Michigan Automobile and Home Insurance Consumer Advocate Urges Michigan Supreme Court to Ban Use of Credit Scores

October 7, 2009 – (RealEstateRama) — Michigan’s Automobile and Home Insurance Consumer Advocate Melvin Butch Hollowell today urged the Michigan Supreme Court to affirm the state’s right to prohibit auto insurance companies from using occupation, education, and credit scores in setting auto insurance rates.

Hollowell’s comments came on the same day the court heard oral arguments in Insurance Institute of Michigan v. Commissioner, Financial and Insurance Services, SC Docket No’s 137400, 137407. Hollowell was appointed Michigan’s insurance advocate by Governor Jennifer M. Granholm in 2008.

“Michiganians pay some of the highest auto insurance rates in the nation so we’re here at the Michigan Hall of Justice to seek justice: affordable rates for all,” Hollowell said. “Governor Granholm has called on the State Legislature to enact comprehensive auto insurance reform this year to make rates more affordable and insurers more accountable, including putting an end to the unfair practice of credit scoring.”

Since 1996, insurance companies have used policyholders’ record of paying bills, as well as their occupation and level of education, in setting rates. The practice is inconsistent with the Michigan Insurance Code.

“The insurance industry’s use of a person’s occupation, education, and record of paying household bills is arbitrary, unfair, and should be prohibited in Michigan. These factors have nothing to do with how consumers drive,” Hollowell said. “How can insurance companies justify charging consumers 50 percent more for their auto insurance if they don’t have a college degree? They can’t.”

Today’s hearing is the result of an appeal of an Appeals Court ruling of a case filed in April 2004 involving the state insurance commissioner’s ruling (R.500.2151-2155) prohibiting the use of credit scoring in setting insurance rates. The Insurance Institute of Michigan filed suit, in Barry County Circuit Court, against the state to continue using credit scores. The August 2008 decision by the Michigan Court of Appeals overturned the lower court’s decision and restored the commissioner’s ruling that rates should be based on objective factors set forth in the Insurance Code, such as driving record, type of vehicle driven, age of the driver and number of miles driven.

Immediately following the decision, the insurance industry filed an appeal to the Michigan Supreme Court. In accordance with the Court of Appeals decision, the practice of credit scoring remains in effect until the matter is resolved by the Supreme Court.

At this morning’s press conference, Hollowell was joined by Mark Gaffney, president of the Michigan AFL-CIO, Rev. Eric Moore, director of the Christian Community Resource Network, and Lincoln Park resident Richard Kudrak.

“It’s wrong that insurance companies use credit scores to set insurance rates, it’s expensive for policyholders, and we don’t want it happening in Michigan,” Gaffney said. “I urge the Supreme Court to uphold the Court of Appeals 2008 ruling overturning the lower court’s decision.”

For more information on the Michigan Office of the Automobile and Home Insurance Advocate, call 517.241.2983 or visit www.michigan.gov/lowerratesnow.

Contact: Kathy Fagan (517) 373-9280

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