I go on vacation for one week, and the Michigan Supreme Court drops a bombshell on credit scoring while I’m gone. Last Thursday, the Court issued an opinion, in a bitterly divided 4-3 ruling, that allows Michigan’s auto insurance companies to use a person’s credit report to determine rates for people.
The Court majority even said state regulators exceeded their authority when they banned the practice as discriminatory. But it is discriminatory. And it makes zero sense.
Let’s be very clear on this: credit scoring using credit reports is by definition, discriminatory. It is also perniciously evil. Read here about your No-Fault insurance rights.
I’ve been asked a lot about this over the years. Let me explain why I think this ruling – along party lines with the Court’s Republican justices all voting in favor of allowing credit scoring – is a really, really bad idea for everyone in Michigan but the auto insurance companies.
First, credit scoring operates on a discriminatory level of lumping correlation evidence into the same concept as causation, which is utter nonsense. For example, saying that people with good credit ratings make fewer claims than people with bad credit ratings is not a logically persuasive argument. There may be correlation, but that is not the same thing as causation. It’s the same thing as saying that all heroin users started by drinking milk. Yes, there is a correlation, but it’s an example of false causation using a correlation. The “justification” is that poor credit score people have more claims, but that is because they also tend to have much lower deductibles, which also translates into more car accident claims.
And more importantly, credit ratings, as most Americans know, are notoriously inaccurate and very hard to correct. This decision actually penalizes and punishes responsible people in Michigan. A decision by someone to pay off their credit cards and/or cancel a credit account does not make anyone a better driver or prevent more car accidents as far as I can tell, but now their insurance rates will also rise. In fact, one real shame about this decision is it hurts financially responsible people; because these are the same people who choose not to have credit card debt, avoid over reliance on multiple forms of credit, avoid owning surplus credit cards, or prefer to pay in cash for things they can afford. Oops, their rates just went up too.
This decision exposes the utter nonsense of all the “free market” talk that the Republican party says they stand for, and is really just a giant giveaway to the insurance industry in Michigan, so they can further sweeten already outrageously high insurance company profits in this state (this is why the Insurance Institute of Michigan, which represents 39 auto insurance companies in Michigan, was lobbying so hard for this).
For my friends in Detroit and Democratic legislators who mistakenly believe the solution is in No-Fault reform, the answer is not dismantling Michigan’s auto insurance and No-Fault system. Our No-Fault system is the nation’s best. The answer is allowing the state to regulate, as almost every other state in America does, the profit margins of the automobile insurance companies that do business in Michigan. Read here on why your auto insurance is so expensive.
And finally, as an insurance attorney who handles lawsuits for Michigan No-Fault benefits, the thing that bothers me most about this terrible decision is that it is one more way that human beings are removed from underwriting decisions. More authority is given to computer programs that are written with only one thing in mind: maximizing insurance company profits.
Not exactly what Michigan needs right now. But hey, the auto insurance companies are happy.
– Steven M. Gursten is recognized as one of the nation’s top attorneys in serious car and truck accident injury cases and automobile insurance no-fault litigation. Michigan Auto Law has received the largest reported jury verdict for an automobile accident case in Michigan in seven of the past 10 years, including 2009, according to published reports.
Related information about No-Fault insurance in Michigan:
What No-Fault benefits are available?
Auto Insurance Coverage You Must Have: Uninsured
Michigan Car Insurance Claims Adjuster Tactics
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. Call (248) 353-7575 for a free consultation with an auto accident attorney. We can help.
Wow. How far will companies go to get every single penny? At this point, I don’t see how checking credit is relevant to my driving record. Maybe I’m not getting the message (which is not a shock since I’m not so….ya) but does my credit tell you what kind of driver I am?
Credit scoring has nothing to do with how a person will pay their premiums. In fact, if someone fails to pay premiums, the insurance company can cancel them. Credit scoring is a ruse to get more premiums in the hands of greedy executives. I have paid my premiums timely for 30 years. I’ve had Frankenmuth as my carrier for about 16 years. I have no tickets, no accidents and made no claims yet because I went through a divorce and don’t have stellar credit, they now charge me 15% more on my premiums.
Ironic that they took my timely paid premiums to fund lawsuits that would give them the right to use my credit score against me and charge me more for my auto insurance. I think this is a breach of their fiduciary responsibilities. I’m sure policyholders don’t want these insurance companies to use “our” surplus to fund litigation initiatives that allow them to charge us more. What a profit windfall for greedy executives taking advantage of the economy and suffering credit scores of millions of policyholders.
I would like to know the names and phone numbers of the idiots on the Supreme (LOL) Court that voted to allow the Auto Insurance agencies to continue to screw us. Post it on the web, so we can all give them something to think about……
I want to write to the Michigan Supreme Court and also our State Senators and governor. Exactly who in the Michigan Supreme Court may I send a letter to and will it make a difference. I think it is time for the People in the State of Michigan to STAND UP and be heard. My auto and home insurance rates have double. They cite my insurance scores. Interesting that I have went over all the documents they have sent me over this past month where my insurance scores were printed and sent to me numerous times and wouldn’t you know that there a lot of discrepancies and confusion that even my agent can not answer to. In addition, they cite my auto score at 477 previous and current at 520…which means it went up (which should be good) and I know my credit fico score has went up as well. However, my premium level of ‘discount’ has went down and has effectively raised my insurance an additional 200 dollars every six months. It seems if I try to raise my credit standing and improve my score, my insurance score goes down. You are damned if you do…damned if you don’t. They have me by the cha cha and I don’t like feeling backed in a corner to pay for something I am required to have only to be told that what I pay is based off insurance scoring…. really? So ALL of the years I have busted my butt and paid my bills and have had outstanding credit doesn’t hold a candle to the fact that our family was hit hard by the economical troubles that even the BANKS needed help out of? Are the banks paying more to be insured by the FDIC? Nobody bailed out my family and we had to go through a bankruptcy because hubby was unemployed for 3 years! But we fed our family, paid our mortgage and never once lapsed our car or homeowners insurance. Finally hubby gets a job…. we get through the bankruptcy and magically my insurance goes up.. on our house and on our car. No matter what you do in the State of Michigan, those who have been hit by the economical downfall are paying out their chi holes. Nice.
As a citizen, as an individual, as a mother and as a consumer, “I WANT ANSWERS”. I want to know how, why and where do they get off? Why when I call my insurance agent he directs me to their contracted company who tells me “having these many accounts, no matter the balance or if you’ve never been late, will hurt your score. If you don’t opt out of pre-screen offers your score will go down. This… and that… and blah blah blah..” Really? Because my insurance agent is saying NONE of that should be a factor in figuring my scores. I order up this credit report they base my insurance rates on but magically they can’t give me the one they actually based my score off from? They give me one for the date I contacted it and requested it. Really? It is fighting a losing battled. I swear that we have lost control of our state and our voice. Guess who is in the driver’s seat and who is footing the bill???? You guessed right! Now what are WE going to do about it???? Because it is going to get worse. Greed doesn’t stop at big fat pockets….