Michigan House Puts Jobs, Consumers at Risk in Passing Auto Insurance Bills

LANSING, Mich—The Michigan House passed misguided legislation yesterday that threatens to increase auto insurance costs and harm the state’s job market and economy, according to the Property Casualty Insurers Association of America (PCI).

The House passed a portion of a bill package focused on misguided reforms that could have disastrous consequences on auto insurance costs and the stability of the insurance market, including a prohibition on credit-based insurance scoring.

“House members passed this legislation without proper deliberation or debate, despite insurance industry offers to participate in a workgroup that would allow appropriate consideration of real ways to reduce auto insurance costs in Michigan,” said Ann Weber, PCI vice president.

Auto and homeowner insurers doing business in Michigan have formed a coalition, Protecting Michigan’s Future, to defeat this misguided, anti-consumer legislation; promote comprehensive, cost-saving reform solutions; provide information to policymakers for making sound public policy decisions; and set the record straight on insurance practices.

“Around the nation, governors and legislative leaders are meeting with insurance company officials and asking them to locate their businesses in, and bring jobs to their states,” said Weber. “But with this legislation, lawmakers in Michigan are sending a message to insurers here and around the nation that Michigan simply is not interested in attracting their investment.”

The bill package was introduced earlier this month, quickly passed through the House Insurance Committee, and brought before a full House vote without thorough consideration of the negative consequences for consumers. “The House’s actions over the past few weeks have been extremely disappointing, and we encourage policymakers to protect Michigan’s future by focusing on accurate, factual information,” said Weber. “We urge the Senate to more thoroughly consider all input from all interested parties on these bills, and we remain ready to participate in a workgroup process aimed at reaching mutually beneficial results.”

Supporters of the proposed auto insurance reforms have greatly misrepresented several critical facts about Michigan’s auto insurance marketplace, but lawmakers should be aware of the following facts:

•Credit-based insurance scoring has been shown to benefit consumers because it allows them to secure lower insurance costs. In Michigan, credit-based insurance scoring is used only to provide discounts for insurance customers. Credit-based insurance scores are not used in Michigan to apply a surcharge or to determine whether a person can be insured by the company. And despite the economy, credit scores are staying stable.

•Michigan’s annual average auto premium for liability and physical damage coverages combined is 12th highest in the nation – not the highest as supporters of the legislation have claimed. Given that Michigan’s mandated auto insurance benefits, including the unlimited no-fault injury benefits, are considered the most expensive in the nation, the average price paid by driver in the state is extremely reasonable.

•Michigan auto insurers are not making enormous profits. In fact, personal auto insurers in Michigan suffered a 10-year underwriting loss of 19.2% of earned premiums, while their 10-year operating return resulted in a loss of 2.4% percent of premiums. Michigan operating and underwriting profits have been substantially lower than nationwide averages.

•Michigan property casualty insurance companies provide thousands of stable, much-needed jobs in the state. In 2007, they paid out more than $8.7 billion in claims and paid more than $200 million in state premium taxes, providing critical tax dollars for state and community development. Legislation that could drive businesses out of the state would only lead to a further deterioration of Michigan’s economy.