AIA, PCI Slam Proposed Mich. Ban on Insurance Scoring

Two national insurance lobbying groups joined their industry brethren by announcing their vehement opposition to Michigan Gov. Jennifer Granholm’s proposal to ban the use of credit-based insurance scoring.

Granholm, a Democrat, announced the proposed rule earlier this week, along with Office of Financial and Insurance Services Commissioner Linda Watters. She said it would reduce base rates by between 10 and 40 percent, and attributed the marked increase in auto and homeowners rates since 1999 in part to insurance scoring.

The Washington, D.C.-based American Insurance Association (AIA) called the proposal “a misguided effort to politicize insurance rates—one that may have very negative and unintended consequences for responsible consumers across the state.”

The group’s Midwest Vice President Sean McManamy said the move would be “grossly unfair to Michigan consumers” because it would force “good risks to pay more while bad risks will pay less.” McManamy said a ban on insurance scoring for homeowners policies in Maryland last year raised rather than lowered rates for consumers across the state. He predicted the same would happen in Michigan if Granholm gets her wish.

The Des Plaines, Ill.-based Property Casualty Insurance Association of America (PCI) also came out against the proposed ban. PCI lobbyist Michael Herrold said in a statement that Michigan already is one of the most restrictive states when it comes to insurance scoring, prohibiting insurers from using the tool in underwriting or for surcharges and allowing it only for discounts.

Harrold said insurance scoring is “more predictive and accurate than driving records,” though it’s unclear whether Granholm and Watters are contesting the accuracy of the tool. In a news release, they said that because insurance scoring discounts are not offered uniformly to all insureds that they are illegal under Michigan’s insurance code.

Both PCI and AIA offered a bill recently introduced in the state’s House of Representatives, HB 5803, as a superior alternative. The bill, pushed into being by the Michigan Association of Insurance Agents and sponsored by Republican Mary Ann Middaugh and Democrat David Woodward, adopts many of the principles of the National Conference of Insurance Legislators’ (NCOIL) model act on the use of credit. These include not using a lack of credit history against a consumer, discounting bad credit due to medical bills, and prohibiting the use of insurance scoring as the primary or sole factor in underwriting and rating.

Twenty-two states have so far adopted the model law on credit via either legislation or regulation, according to NCOIL. The proposed rule must withstand a public hearings process before being approved and is then subject to approval by the state legislature, according to MAIA CEO Bob Pierce.