Michigan House Passes Auto Insurance Reform Legislation

An insurance trade group says a bill passed by the Michigan House of Representatives threatens to increase auto insurance costs and harm the state’s job market and economy.

The Property Casualty Insurers Association of America (PCI) says the House passed a portion of a bill package which contains what the group calls “misguided reforms,” including a prohibition on credit-based insurance scoring.

“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,” said Ann Weber, PCI vice president in an announcement released by the trade group.

The bill package was introduced earlier this month and quickly passed through the House Insurance Committee. Democratic lawmakers supporting the proposals say they would make auto insurance more affordable and strengthen consumer protections in the state.

PCI maintains that supporters of the proposed auto insurance reforms have greatly misrepresented several critical facts about Michigan’s auto insurance marketplace, but lawmakers should be aware of the following:

• Credit-based insurance scoring has been shown to benefit consumers because it allows them to secure lower insurance costs. In Michigan, credit-based insurance scoring is used only to provide discounts for insurance customers. Credit-based insurance scores are not used in Michigan to apply a surcharge or to determine whether a person can be insured by the company. And despite the economy, credit scores are staying stable.
• Michigan’s annual average auto premium for liability and physical damage coverages combined is 12th highest in the nation – not the highest as supporters of the legislation have claimed. Given that Michigan’s mandated auto insurance benefits, including the unlimited no-fault injury benefits, are considered the most expensive in the nation, the average price paid by driver in the state is extremely reasonable.
• Michigan auto insurers are not making enormous profits. In fact, personal auto insurers in Michigan suffered a 10-year underwriting loss of 19.2 percent of earned premiums, while their 10-year operating return resulted in a loss of 2.4 percent of premiums. Michigan operating and underwriting profits have been substantially lower than nationwide averages.
• Michigan property casualty insurance companies provide thousands of stable, much-needed jobs in the state. In 2007, they paid out more than $8.7 billion in claims and paid more than $200 million in state premium taxes, providing critical tax dollars for state and community development. Legislation that could drive businesses out of the state would only lead to a further deterioration of Michigan’s economy.

Source: PCI

Topics Auto Legislation Michigan