LANSING, Mich.– Governor Gretchen Whitmer has directed the Department of Insurance and Financial Services (DIFS) to examine and report on two specific aspects of auto insurance rates in Michigan: the use of non-driving factors to set rates and the pricing of coordinated policies.
“Michiganders continue to pay the highest auto insurance rates in the nation and are feeling the pressure of those rates,” said Whitmer. “I’m committed to using the power of my office to increase transparency, strengthen consumer protections, and better determine how we can provide relief to motorists.”
Currently, insurers may, with some limitations, use non-driving factors to determine insurance premiums. These factors can include education, home ownership, occupation, credit scoring factors, and in some cases gender and marital status. Additionally, auto insurers can offer coordinated policies to drivers with health insurance as their primary policy, which lowers the risk to the auto insurers. The law, however, requires insurers to lower auto insurance premiums for coordinated policies to account for this reduced risk.
“Auto insurance rates must be fair and reasonable,” Whitmer added. “We must take a hard look at how auto insurers are setting rates to ensure these practices are lawful and to determine how we can achieve complete and lasting reform for Michiganders.”
According to a study conducted by the University of Michigan, Michigan drivers pay nearly twice as much as drivers in other states for auto insurance, with the average premiums reaching $2,600. Moreover, that number pales in comparison to the amounts paid by Detroit residents, who pay $5,414 in insurance premiums each year.
“Drivers deserve to understand how auto policies are priced so that they can make informed decisions,” Anita Fox said, who serves as director of DIFS. “Governor Whitmer’s order to examine these issues will provide greater transparency, identify possible avenues for administrative action, and shed further light on the need for legislative reform.”
Under this directive, DIFS will use its broad powers to identify what specific non-driving factors insurers are using and how those factors are being applied, and make recommendations for legislation, rulemaking or other measures as appropriate to ensure compliance and protect consumers. As part of this examination, DIFS will also review the use of “price optimization” techniques, which employ consumer data to measure consumers’ anticipated resistance to increased premiums.
In addition, DIFS will examine how insurance companies are determining whether coordinated auto insurance policies have “appropriately reduced” premiums, as required under Michigan Law. As part of this review, the department will consider any necessary actions to ensure compliance with this requirement.
Previously, Gov. Whitmer requested that DIFS conduct an audit into the Michigan Catastrophic Claims Association (MCCA) after the board voted to impose an additional fee increase of $28 on drivers, which is added to a driver’s insurance premium, bringing the total fee to $220 per vehicle.
Under the new directive, DIFS will begin the examination immediately and produce a report as soon as possible.