An insurers' trade group has accused Michigan's governor of playing destructive election politics by proposing an insurance reform package that includes a 20 percent rate cut and a ban on credit record use to rate consumers as risks.
The National Association of Mutual Insurance Companies' blistering criticism came after Michigan Gov. Jennifer Granholm and Democratic legislators on Monday announced a package of 20 insurance measures, addressing "rates, consumer protection and industry accountability" for all insurance lines.
The announcement noted data from the National Association of Insurance Commissioners showing that Michigan auto rates were highest in the Midwest and tenth-highest in the nation.
Democratic Gov. Granholm's term expires this year and it is widely expected that she will seek reelection according to Joe Thesing, NAMIC North Central Region state affairs manager, who called her package announcement "blatantly political."
He decried the governor's "dangerous proposals that will increase insurance rates and ultimately harm Michigan's already vulnerable economy."
Liz Boyd, the governor's press secretary said in response, "This is not about politics Republicans and Democrats alike are paying some of the highest insurance rates in the nation and the highest in the Midwest and we are committed to giving working families, regardless of their party, pocketbook relief when it comes to auto and homeowners insurance."
Mr. Thesing noted that introduction of the governor's proposals followed the state's appeal of a lower court ruling that Insurance Commissioner Linda Watters overstepped her authority when she filed new rules reducing base rates and barring insurers from providing discounts to policyholders with good credit scores.
"Insurance is one of Michigan's only growth sectors; passage of these proposals would send a clear message to prospective businesses that economic growth and job creation are not a real priority of the current administration," Mr. Thesing said in a statement.
Credit-based insurance scoring, he said, is a strong predictor of insurance loss that benefits policyholders directly through better rates and more choices.
A ban on credit scoring use, said Mr. Thesing, would undercut pricing accuracy and would result in less competitive auto and homeowners insurance markets."
Consumer advocates argue that credit scoring should not be used because its negative impact is heaviest on minority and low income customers and it fails to account for anomalies such as expensive medical needs that can impact a good credit rating.
Mr. Thesing predicted that putting more restrictions on insures would lead to higher prices and less availability.
Among the items in the Governor's package are provisions for:
o Establishment of an Office of Insurance Ratepayer Advocate to represent and protect consumers' interests.
o Elimination of the requirement that a lack of competition must exist for rates to be deemed excessive.
o Permitting the state insurance commissioner to order a refund on premiums where rates are found to be excessive or unfairly discriminatory.
o Banning insurers from being able to deny coverage to consumers with no evidence of prior insurance.
o Increasing civil and criminal penalties for insurance code violations.
o Requiring insurance bills to include a "clear, complete and accurate" explanation of all charges.
o Providing consumers with a cause of action against an insurance company that fails to negotiate and settle an insurance claim in good faith.
Mr. Thesing, who said none of the proposals has been officially introduced, said he believed they are not getting much credence.
"These are outdated ideas contrary to every trend in the country. Government dabbling in price setting, arbitrary redundant regulation and unfounded punitive measures will only result in less competition, higher rates, and a market that is not good for companies or consumers," he said.
The Michigan legislature has Republican majorities in both the House and Senate.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.