Drivers and insurance-holders in Michigan have some new financial worry to handle as the county’s Supreme Court approved the use of credit scores to determine the price of car insurance in the said state. At the same time, insurance institutions and companies in the county such as the Insurance Institute of Michigan consider this turn of events as a major success for them.
The Office off Financial and Insurance Regulations have attempted to ban the usage of credit scores to determine the prices of auto insurance because it believes that if it is implemented it would cause some consequences and problems that the residents of Detroit would find too harsh. Despite the Supreme Court having voted in favour of using credit scores, the office body would still move against the motion.
According to a representative of Michigan auto insurance consumers, Melvin Butch Hallowell, there is no connection between the driver’s driving skills on the road and the rate of their credit scores. Hallowell also said that the approval of the Supreme Court was unfair because this would allow auto insurers to charge more expensive rates as they see fit.
The issue of using credit scores to determine consumer’s auto insurance rates started way back in 2004 when Michigan Governor Jennifer Granholm and Commissioner Linda Watters had submitted a plan to prevent the mentioned practice. Four years later, a state lower court decided to allow the use of credit scores but the Michigan Court of Appeals overruled it. Eventually, the state’s Supreme Court took over the case where it was found that there are contradictions in the laws against the insurance code. Thus, the Supreme Court voted to allow the practice because there is no proof that the insurance scoring rates are unfair.
David Snyder, the American Insurance Association Vice President, stated that the issue of using credit scores to determine coverage rates would cause similar concerns in other states because there are already many of them using the practice
Michigan is known to have high insurance rates, in fact it has more expensive coverage rates in the United States. Residents complained that with the use of credit scores to determine overage rates, they would have a harder time handling their finances most especially with the unemployment rates and poverty in their city. But city records show that the basis for the high insurance rates in Michigan are due to the more frequent risk of car thefts and auto accidents that happen there.