Michigan Looks to Ban Credit Scores to Set Auto Insurance Rates

Michigan auto insurance

Using credit score ratings to set Michigan auto insurance rates may become a thing of the past, if two state House representatives have their way. The members have proposed legislation that would prevent insurers from using scores as a factor in determining rates, a change that would likely reduce car insurance premiums in the area dramatically.

Banning Credit Score Ratings

Michigan House Representatives Hansen Clarke (D) and John Conyers Jr. (D) introduced the Ban the Use of Credit Scores in Auto Insurance Act last week, which would amend the Fair Credit Reporting Act so that auto insurance rates could no longer be set based on credit score ratings.

The representatives stated that the use of consumer credit reports when setting rates is having a crushing impact on Michigan drivers who were affected heavily by lost jobs during the recession. With so many drivers now suffering for lower credit scores due to an inability to pay their bills years ago, they are forced to pay higher fees despite credit scores not being a true reflection of their credit management habits.

With the state having the highest auto insurance rates in the country, along with a higher-than-average unemployment rate, the representatives insist that their drivers will remain at a disadvantage if the rules don’t change.

Michigan Auto Insurance Companies Likely to Reject Bill

Though Clarke and Conyers say Michigan auto insurance companies are blatantly treating their customers unfairly by penalizing them for their credit score ratings, many expect insurers to push very hard to reject the proposed legislation.

Companies view credit scores as a sign of a person’s ability to pay their bills and, like other financial institutions, increase customers’ premiums when they determine the risk of non-payment increases.

Conyers said on this Facebook page last week, however, that Michigan insurance companies should not follow the same guidelines as other financial institutions. “Auto insurance rates should be based on your skills and responsibility behind the wheel, not extraneous factors outside your control,” he wrote.