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Ouch! Is there a car insurance hike at the bottom of that pothole?

May 5, 2014 by Steven M. Gursten

HB 5456 proposed ban on pothole-related insurance rate increases says, “better not be!”

potholes Michigan We all know how horrible and dangerous Michigan’s pothole-plagued roadways are today. But did you know that some auto insurance companies are raising your automobile insurance rates because of these potholes?

Now, lawmakers are saying the state’s auto insurance industry should be prohibited from profiting and raising insurance premiums for pothole-damage claims.That is, Rep. Marilyn Lane (D-Fraser) and 51 of her colleagues in the Michigan House of Representatives.

In House Bill 5456, introduced on April 17, 2014, Rep. Lane – along with 39 Democrats, 11 Republicans and 1 Independent Democrat – proposed that auto insurance consumers be protected against price gouging related to pothole-vehicle-damage claims.

Specifically, Lane and her bill’s co-sponsors want the Michigan Legislature to impose the following restrictions on Michigan auto insurance companies:

“An automobile insurer shall not establish or maintain a rate, rating classification, premium, or premium surcharge based upon a prior claim for damage to the insured automobile caused by a pothole.”

I discussed the subject of small insurance claims raising insurance rates in a recent blog post: “Even a small insurance claim can make your auto insurance soar – up to 67%!”

In a statement on the Michigan House Democrats website, Rep. Lane explained her reasons for introducing HB 5456:

“‘It is certainly not the driver’s fault that potholes exist on our streets and roads, and it is absolutely not the driver’s fault that a pothole can’t be avoided and damages their car … Motorists shouldn’t face higher rates because our roadways are a mess after one of the worst winters in recent memory. … [and] because of Lansing’s inability to fix the roads.’”

Additionally, Rep. Lane noted that the experience of her colleague, Rep. Jon Switalski (D- 28th Warren), factored into her decision to sponsor HB 5456.

In a statement on the Michigan House Democrats web site, Rep. Switalski explained that the injustice of increased auto insurance rates resulting from pothole-damage claims became real when the experience became personal:

“‘I was floored when my insurance company raised my rates after I submitted a claim for pothole damage … I’m sure that insurance companies are seeing an increase in claims because of the winter damage to our roads, but potholes are unavoidable. If we all start swerving to miss them so our rates don’t increase when we submit a claim for repairs then there will be mayhem on the roads and likely far greater costs for insurers.’”

Not surprisingly, Michigan’s auto insurance industry doesn’t seem too sympathetic to consumers and their predicament, which HB 5456 endeavors to alleviate, according to MLive’s Melissa Anders in her article, “Michigan drivers wouldn’t see higher auto insurance rates for pothole damage claims under proposal.”

Although he acknowledged that “some insurance companies don’t charge a pothole claim specifically as an at-fault accident and others do [which, assumedly, leads to the increase in auto insurance premiums that Rep. Switalski experienced],” Pete Kuhnmuench, executive director of the Insurance Institute of Michigan told MLive:

“Not allowing carriers to charge those individuals who have had the accident, will automatically shift those costs to all policyholders.”

Perhaps also not surprising, I find myself on the side of the lawmakers like Marilyn Lane who want to stop insurance companies from raising rates because of potholes. Politicians helped create this mess in large part by underfunding infrastructure and roads in Michigan for years.  The people of this state who encounter what, in many cases, are unavoidable hazards shouldn’t be punished further by seeing big hikes in their auto insurance.

 – Photo courtesy of Creative Commons, by JoshuaDavisPhotography

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