Michigan Governor Seeks 20% Discount on Auto, Homeowners Rates

Michigan Gov. Jennifer Granholm and Democratic lawmakers want to give homeowners and motorists a 20 percent cut in their insurance rates, a move the insurance industry says isn’t justified and is politically motivated.

Granholm and lawmakers plan to release a package of legislation they say will lower insurance costs, strengthen consumer protections and improve accountability in the insurance industry.

Above national average
A recent report by the National Association of Insurance Commissioners found that Michigan has the tenth-highest average auto rates in the country and the highest in the Midwest. Rates are 15 percent above the national average and 32 percent above the Midwest average, according to the NAIC.

“Insurance rates are skyrocketing here in Michigan,” said Rep. Morris Hood III, a Detroit Democrat who is sponsoring part of the package. “We want to make sure that there’s fairness for consumers.”

Carmel Roberts of the Michigan Association of Insurance Agents, however, said the rate cut is a political move by Democrats frustrated by high–but justifiable–insurance rates in urban areas such as Detroit.

“If rates truly were 20 percent above what they should be, then they (state insurance regulators) would have the authority to roll them back without having to seek legislation. I would expect this is more politically motivated,” said Carmel, the MAIA’s senior vice president for legislative affairs.

Watters study
She noted that Insurance Commissioner Linda Watters–a Granholm appointee–released a study in March that found that “the markets for private passenger auto insurance throughout the state are reasonably competitive.”

The MAIA also said that Detroit ranked tenth nationally in the number of stolen vehicles in 2003, and that premiums generally are higher in urban areas because the frequency and severity of insurance claims are much higher.

Sen. Martha Scott, a Highland Park Democrat who has said Detroit insurance rates are too high for many residents to pay, said in a release that “it’s time we do something to bring down the cost of insurance.”

One part of the proposed package would deal with a 2004 Michigan Supreme Court decision. The court ruled 4-3 against granting two injured motorists’ claims for pain and suffering beyond the economic damages they received.

Personal injury lawyers said the court placed politics over legal reasoning. Insurers said the ruling was a compromise that keeps those with minor injuries from collecting major awards.

Democrats say that part of their package would revise the definition of “serious impairment of bodily function” to ensure that people who are hurt in auto accidents are able to receive monetary damages if their ability to lead a normal life is hampered.

Package provisions

The package also would:
–Prohibit insurance companies from using an individual’s credit history or credit score to determine insurance rates. The state is appealing a lower court ruling that Watters overstepped her authority when she filed new rules reducing base rates and barring insurance companies from providing discounts to policyholders with good credit ratings.

–Eliminate the requirement that a lack of competition must exist for rates to be deemed excessive.

–Allow the state insurance commissioner to order a refund on premiums where rates are found to be excessive or unfairly discriminatory.

–Establish an Office of Insurance Ratepayer Advocate to represent and protect consumers’ interests.

–Ban insurers from being able to deny coverage to consumers with no evidence of prior insurance.

–Increase civil and criminal penalties for insurance code violations.

However, since the governor made her announcement Oct. 10, there has been no bill language introduced, said Jeffrey Junkas, spokesman for the American Insurance Association.

“With her approval ratings around 40 percent, this just seems like another political move,” he said.