Michigan Supreme Court Voted In Favour Of Using Credit Score for Determining Auto Insurance Rates


30The Michigan Supreme Court has voted in favour of the use of client credit scores to determine the price of auto insurance in the county. This is a major success for the Insurance Inst of Michigan and other insurance companies in the region, while residents and drivers in the county have something new to worry about.

The use of credit scores in determining drivers’ car insurance had attempted to be banned by the Office of Financial and Insurance Regulations, due to the problems and consequences that Detroit residence would experience might be too harsh to handle. The office may have lost

The government’s Office of Finance and Insurance Regulatory body may have lost in its attempt to ban the using of credit scores to decide the rates of auto insurance but it would still continue to move against it. The office believes that the consequences of using consumer credit scores for determining the insurance rates of drivers would be too harsh for Detroit residents to handle.

According to Melvin Butch Hallowell, representative of the insurance consumer  in the region, there is no connection between credit scores and actual driving. And he also added that the verdict that the Supreme Court was unfair because this would just give insurance companies the chance to charge high rates as the latter wants.

This issue could be traced back in 2004 when two government officials, Governor Jennifer Granholm and former Commissioner Linda Watters, put forward the plan to prevent the use of credit scores to determine auto insurance prices. Then in 2008, a state lower court made a decision to allow the practice but it was overruled by the Michigan Court of Appeals. Afterwards, the Michigan Supreme Court took the case where it was held that the laws proposed by Watters contradicted the insurance code. The high court then stated that the scoring should be allowed because the insurance scoring rates had not been proven to be unfair.

Vice President of the American Insurance Association, David Snyder, made a statement that the issue would be raise similar concerns from other states in the country because many of them have already been using their credit scores as their determining tool of their rates.

The state of Michigan has some of the most expensive auto insurance rates in the country, and residents pointed out that they would have a difficult time keeping up with their insurance payment with the high poverty and unemployment rates in their city. But records show that the city suffers from an above-average risk of thefts and car accidents, which is the basis for the area’s high insurance rates.

Meanwhile, advocates of insurance companies and the Federal Trade Commission support the Supreme Court’s ruling. Analysts pointed out that insurance rates would increase for about 2/3’s of Michigan drivers if the practice would not be allowed.