Michigan Gov. Jennifer Granholm’s (D) proposal to ban the use of credit-related discounts for automobile and homeowners insurance is a misguided effort to politicize insurance rates – one that may have very negative and unintended consequences for responsible consumers across the state, the American Insurance Association (AIA) said on Wednesday.
“Taking away any discounting factor, especially one as highly predictive as consumer credit information means that people who live up to their commitments and who pay their bills on time may end up paying more than they should. This is grossly unfair to Michigan consumers,” said Sean McManamy, AIA assistant vice president, Midwest Region. “Gov. Granholm is simply proposing to redistribute costs, forcing good risks to pay more while bad risks will pay less.”
“AIA has worked with legislators and regulators in many states to enact reasonable laws and regulations pertaining to credit information. A virtual ban in Maryland last year had the unintended – but predicted – effect of raising rates for consumers across the state, and under Gov. Granholm’s proposal, Michigan will be heading down that same path,” said McManamy. “If the administration is interested in lowering insurance rates for Michigan consumers, they should take steps to foster more competition in the marketplace, not make it harder for insurers to do business in the state.”
There is reportedly strong legislative and regulatory support across the country for the use of credit information as a way to help insurers more accurately price their products, and implementing a ban would disconnect Michigan from the mainstream of states.
For example, the National Conference of Insurance Legislators (NCOIL) reports that 22 states have adopted their model law on credit via either legislation or regulation. Several Michigan legislators, including Rep. Mary Ann Middaugh (R) and Rep. David Woodward (D) introduced a bill last week (HB 5803) that contains provisions similar to those found in the NCOIL model.
“HB 5803 would enhance current consumer protections on the use of credit information without forcing good risks to subsidize bad risks,” added McManamy. “AIA urges the governor to follow the lead of Rep. Woodward and other members of her party in supporting the common-sense legislative approach of HB 5803, rather than continuing down a path toward needlessly higher rates for consumers from Detroit to Grand Rapids to Iron Mountain.”
Was this article valuable?
Here are more articles you may enjoy.