appalling that insurance companies are using things like credit history to justify huge rate increases.”
Credit ratings aren’t the only prohibition car insurance companies will be facing if this package of bills is passed. The new legislation will also forbid insurers from raising their rates on a company-wide level without the approval of the State Insurance Commissioner, who has the power to veto any such increase and demand a refund for any customer they feel is paying too much. (Wouldn’t you love to be a fly on the wall for that conversation?)
More importantly, the new legislation would forbid something Michigan car insurance companies claim to eschew completely-raising the insurance rates of an individual following an accident when they weren’t the ones responsible.
The bills have met with considerable controversy from the Michigan Insurance Coalition and the Insurance Institute of Michigan, both of whom are taking steps to counter the plan. It should be interesting to see who comes out ahead in the end.