Granholm pushes to cut home, auto insurance rates

October 10, 2005



FREE PRESS STAFF AND NEWS SERVICES



Insurance rates in urban areas that often are considerably more expensive than in neighboring suburbs have prompted Gov. Jennifer Granholm and Democratic lawmakers to propose a 20% cut in homeowners' and motorists' insurance premiums.





But the insurance industry calls the proposal unnecessary and politically motivated.





Granholm and lawmakers scheduled news conferences today in several cities, including Detroit and Southfield, to release a package of legislation they say will lower insurance costs for everyone, strengthen consumer protections and improve accountability in the insurance industry.





A recent report by the National Association of Insurance Commissioners found that Michigan has the tenth-highest average auto insurance rates in the country and the highest in the Midwest, a release from the governor's office said. Rates are 15% more than the national average and 32% more than the Midwest average, according to the association.





"We want to find out why the rates are being changed and to provide some relief," said state Rep. Morris Hood III, a Detroit Democrat who is sponsoring part of the package. "Most of all, we want to provide some fairness across the board."





But Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, said insurers set rates based on costs such as claims. Some areas of the state have more claims than others, he said.





Kuhnmuench said Granholm's own administration released a study showing that Michigan has reasonable insurance rates with sufficient competition.





He questioned whether the legislation is politically motivated.





"You can't have your cake and eat it, too," he said. "If you want to bring down rates, you have to bring down underlying costs."





State Sen. Martha Scott, a Highland Park Democrat who has railed against the cost of insurance at every Senate session for the last two years regardless of whether the issue was before the body, said insurance rates are making people poor.





"We have made Detroit the poorest city in the country, and a lot has to do with these high insurance rates," she said.





Granholm spokeswoman Liz Boyd said the bills take on even more urgency with Delphi Corp.'s Saturday announcement that it is filing for bankruptcy protection, a move she said would further strain families' budgets already limited by insurance rates.





"Working families are being hit with exorbitant rates in insurance," she said. "Affordable insurance is a critical part of a family's financial security."





But Matt Resch, spokesman for state House Speaker Craig DeRoche, R-Novi, questioned the seriousness of the plan, considering Granholm's earlier proposal to raise taxes on insurers, a move the insurance industry and some Detroit Democrats said would lead to higher rates. Granholm's plan would use the tax increase to pay for tax cuts to other businesses.





Resch said Republicans would need to study the Democrats' plan before determining whether they would support it. The GOP controls the Legislature and will decide the fate of the bills.





One part of the proposed package would deal with a 2004 Michigan Supreme Court decision. The court ruled 4-3 against granting two injured motorists' claims for pain and suffering beyond the economic damages they received.





Personal injury lawyers said the court placed politics over legal reasoning. Insurers said the ruling was a compromise that keeps those with minor injuries from collecting major awards.





Democrats say that part of their package would revise the definition of "serious impairment of bodily function" to ensure that people who are hurt in auto accidents are able to receive monetary damages if their ability to lead a normal life is hampered.





Kuhnmuench responded that this bill would only lead to more lawsuits, further driving up costs, resulting in higher insurance rates.





The package also would:





•Prohibit insurance companies from using an individual's credit history or credit score to determine insurance rates.





•Eliminate the requirement that a lack of competition must exist for rates to be deemed excessive.





•Allow the state insurance commissioner to order a refund on premiums where rates are found to be excessive or unfairly discriminatory.





•Establish an Office of Insurance Ratepayer Advocate to represent and protect consumers' interests.





•Ban insurers from being able to deny coverage to consumers with no evidence of prior insurance.





•Increase civil and criminal penalties for insurance code violations.