AIA Weighs In On Democrats’ Proposed Insurance Bills in Michigan

Michigan House Democrats’ attack on the insurance industry is misguided and the House Insurance Committee should not support the onerous and unneeded legislation up for consideration tomorrow [March 20], said the American Insurance Association (AIA).  
  
“These bills will do nothing to get at the high systemic costs that drive premium increases, such as Michigan’s one-of-a-kind unlimited medical benefits, or regulatory restrictions that dampen competition,” said John Birkinbine, AIA assistant vice president, Midwest Region. “This attack is misguided, purely political and if passed, the legislation will ultimately not benefit consumers.”  
  
The House Insurance Committee is conducting a hearing tomorrow to consider a number of insurance bills, including HB 4412, a ban in insurer use of credit; HB 4993, a bill requiring annual claims data reporting to the insurance commissioner; HB 5420, a bill that eliminates market competitiveness as a requirement to find a rate excessive; and HB 5558 & HB 5559, bills that require premium refunds for rates deemed “excessive.”  
  
“The hodgepodge of bills being considered, such as the ban on insurer use of credit, which numerous state and federal studies show benefits a majority of consumers, or the presumption of non-competitiveness, when there are more than 675 property-casualty insurance companies writing policies in Michigan, are simply unnecessary and should be voted down,” added Birkinbine.  
  
In reference to HB 4412, credit-based insurance scoring has been proven to be an objective, strong indicator of how likely a person is to file a claim. A 2007 study by the Federal Trade Commission (FTC) found that: “credit-based insurance scores are effective predictors of risk under automobile policies. They are predictive of the number of claims consumers file and the total cost of those claims.” The FTC also found that such scores may make the insurance process “quicker and cheaper.”[1] In Michigan, credit can only be used to provide discounts.  
  
Additionally, in reference to HB’s 5420, 5558 and 5559, according to recent reports by the Office of Financial and Insurance Services, Michigan has a “reasonably competitive” market and “rates are not unreasonably high in relation to covered losses”[2]; and 680 property-casualty insurance companies write more than $15 billion in premiums across the state.[3]  
  
The property/casualty industry in Michigan employed more than 15,000 and paid more than $219.5 million in premium taxes alone in 2006. Additionally, insurers are a major source of capital for governmental bodies in the state. According to analysis of A.M. Best data, they held $10.7 billion in Michigan municipal bonds in 2005 – approximately 19% of the outstanding state and local government debt in the state.  
  
  
  
[1] CREDIT-BASED INSURANCE SCORES: IMPACTS ON CONSUMERS OF AUTOMOBILE INSURANCE, A Report to Congress by the Federal Trade Commission, July 2007  
  
[2] “The Competitiveness and Premium Excessiveness of the Home and Auto Insurance Industries in the State of Michigan”; Prepared by the Center for Urban Studies, Wayne State University for the Michigan Office of Financial and Insurance Services, March 2005  
  
[3] Michigan Office of Financial and Insurance Services, Annual Report For the Year Ending December 31, 2006