A host of personal lines issues — ranging from credit scoring to a commissioner-requested data call to state fines on drivers with no proof of auto insurance — headlined the Michigan Association of Insurance Agents (MAIA) convention last February and have been in the news since then.
MAIA has initiated a bill that would restrict insurers’ use of credit, but it has yet to be voted out of the Senate Committee on Banking and Financial Institutions. Senate Bill 884 closely tracks the National Conference of Insurance Legislators’ (NCOIL) model bill, a consensus approach agreed to by politicians, insurers and agents which has received insurers’ support in at least 15 states.
Insurers in Michigan, however, have been reluctant to sign on to MAIA’s crusade. During a panel at the convention, Citizens Insurance CEO Mike Britt expressed reservations about the bill.
“The terms of NCOIL are inapplicable in Michigan,” he said. “We’re a little nervous about it being attached to chapter 21 of the insurance code. There are other issues too.” Frankenmuth Mutual CEO John Benson, who was also on the panel, said he was fully supportive of the NCOIL approach.
Without insurers on board SB 884 seems to have stalled, in spite of Office of Financial and Insurance Services (OFIS) Commissioner Linda Watters’ support for some kind of reform. Watters, who spoke at the convention, said key elements of any credit-based insurance scoring reform included transparency and fair treatment for those with little or no credit as well as tragic life events that resulted in enormous medical bills. These elements are encapsulated in SB 884.
Watters also said that the OFIS was not convinced of the actuarial justification for using credit scoring in underwriting and rating, and that a ban had been considered internally. She said she hopes to have the department’s official position finalized before the end of 2004.
In the meantime, MAIA Executive Director Robert Pierce expressed exasperation at the carriers’ refusal to get on board the agents’ proposal.
“We’re puzzled by why some companies have reacted the way they’ve done,” Pierce told Insurance Journal. “We have a number of these companies who do business in other states have already passed the NCOIL model or are getting close to it. They are successfully doing business in those states. But for some reason in Michigan they are unwilling to accord their agents in this state the same protections they have in other states.”
Gathering data, making hay
While credit scoring has been an issue of major concern to agents in Michigan, rising auto and homeowners insurance premiums — and the disparity between rates between urban, suburban and rural areas — has become a political hot button. In response to outcries from Detroit-area politicians, Democratic Gov. Jennifer Granholm and Watters made a joint announcement that OFIS issued a call for insurers’ data related to auto and homeowners rates to examine whether the rates are justified by loss experience and whether the geographic rate disparity is justified.
The information is not currently collected, Watters told the convention’s attendees in her speech, and she elaborated on the reasons for the data call in an interview with IJ.
“The complaint rates have increased in the last five years,” she told IJ. “There’s no major impetus for this except that consumers are complaining every day. They’re calling and writing. It’s real. It’s not something they’re being told, but something they’re experience for themselves.”
Editor’s note: To read the rest of this story, see the April 5 issue of Insurance Journal Midwest, which covers Ohio, Michigan, Indiana, Wisconsin, Illinois, Missouri, Minnesota, Iowa, North Dakota, South Dakota, Nebraska and Kansas.
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