December 4, 2009

The following is an editorial written by State Representative Barb Byrum (D-Onondaga). If you have questions about this commentary, please contact Rep. Byrum's office by calling (517) 373-0587.

Imagine if you were required by law to purchase a company's product, and they could raise their prices whenever they choose. This company, being exempt from anti-trust and basic consumer protection laws, could charge you a higher price simply because of your job or if you went to college.

Impossible? Nope. Welcome to auto insurance in Michigan, and it is Michigan consumers who are getting the short end of the stick.

Times are tough for Michigan families right now. We have the highest unemployment rate in the nation, and many people who are lucky enough to have a job are working less hours and have seen their benefits and wages cut. Many are struggling to make ends meet through no fault of their own, and have seen their credit score suffer as a result.

Michigan consumers are required by law to buy auto no-fault insurance and have no choice but to pay rates that are among the highest in the nation. Rates jumped nearly 70 percent between 1989 and 2005, and when you consider the state of our economy and how much wages have declined these past few years, we pay more than just about anyone – even though Michigan drivers are among the country's safest. We have the highest rate of seatbelt use at 97.2%, the lowest rate of motor vehicle deaths since 1925, and even auto thefts are down 42 percent since 1986. We have done our part to lower costs, but our rates just keep on rising.

Adding insult to injury, insurance companies are using secret formulas based on a person's credit score, their occupation, even whether someone went to college, to determine their rate. Shockingly, someone with a drunk driving conviction and great credit can actually pay less for auto insurance than someone who has poor credit but a spotless driving record. When it comes to determining how much one should pay for auto insurance, a person's driving record and other objective factors should be the only thing that is taken into account. Without accountability, insurance companies can get away with just about anything.

To fight back, my colleagues and I have introduced a plan that will require the insurance companies to be transparent and accountable in how they set their rates, and drive down the cost of auto insurance for us all. The plan will help consumers by giving Michigan the power to:

• Deny excessive rate increases and order refunds for customers charged excessive rates.
• Stop rate hikes on good drivers who are not at fault in an accident.
• Make it illegal for companies to use irrelevant factors like credit score, level of education and employment when determining how much to charge someone.
• Prohibit auto insurance companies from selling customers' personal information without their consent.

Auto insurance companies do not like strong consumer protections. They will say it will cost jobs or cause lawsuits. This is the same tired old rhetoric that we hear from the usual suspects trying to protect their profit margins. Fifteen states and the District of Columbia have enacted many of these same protections we are proposing, and the insurance companies are doing just fine, even as consumers save money and are treated fairly.

Insurance companies should not be exempt from consumer protection laws, especially when we are required to purchase their product. Insurance companies should not be able to use secret formulas to charge someone one rate and another far more. At a time when Michigan residents are suffering through the worst economy in generations, the big insurance companies have done everything they can to keep their special treatment in Michigan going, and our weak consumer protection laws have let them get away with it. Michigan laws should work for Michigan consumers, not shield the big corporations and the special interests from oversight and accountability. Our residents deserve better and our plan will make sure they get better.