The topic of insurance companies using a driver's credit score as a factor in setting insurance rates has been a political talking point in Lansing for a long, long time.  "Political" and "talking" being the operative words there.

Yesterday, a State House committee considered a new tact on the issue.

From the subscription-only Gongwer newsletter:

HOUSE DEMOCRATS TRY NEW APPROACH ON CREDIT SCORING ISSUE

After fighting the industry and their Republican counterparts on a measure to ban the use of credit scores in setting insurance premiums, House Democrats appeared to be trying a new tactic Thursday as the Insurance Committee took up legislation that would regulate use of those scores.

The legislation, HB 5297, is modeled after policy by the National Conference of Insurance Legislators and received support from various insurance industry representatives.

While the bill still appears to be going through some drafts, it would prohibit insurance companies from using a credit score to deny, cancel or not renew a person's policy. But insurance companies could use the score in rate setting or underwriting if several conditions were met.

A person who doesn't have a credit score couldn't be adversely reviewed by an insurance company and consumers could ask their company to reexamine their credit score, which could lead to a recalculation of their insurance score.

In recalculating an insurance score, companies couldn't negatively view inquiries into a credit report, either by the person seeking insurance or another auto, insurance or home mortgage company. Collections because of medical bills, or bankruptcies that are more than 10 years old, also could not be viewed in a negative light as insurance companies recalculate a person's insurance score.

And the legislation calls for insurance companies to provide "reasonable exceptions" to a person's premium rate if his or her credit report has been affected by a serious illness or injury, catastrophic event, death of an immediate family member, identity theft, loss of job for more than three months or military deployment.

Rep. Andy Neumann (D-Alpena), who is sponsoring the bill, said family medical bills forced him to declare bankruptcy about six years ago and while he's gotten his credit back on track, insurance companies still look unfavorably at his record.

"There is always some formula insurance companies are going to use, but this is one avenue, if we do this piece of legislation, we can control it," he said.

There was still some pushback among Democrats in challenging the validity of tying people's credit reports to whether or not they'll get in car accident.

"All a credit card score shows is a proxy for someone's income," said Rep. Bob Constan (D-Dearborn Heights).

And Rep. Ellen Cogen Lipton (D-Huntington Woods) noted the state's high court is set to rule on the use of credit scores by insurance companies after hearing oral arguments last fall.

But Dave Williams, Michigan product manager for Progressive, noted, "The car you drive, a lot of people drive the same car. Your credit report is all about you."

According to his research, about 65 percent of customers would see an increase in their insurance premiums without the review of their credit report because companies use that to discount policies.

The Democratic-controlled House passed legislation in December banning the use of credit scores in setting insurance rates, but even then the chamber dropped efforts to pass the entire package.

Chair Rep. Barb Byrum (D-Onondaga) commented that perhaps the best option for consumers at this point is to regulate the use of credit scores, as opposed to an outright ban. She said all sides would have to compromise as the bill moves through the process.

Teri Morante, representing the Michigan Insurance Coalition, said the national policy was crafted to fit with the way Michigan currently regulates the insurance industry. Twenty-six states have some type of law in place because of the national policy, she said. About 40 states allow for the use of credit scoring in setting insurance rates.

The legislation also received support from the Michigan Association of Insurance Agents, the Insurance Institute of Michigan, Farmers Insurance, Property Casualty Insurers, Auto Owners Insurance and AAA of Michigan.

While there was no testimony in opposition to the bill, the state's Automobile and Home Insurance Consumer Advocate Butch Hollowell indicated opposition to the measure, as did Michigan Citizen Action, the AFL-CIO and the Coalition Protecting Auto No-Fault.

So.  What do you think?

The Rand Corp. recently released a look at the popularity - or lack thereof - and costs of no-fault insurance across the country.

The study gives an overview of the United States' experience with no-fault systems, in which automobile accident victims seek recovery from their own insurer instead of from another driver.

In the 1970s, many policymakers and analysts believed that no-fault automobile insurance would displace conventional, tort-based automobile insurance policies. Today, however, no-fault has lost much of its popularity among insurers and consumer groups, according to the report. Currently, 29 states have tort-based policies, three states allow drivers to choose between less expensive "limited tort" insurance or more expensive "full tort" insurance, and the remaining states have some form of no-fault insurance. These numbers have remained fairly steady over the past decade.

No-fault insurance has three components: a restriction on the right to sue other drivers for being at fault for an automobile accident; a restriction on receiving payment for pain and suffering or other non-economic damages; and mandatory insurance so anyone involved in an accident can recover his or her economic losses, including medical costs, from their own insurance company.

Policymakers believed no-fault insurance would minimize litigation and administrative costs, more fairly compensate victims of automobile accidents and be less expensive than tort-based insurance. In practice, however, premium cost reductions never materialized, in large part because of increased medical costs.

Injury costs under no-fault were only 12 percent higher in 1987 relative to tort-based insurance, but by 2004 costs were 73 percent more expensive under no-fault plans. In addition, those states that restricted lawsuits against other drivers actually had higher claim costs than states that permitted lawsuits.

Read the whole article.

The Lansing State Journal ran an interesting side-by-side of two op eds debating the pros and cons of Michigan's no fault auto insurance policy... ok, even I couldn't get through that sentence with a straight face.

Interesting, maybe not.   Informative, yes, especially considering the potential savings that could result from the DFS plan.  Take a look here and here.

Yesterday, the Livingston Daily published a spot-on commentary from Paul Mueller, president of Citizens Insurance, a large local employer in Howell, MI.  Mueller called into question some items from a recent article about auto insurance in Michigan and the state's "Insurance Advocate," Butch Hollowell, and responded with... wait for it... facts.

Mueller wrote:

The legislation, which is currently under consideration, would damage competition among the state's auto insurers and do little to actually address the main factors contributing to high insurance premiums. These main factors include the requirement, under our current no-fault system, for Michigan drivers to purchase unlimited medical benefits (outside Michigan, the highest limit that is required is $50,000); the absence of a dedicated fraud-fighting resource; and the lack of a collision deductible on most hit-while-parked claims.

In fact, the effect of the proposed changes would produce little more than cost shifting — high-risk drivers would pay less, and good drivers would pay more. Consumers would be ill-served by such an approach, which is fundamentally unfair.

And then concluded:

We think the state should also do its part to provide Michigan consumers with value for their money, by taking real and responsible action to fix the main problems that are driving high costs for auto insurance — implementing medical-fee schedules and utilization-management protocols; prosecuting fraud; and by giving consumers the choice of how much no-fault coverage to carry on their policy.

Facts.  What a novel idea.

There's a very good op ed in today's Detroit News.  The Competitive Enterprise Institute in Washington, D.C. picks apart a proposed ballot issue planned for Michigan's November election.

They write:

The group [Fair and Affordable Insurance Rates (FAIR)] claims that [its proposal] would reduce the cost of insurance. However, it is more likely that if these measures are passed, rates throughout Michigan will rise and availability will diminish as insurers leave for other states where they are free to base their rates on the factors they know correlate to risk.

The author points to other states where similar proposals have been enacted as proof positive that the measures in the proposed ballot langauge won't do what the politicians claim.  Shocking, for an election year ploy, isn't it?

And then the D.C. experts write:

If reformers really want to reduce the cost of insurance for consumers in Michigan and they want people to pay fair rates, they must reduce the cost of writing auto insurance in Michigan. One way to do this is to allow consumers and insurance companies to choose the amount of insurance they want to buy.

Michigan is the only state in the nation that requires drivers to purchase personal injury insurance with unlimited medical coverage. This is one reason that the average claim in Michigan has risen 250 percent in the past decade.

Allowing insurers the freedom to offer the products they wish to consumers and to determine the premiums that they believe reflect the risk of certain drivers may not solve all of Michigan's auto insurance problems instantaneously, but increasing the controls on insurance companies will potentially drive insurers from the state, decrease the availability of insurance, and simply exacerbate the problems in Michigan's auto insurance market.

Sounds familiar and sounds like a good plan. ;)

Sunday's Lansing State Journal carried a head-to-head on the question of insurance savings.  Check it out.

State Rep. Barb Byrum v. Peter Kuhnmuench of the Insurance Institute of Michigan

A letter to the editor in today's Detroit News hits all the right points on insurance affordability and the ongoing debate in Lansing about how to address the issue.

Is it fair to talk about Michigan having the 12th highest premiums without mentioning that Michigan has the highest mandated benefits? Isn't that like comparing the cost of a Cadillac to a Kia? Of course, the Cadillac costs more, but it also offers more features and benefits to the owner.

Michigan drivers are required to purchase unlimited medical benefits under their no-fault policy. No other state in the country requires their residents to purchase such a high level of benefit. In fact, most states don't mandate any medical benefits and if they do, it is generally about $5,000. That compares with the unlimited, lifetime medical benefits that drivers in Michigan must purchase.

It’s a new year and we have a new look at DriversforSavings.com.  Please, check out our new Facebook and Twitter pages, and take a look below at how we wrapped up 2009.

The push for savings finished strong.

In the Detroit News:

State House and Senate Democrats proposed auto insurance reforms would likely require all Michigan drivers to share in the very high cost of coverage now paid in urban areas, especially Detroit. They are not the best way to reduce insurance rates.

But.

The Insurance Institute of Michigan, an insurance trade association, says requiring less personal injury coverage would do more to lower rates than the Democrats' proposals. That lower-cost option would be especially helpful in Detroit or other urban areas where high crash and theft rates make auto ownership riskier, driving up the cost of insurance. Premiums would drop 15 to 45 percent, depending on levels of optional coverage.

We agree.

In the Detroit Free Press, editors called to “End the standoff on insurance reform”:

Partisan politics in the Michigan Legislature -- and resulting gridlock -- have hurt the entire state. And no issue has felt a heavier dose of it than sorely needed insurance reform…. That means rethinking Michigan's unlimited medical coverage, and considering a fee schedule for medical treatments. No other state has such a comprehensive, and costly, system.

They’re right.

In Jackson, the Citizen Patriot said, “Give public choice to lower auto costs.”

You could start by eliminating the requirement that Michigan drivers carry limitless medical benefits through their auto plans.

That is excessive and redundant. A 65-year-old driver injured in a crash could have hospital bills covered by Medicare, instead. Private insurance can do the same for younger drivers. In fact, Michigan is the only state with such a requirement, according to the Insurance Institute.

Are there alternatives? Yes. Force drivers to carry, say, a minimum of $50,000 in medical coverage, and Michigan's average auto-insurance rates would fall 15 percent to 45 percent, the Insurance Institute predicts. Drivers, of course, could choose to buy more medical coverage through their auto policy if they could afford it.

Couldn’t have said it better ourselves.

A news item from the end of 2009 too important not to pass along:  this Tom Walsh column from the Free Press.  Not only does Michigan’s insurance mandate cost drivers, it may cost jobs.

Tom Wilson, president and CEO of Chicago-based Allstate Corp., told me recently that consumers are becoming more and more savvy about managing their own coverage choices.

That's why Wilson, a St. Clair Shores native and University of Michigan grad, launched Allstate's "Your Choice Auto" program in 2006, offering cafeteria-style coverage packages.

Auto insurance in Michigan, Wilson said, "is more expensive than it needs to be" because the mandate of unlimited medical benefits "doesn't put economic discipline in the system."

Wilson and other insurers understand that auto insurance, a product drivers are required by law to purchase, will always be a highly regulated industry. All parties agree on the need to reduce the number of uninsured motorists and make more affordable coverage available to low-income drivers.

The alternative?  You get Buckeyes setting up websites like this.

We commend Governor Granholm and state lawmakers for igniting new dialogue on efforts to reduce auto insurance November 30th in Lansing, yet we believe the latest legislative plan misses the mark. When the state’s no fault law was enacted in 1972, Michigan drivers were provided with the most

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