Michigan Automobile and Home Insurance Consumer Advocate Issues Statement on Supreme Court Decision to Allow the Use of Credit Scoring in Setting Insurance Rates

Michigan, MI – July 12, 2010 – (RealEstateRama) — Automobile and Home Insurance Consumer Advocate Melvin Butch Hollowell today said he is extremely disappointed by the Michigan Supreme Court’s decision to allow insurers to continue using an individual’s credit score in setting rates for automobile, home, and other personal lines of insurance.

“The decision by the Michigan Supreme Court to allow insurance companies to continue the unfair, arbitrary practice of credit scoring is incredibly disappointing and terrible news for Michigan consumers,” Hollowell said. “Michiganians pay among the highest auto insurance rates in the nation. Now, at a time when our residents are struggling more than ever, the Supreme Court has ruled in favor of the insurance industry’s bottom line, rather than the wallets of Michigan consumers.”

Since 1996, insurance companies have used policyholders’ record of paying bills, as well as their occupation and level of education, in setting rates.

In April 2004, the state insurance commissioner issued a 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. In October 2008, 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. The Supreme Court heard oral arguments in the case on October 7, 2009.

On July 8, the Supreme Court ruled that the use of credit scoring in setting insurance rates is not in violation of the Michigan Insurance Code, and that the insurance commissioner overstepped her authority by enacting a total ban on the practice of credit scoring.

“A person’s occupation, education, and record of paying bills have nothing to do with how that person drives,” 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.”

Hollowell stated that in light of the Supreme Court’s decision, it is more crucial than ever for the Michigan Legislature to act on a package of insurance reform bills that would make auto insurance rates more affordable for consumers and make insurance companies more accountable.

Last December, the Michigan House of Representatives passed H.B. 5634, making it illegal for insurance companies to use credit scores in setting insurance rates. The bill moved to the Michigan Senate, where it has been waiting to be acted upon by the Senate Economic Development Committee.

“The Senate needs to take action now to bring relief to Michigan consumers. The bill to ban credit scoring was passed by the House, but has been gathering dust in the Senate since last December,” Hollowell said. “It’s time for the people to take charge. We need to urge our senators to do what’s right for all Michigan residents, and support insurance reform now.”

Michigan’s Automobile and Home Insurance Consumer Advocate Melvin Butch Hollowell was appointed by Gov. Jennifer M. Granholm in March 2008 to fight for affordable, reliable, and fair auto and home insurance in Michigan.

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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