LANSING, Mich. (AP) – Gov. Gretchen Whitmer on Wednesday ordered a review of how Michigan’s auto insurers use non-driving factors such as education and credit scores to set premiums that rank among the nation’s highest.

(Credit: Bill Pugliano/ Getty Images)
(Credit: Bill Pugliano/ Getty Images)

The Democrat’s directive also includes an examination of how insurers price policies that coordinate medical coverage with drivers’ health insurance, and arrives as Republican lawmakers prepare to unveil legislation designed to reduce car insurance rates.

(Credit: Africa Studio/
(Credit: Africa Studio/

“Auto insurance rates must be fair and reasonable,” Whitmer said in a statement. “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.”

The use of non-driving factors such as education, homeownership, occupation and credit scores is legal in the state. The law bars insurers from using sex or marital status as rating factors for policies issued on an individual basis, though policies issued on a group basis are exempt.

Michigan is the only state to require unlimited coverage for medical expenses resulting from auto crashes. It also allows health providers to bill car insurers much more for care than health insurers pay. The annual fee to cover personal injury protection benefits exceeding $550,000 will rise to a record $220 per vehicle this summer.

While medical costs are factors in Michigan’s high rates — and issues the GOP legislative majority intends to address — Whitmer said she is committed to using the power of her office to study other dynamics, too. Democratic legislators in particular have said allowing non-driving factors in rate-setting is discriminatory, especially in the Detroit — where residents pay $5,414 a year in premiums. That is more than double the state average, which is almost double the national average, according to a University of Michigan report cited by Whitmer.

(Credit: Africa Studio/
(Credit: Africa Studio/

The insurance department will identify what specific non-driving factors are being used and how they are being applied, and make recommendations for legislation, rules or other measures. It also will review “coordinated” auto insurance policies — cheaper coverage that is available to motorists who choose to make their health insurance the primary insurer for crash injuries and their auto no-fault coverage secondary.

Whitmer wants to know if car insurers are appropriately reducing the price of premiums for those picking coordinated coverage.

A trade group for the insurance industry welcomed the state review.

“We encourage the governor to review costs associated with medical providers and personal injury attorneys and examine rampant fraud and abuse within the system, dramatic overcharging by medical providers and Michigan’s one-of-a-kind mandate that every driver purchase unlimited, lifetime medical benefits,” said Tricia Kinley, executive director of the Insurance Alliance of Michigan. “We are confident the governor will reach the same conclusion as independent experts on the true cost drivers behind Michigan’s highest-in-the-nation auto insurance premiums.”

Senate Majority Leader Mike Shirkey, a Clarklake Republican, said Wednesday there “soon” will be movement on auto insurance bills — a top priority for the GOP caucus .

“We can measure that in days, not weeks, probably,” he said.

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  1. Robert Klein says:

    It is good that Governor Whitmer has established lowering auto insurance costs as one of her priorities and I support her on this. In my opinion as an insurance economist (and former regulator) with 35+ years of experience, the problem is not how insurance companies set rates or the rating factors they use. The problem is out of control Personal Injury Protection (PIP) coverage costs due to unlimited medical benefits and the lack of a medical fee schedule. This leads to severe fraud and abuse that drive up costs; all of us are paying to line the pockets of the medical providers and lawyers who abuse the system. The only sensible way to reduce premiums is to reduce claim costs and this should be the focus of reform efforts. We can certainly examine the fairness and legitimacy of the rating factors insurers use but based on my research and that of many others, we are unlikely to find any “silver bullet” that will make everyone happy. Prohibiting a rating factor like credit scores could lower rates for some but will raise rates for others. What we have is akin to a balloon filled with air – if we squeeze it one in place it will puff out further elsewhere. What we need to do is let a lot of air out of our balloon and this will lower premiums for everyone P.S.: I also support the Governor on her efforts to fix the roads. How we fund this is controversial but at the end of the day we need to fund this. There is no “free lunch” whether it is auto insurance or good roads.

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