New report show major auto insurers charging higher prices to people who need insurance the most
Discrimination based upon credit scoring is alive and well.
Michigan lawmakers, are you listening? While the insurance industry is pushing aggressively for changes to Michigan’s No Fault laws in 2014, the Consumer Federation of America has already identified a quick, easy and sure-fire way for you to lower auto insurance prices for all Michigan consumers. The result will be a more fair and just way for consumers to obtain insurance, and at lower prices.
Here it is:
Prohibit Michigan’s auto insurance companies from “insurance credit scoring,” i.e., using consumers’ credit scores to determine how much to charge consumers for auto insurance.
For tens of thousands of people in Michigan with poor credit, or who just live in the “wrong” neighborhood, they could see immediate savings.
Research by the Consumer Federation of America (CFA) shows that two major auto insurance companies – State Farm and Allstate – charge drivers “with poor credit scores much higher prices [for auto insurance] than drivers with excellent scores,” according to a press release announcing the publication of CFA’s report, “The Use of Credit Scores by Auto Insurers: Adverse Impacts on Low- and Moderate-Income Drivers.”
For example, the CFA concluded:
- State Farm’s auto insurance prices were on average 127% higher for consumers with “poor” credit scores as compared to the prices charged to consumers with “excellent” credit scores.
- Allstate’s auto insurance prices were on average 39% higher for consumers with “poor” credit scores as compared to the prices charged to consumers with “excellent” credit scores.
Based on the findings from the CFA report, it’s clear that if Michigan chose to “ban insurer use of credit scores in pricing” since it is prima facie discriminatory (as many other states such as California, Massachusetts and Hawaii have done), this would bring down auto insurance prices for all consumers.
This would be great news for everyone shopping for auto insurance, and especially the working poor and middle class consumers with poor credit who are currently being discriminated against. But it would also be outstanding news for all present and future Michigan auto accident victims, especially those who have suffered catastrophic injury, since the insurance industry is pushing hard right now to take away some of our most important legal protections under the Michigan No Fault law.
Imagine that. Michigan politicians could lower the price of auto insurance and save consumers money, and we could all abandon their crusade to dismantle Michigan’s No Fault auto insurance system, which the Insurance Institute of Michigan says provides auto accident victims with the “best auto insurance coverage in the country.”
Other ways to lower consumers’ auto insurance costs
Prohibiting auto insurance companies from “credit scoring” is not the only way to bring down auto insurance prices for consumers. Consider the following proposals:
- Empower Michigan’s Insurance Commissioner to regulate the profit margins for auto insurers doing business in Michigan. According to a study of the profitability of Michigan’s auto insurance market, Michigan auto insurers have been “highly profitable” and “significantly more profitable than the national average.” For more, please check out Michigan Auto Law’s blog post, “Michigan auto insurance industry ‘highly profitable,’ according to former insurance commissioner.”
- Enact one or all of the “Proposals to make Michigan auto insurance affordable” which are discussed in Michigan Auto Law’s “Auto Insurance Consumers’ Guide To Michigan No Fault Reform & House Bill 4612.”
- Enact one or all of the No Fault reforms discussed in Michigan Auto Law’s blog post, “Reforms That Will Truly Save You Money On Your No Fault Insurance.”
“8 things to know about how Michigan auto insurance companies can use your credit score”
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