Lobby: Many Mich. Consumers Will Pay More if Scoring Ban Approved

Many consumers will pay more for home and auto insurance if a state-proposed rule to ban the use of credit-based insurance scoring discounts in Michigan becomes effective next year, a lobbyist for the state’s insurers argued in a written statement. The final version of the proposed rule was filed with the Office of Regulatory Reform recently.

“If the state’s plan to ban the use of credit-based insurance scoring discounts is implemented, those policyholders with very good credit will no longer receive a discount,” said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, a group which represents 43 of the state’s property/casualty insurance companies.

“In fact,” he added, “a majority of policyholders will experience an increase in insurance premiums to subsidize the reductions provided to those with poor credit, who are the most likely to file an insurance claim.”

To make fair and accurate decisions, insurance companies need to have as much information as possible, Kuhnmuench argued. Credit history provides a consistent and effective tool to evaluate risk that does not discriminate against any specific group of customers. All kinds of businesses utilize credit information to determine customer responsibility, according to Kuhnmuench.

In Michigan, credit-based insurance scoring is used only to provide discounts for customers for their insurance. Credit-based insurance scores cannot used to determine whether or not a person can be insured by the company or apply a surcharge.

IIM said it supports bipartisan legislation (House Bill 5803) introduced in the State House that would codify consumer protections on the use of credit by insurance companies instead of a ban.

If the proposed rule becomes effective, Michigan would be the first state in the country to ban the practice without approval by its governing legislature.

Topics Legislation Michigan