LANSING - House Democrats announced today that it will begin moving forward on legislation to make auto insurance more affordable, improve accountability and eliminate credit scoring, the unfair practice of basing a person's auto insurance rate on their credit rating.
"Credit scoring is unfair to Michigan consumers, especially when too many of our working families are already struggling to make ends meet," said State Representative Virgil Smith (D-Detroit), who chairs the Insurance Committee, which will take up the legislation this week. "During these difficult economic times, the cost of insurance should not be a barrier to family's economic well-being. Your insurance rates should be determined by your driving record - period."
Late last year, House Democrats introduced a package of bills that will:
- Eliminate the use of credit scoring in setting auto insurance rates.
- Give the state Office of Financial and Insurance Services (OFIS) the authority to order refunds when customers are overcharged.
- Provide Michigan citizens the ability to take insurance companies to court for various violations of the insurance code. Residents will be empowered to take matters into their own hands if insurers overcharge them and the state refuses to act.
- Eliminate the practice of using a time gap in coverage as a reason for charging exorbitant rates to reinstate insurance.
- Change the definition of "excessive rates" so that violations are based solely on the costs of providing insurance.
Under current Michigan law, citizens have no legal recourse against abusive insurance companies that charge them excessive rates. In fact, not even the Commissioner of OFIS can order a refund of excessive rates.
"It's outrageous that consumers who have been overcharged by their insurance companies have no clear right to a refund," said State Representative Bert Johnson (D-Detroit). "We must ensure that we protect the pocketbooks of families and consumers - not wealthy insurance companies. This plan will do that."
Legislation to increase the transparency of the Michigan Catastrophic Claims Association, an independent insurance fund that pays for the care of severely injured motorists, has already passed the House; it currently awaits Senate action.
"Michigan's average auto insurance rate remains one of the highest in the Midwest," said State Representative Tim Melton (D-Pontiac/Auburn Hills). "Though the insurance industry receives several tax breaks, insurance rates continue to climb dramatically. This system is seriously out of balance, and it allows insurance companies to essentially operate with very little oversight. As Michigan families try to do more with less in these tough times, they need relief from sky-high insurance premiums now."
Since 1999, auto insurance rates have increased between 45 and 90 percent, according to OFIS.