Consumer Federation of America study shows that GEICO, Farmers and Allstate have also imposed the ‘not-at-fault’ penalty to raise car insurance prices on consumers after car accidents caused by others
Imagine you are sitting in your car at a red light, and you are suddenly rear-ended by the driver of the car behind you.
Now imagine how you’d feel if you found out your insurance premium were being raised by 16% because of this automobile accident that was caused by the driver who wasn’t paying attention behind you. You were completely innocent and not at fault, but your insurance rates just jumped up.
In 2014, a bill was introduced in the Michigan Legislature that would have amended Michigan’s Insurance Code to specifically prohibit auto insurance companies from increasing a person’s auto insurance rates for car accidents that the person was not “substantially at fault” in causing.
The bill, House Bill 5517, should have passed and been enacted into law.
But it wasn’t.
That was a huge mistake.
Not only did HB 5517 and its proposal to end this ridiculous, arbitrary and illogical form of price-gouging make sense, but it was also quite obviously the right thing to do.
It still is – as a recent study by the Consumer Federation of America (CFA) confirms just how big a mistake the Michigan Legislature made in failing to enact HB 5517 and how pervasive and far-reaching the problem of insurance price-gouging after not at fault car accidents has become.
In its study, “Major Insurance Companies Raise Premiums After Not-At-Fault Accidents,” the CFA reported:
“Safe drivers who are in accidents caused by others often see auto insurance rate hikes … [among] the nation’s largest auto insurers.”
Specifically, the CFA reported that the “average” rate hike (i.e., “not-at-fault penalty”) imposed by insurers on “customers after accidents they did not cause” were as follows:
- Progressive “raised rates” an average of 16.6% “for not-at-fault accidents.”
- GEICO “raised rates” an average of 14.1% “for not-at-fault accidents.”
- Farmers “raised rates” an average of 11.1% “for not-at-fault accidents.”
- Allstate “raised rates” an average of 4.8% “for not-at-fault accidents.”
- State Farm “raised rates” an average of 0.0% “for not-at-fault accidents.”
This confirms what I’ve argued many times before on the pages of this auto lawyers blog about this shameful, predatory insurance practice:
“I know firsthand just how frustrating [it] can be for people … [when] auto insurance rates go up – in some cases by hundreds of dollars – for a car crash that wasn’t their fault. As an attorney who helps people injured in car accidents caused by others, I see what this does. People who are completely innocent but who were rear-ended or otherwise involved in car accidents caused by other drivers are astonished when they see their next car insurance premium spike upwards. Adding insult to injury, as most people do not carry collision coverage and can only recover $1,000 for vehicle damage under the Michigan mini tort law, they also often have to personally pay thousands of dollars to repair car damage caused by someone else who wasn’t paying attention.”
A missed opportunity to end jacked-up prices for unlucky, non-negligent car insurance consumers
In 2014, House Bill 5517 was introduced which proposed to amend Michigan’s Insurance Code to specifically prohibit auto insurance companies from increasing a person’s auto insurance rates for car accidents that the person was not “substantially at fault” in causing.
Specifically, if enacted, HB 5517 would have:
Prohibited an “automobile insurer” from setting rates and/or premiums “based on an accident that an insured or applicant for insurance was involved in if the insured or applicant for insurance was not substantially at fault in the accident.”
Under the existing Insurance Code, a person is “substantially at-fault” when the “person’s action or inaction was more than 50% of the cause of an accident.” (MCL 500.2104(4)) Nothing in HB 5517 would have changed the meaning of “substantially at-fault.”
Unfortunately, HB 5517 “died” due to inaction at the end of the 2013-14 legislative session.