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Bills Aim to Regulate Auto Insurance Rate Hikes in Michigan

December 4, 2009 by Steven M. Gursten

Auto insurance in Michigan is way too expensive. And another round of auto insurance reform bills is highlighting the dire need to clean up our system and support countless injured people who are gouged and abused by the insurance companies that are supposed to protect them. Our attorneys are excited about the prospect. We’re equally pleased that the office of Butch Hollowell, the state automobile insurance consumer advocate, is also taking on this important issue.

The proposed laws include:

o Mandates for the state insurance commissioner to sign off on auto insurance rate hikes;
o A ban on insurance companies considering a consumer’s credit history, education or occupation when setting rates; and
o Prohibition of hiking drivers’ rates following car accidents in which they were not at fault.

This legislation mirrors recommendations released in February by Hollowell’s office. Kudos to Butch, whose recommendations followed a handful of public hearings and a state-by-state survey of insurance practices nationwide.

Butch recently told The Detroit News in an article about the bills that Michigan drivers pay the second-highest annual average premiums in the country — even though Michigan has the safest drivers and highest seat belt use in the nation. It’s also of the few states in the country without an insurance commissioner regulating rates. For example, Hollowell said, rate hikes by auto insurers in 15 other states are subject to approval by state officials – and rates are about 20 percent lower in those states.

This is a topic I’ve written on extensively and that our auto insurance attorneys care deeply about. In Why is my Auto Insurance So Expensive?, I urged readers to consider the following:

Michigan law does not require people to purchase GM cars or Google stock, or punish them with civil fines and criminal misdemeanors when they choose not to buy. But every driver must pay for basic auto no-fault insurance to cover their car or truck in Michigan.

Meanwhile,(according to an independent audit of the auto no-fault insurance industry from June 2007 called the Angoff report), Michigan auto insurance companies have been gouging consumers while hoarding record-breaking profits for years. The report states the reason the Michigan insurance industry has achieved such massive profits is lack of supervision, and the dismantling of the state’s ability to regulate insurance companies that occurred during the Engler administration.

For example, the rate for basic car insurance with Allstate for a consumer who lives in Kalamazoo, Michigan is roughly $1,821. The rate jumps 241 percent if the same driver lives in Detroit. With AAA of Michigan, the rate jumps 251 percent. With State Farm, the rate jumps the most, totaling 365 percent more for a Detroit resident.

The report strongly calls for further reforms, such as empowering the Michigan Insurance Commissioner to regulate car insurance rates and punish companies for excessive overcharges. This includes the practice of red-lining, or driving up rates based upon address and credit history.

Make Michigan Insurance Companies Accountable

Like Butch stressed, Michigan is one of the only states remaining that allows insurance companies to legally charge different rates and higher insurance premiums for people who have bad credit, low-status jobs and limited education. It’s also one of the last states to let insurance companies use criteria other than a person’s driving record to determine insurance rates.

Said Hollowell, “If you’re deserving of a rate hike, you should at least have to prove it. You don’t have to do that in Michigan today — you just file your rates and use them immediately.”

The no-fault insurance lawyers of Michigan Auto Law are working to make insurance companies in Michigan more accountable and to help auto accident victims get the help they need. Don’t forget about an existing round of bad faith insurance bills that were rolled out in the summer. They’ve been passed by the House and have been referred to the Committee on Economic Development and Regulatory Reform.

Steven M. Gursten is recognized as one of the nation’s top experts in serious car and truck accident injury cases and automobile insurance no-fault litigation. Steve has received the largest jury verdict for an automobile accident case in Michigan in four of the past seven years, including 2008, according to a published, year-end verdicts and settlements report.

Related information:

How to Read Your Insurance Policy

Lawyers Look to Insurance Commissioner to Prevent Set-Off Scams

Attorney Video: No-Fault Law 101

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you.

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2 Replies to “Bills Aim to Regulate Auto Insurance Rate Hikes in Michigan”

  1. I appreciate perspective on this issue. Please elaborate on the comment: “Michigan law does not require people to purchase GM cars or Google stock, or punish them with civil fines and criminal misdemeanors when they choose not to buy. But every driver must pay for basic auto no-fault insurance to cover their car or truck in Michigan.” I am not clear about the implication being made by the first two lines.

  2. Thank you for your comment. The statement you ask about was in response to a comment made by Pete Kuhnmuench, executive director of the Insurance Institute of Michigan. When asked about record-breaking insurance company profits in Michigan, Mr. Kuhnmuench said he did not apologize for such high profit margins, and said: “When GM or Google makes a profit, we celebrate it. Profit is not a dirty thing, it’s a good thing.”
    My point is simply this: unlike GM or Google, Michigan law does not require people to purchase GM cars or Google stock. Since Michigan law does require all Michigan citizens to purchase automobile insurance, and Michigan citizens will face civil fines and criminal misdemeanors if they drive a car without insurance, it is an unfair and ridiculous comparison. In Michigan, every driver must pay for basic auto no-fault insurance to cover their car or truck. If people are going to be required by law to purchase insurance, then the profits that these insurance companies in Michigan, which is much higher than in other states, should also be regulated. It seems an unfair comparison for the Insurance Institute of Michigan to celebrate high profits by comparing a product that people are legally forced to purchase with GM or Google.
    Finally, note that Michigan is one of the only states remaining that does not regulate the profits that insurance companies make. For a product that we are all legally compelled to purchase, that certainly can (and does) lead to abuse.

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