LANSING – Oakland County lawmakers today passed the first wave of reforms that will require insurance companies to be more accountable and transparent to Michigan consumers. The broader package of reforms will shine a spotlight on the insurance industry's unfair pricing practices, make insurance more affordable and give the Insurance Commissioner new power to block excessive rate increases.
"Auto insurance companies cannot be allowed to set and raise rates in secrecy while consumers foot the bill," said State Representative Tim Melton (D-Pontiac), who sponsored the part of the plan giving consumers the right to sue at-fault drivers for collision damage caused to a vehicle. "It's unacceptable to require residents to insure their vehicles yet provide no protection for them from soaring premiums. The people of Michigan deserve more from their consumer protection laws."
Michigan's consumers are at the mercy of auto insurance companies because state law requires drivers to purchase insurance while failing to protect them from gouging by the industry. In Michigan, insurance companies can arbitrarily raise rates without prior approval from the Insurance Commissioner. As a result, insurance premiums skyrocketed 69 percent between 1989 and 2005.[1] Michigan drivers now pay the second highest annual average premium in the country when economic conditions and wages are considered.[2]
"Despite the fact Michigan's drivers are some of the safest in the country, we are continually slapped with outrageous rate increases and insurance premiums," said State Representative Ellen Cogen Lipton (D-Huntington Woods), a sponsor of the plan. "There is absolutely no reason why auto insurance companies should be able to arbitrarily raise rates with no oversight or accountability. It's time to expose these practices for what they are and put an end to the exploitation of residents for the obscene profits of large insurance companies."
The bills that passed the House today will:
- Prohibit rate increases on good drivers who are not at fault in accidents.
- Make it illegal for insurance companies to use irrelevant factors such as a driver's occupation, education level or credit history — rather than objective factors such as a driving record — to deny coverage or set rates.
- Prohibit insurance companies from selling consumers' personal information without their consent.
- Prohibit Insurance Commissioners from going to work for an insurance company within two years of leaving office.
Other parts of the package that will be moving in the days ahead can be found at www.StopUnfairInsurance.com.
"Insurance companies should not be allowed to profit from selling customers' information," said State Representative Lisa Brown (D-West Bloomfield), who sponsored a bill that prohibits insurance companies from selling consumers' personal information without their consent. "This bill will ensure that consumers are the ones deciding when and where to disclose private information."
State Representative Marie Donigan (D-Royal Oak) said: "Motorists should be judged on their driving records – using formulas based on other factors just isn't fair and doesn't make sense. Good drivers deserve rates that reflect their strong driving records. It's shameful that good drivers are being slammed with extreme rate increases, and there is no system in place to stop that unfairness."
[1] The Consumer Federation of America
[2] The U.S. Department of Labor, the Bureau of Labor Statistics and Michigan's Insurance Consumer Advocate