Michigan House Passes Heavy Auto Insurance Regulations
Michigan’s House of Representatives has approved a package of bills that proponents claim will lower auto insurance rates and opponents assert will do the opposite.
Next step for the legislative package is the state Senate. If approved there and then signed by Gov. Jennifer Granholm (D), the bills would make it illegal for insurance companies to use factors such as a driver's occupation, education level, or credit history—rather than factors such as driving record—to set rates or deny coverage. The bills also would prohibit insurance companies from selling consumers' personal information without their consent, and would bar insurance commissioners from going to work for an insurance company within two years of leaving office.
About half the bills in the 12-bill legislative package dubbed Fair, Affordable Insurance Rates (FAIR) passed in the Democratic-controlled Michigan House. Republicans in the House objected to the bills, citing them as a catalyst for driving auto insurers to take their business to other states.
The Michigan Senate, where Republicans have the majority, adjourned before Christmas without taking action on the legislative package.
“We understand Senate Republicans have little or no interest in moving any of these pieces of legislation, other than the one prohibiting the insurance commissioner from working for insurance industry within two years of leaving office,” said Tom Shields, a spokesman for the Michigan Insurance Coalition.
Insurers do acknowledge a problem with Michigan’s auto insurance system but do not see this FAIR legislative initiative as the answer. Insurers say one of the biggest culprits is Michigan’s “no-fault” system, which gives state residents no choice but to buy what’s described as “a Cadillac” auto insurance policy.
“If the problem is high rates, and for some that is absolutely a problem, insurers believe giving rate payers more options in the kind of insurance they want to buy would allow them to control their costs,” Shields said. “Our no-fault system is unique. It provides unlimited medical coverage, which adds significant costs for everyone and makes that coverage [cost] the highest in the country.”
The American Insurance Association (AIA) echoes this position that there are other ways Michigan can fix the problems that lead to high auto insurance costs.
Other States’ Models
“Michigan should follow the lead of states such as South Carolina, Massachusetts, and even New Jersey, which once also had unacceptable automobile insurance systems but turned them around by allowing insurers to better compete with one another on rates and types of coverage,” said John Birkinbine, assistant vice-president for the American Insurance Association, in a statement. “Such competition ultimately benefits all consumers with more choices for products and prices,” he added
Dennis Kelly (firstname.lastname@example.org) is a freelance writer living in Columbia, Maryland.