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Petra E.
Winder, GA
By Chris Christoff, Detroit Free Press
Mar. 18--LANSING -- House Democrats said today they'll move to stop insurance companies from using consumers' credit scores to determine their auto insurance rates, and to give the state more clout against excessive rates.
But a leading Democrat admitted that approval in the Republican-controlled Senate is doubtful, at least until lame-duck session after the November elections.
"You never know what's going to happen then," said Rep. Virgil Smith III, D-Detroit, chairman of the House Insurance Committee.
Smith said his committee on Thursday will consider five bills aimed at reducing rates for consumers. He said public pressure is mounting to do something about high auto insurance rates, particularly in urban areas like Detroit. The House is controlled by Democrats.
Smith said auto insurance should be based on individual driving records. Rep. Bettie Scott, Detroit, said the proposals would give consumers a legal hammer against excessive insurance rates.
They were joined in a press conference by a coalition of attorneys, health care specialists and consumer advocates for lower insurance rates.
But an insurance industry spokesman said the Democratic proposals would result in higher auto insurance rates for many Michigan consumers.
One proposed bill would change the way insurance companies file their rates with the state. Currently, they set their rates and then file the rates with the insurance commissioner. The commissioner has 60 days to deny the new rates, but critics say that virtually never happens.
The Democratic plan would require insurance companies to receive approval from the insurance commissioner before the rates take effect.
Legislation also would prohibit insurance companies from charging extra to reinstate policies that have expired or been terminated. One bill would make it easier for consumers to obtain refunds for insurance rates that are ruled excessive.
Rep. Tim Melton, D-Auburn Hills, said using customers' credit scores to set insurance rates is unfair and is affecting more people whose credit ratings are slammed by identity theft and financial problems, such as home foreclosures.
Melton said his mother saw her auto insurance rate soar after her credit was damaged by identity thieves.
"This is not just impacting urban areas, it's affecting people in suburbs, all over the state," said Melton.
Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, defended the use of credit ratings as one of many factors that are used to determine auto insurance rates. In fact, he said whether a person is a good or bad credit risk is the single most accurate gauge of their risk of having an auto accident.
Kuhnmuench said banning credit scores in rate-setting would increase auto insurance rates for two-thirds of Michigan motorists. That's because those with good credit ratings are given a discount, so their discount would be removed.
Kuhnmuench said requiring insurance companies to get state approval for new rates will make it difficult for them to respond quickly to changed in the market. He said the insurance commissioner's office isn't equipped to determine every rate change I receives.
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Car Insurance News: Mich. House Democrats to Launch Effort to End Use of Credit Rating to Determine Auto Insurance Rates...Get an auto insurance quote!