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Whitmer orders auto insurance rate review for non-driving factors

Jonathan Oosting
The Detroit News
Michigan Governor Gretchen Whitmer speaks from the podium.

Lansing — Gov. Gretchen Whitmer on Wednesday ordered a state review of how non-driving factors and coordinated policy options affect Michigan auto insurance rates that regularly rank among the highest in the nation.

Whitmer’s directive to the Department of Financial Services comes as the Republican-led Legislature debates potential no-fault auto insurance reforms that have largely focused on costs associated with unlimited lifetime medical benefits for injured motorists and medical provider fees.

Legislative Democrats have long complained about insurers' ability to use non-driving factors to determine customer rates and offered various proposals to curb consideration of credit scores, zip codes and other data they say can drive up rates in areas like Detroit.

Under the governor’s order, state insurance regulators are expected to identify what non-driving factors insurers are using and how those factors are being applied. The department is also expected to recommend legislation, laws or other measures.

“Michiganders continue to pay the highest auto insurance rates in the nation and are feeling the pressure of those rates,” Whitmer said in a statement. “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.”

Michigan also allows auto insurers to offer coordinated policies that are intended to reduce rates for motorists by designating a customer’s health insurance as the primary payer for medical expenses arising from an auto accident.

As part of the state review, Whitmer’s office said regulators will examine whether those coordinated policies have “appropriately reduced” premiums, as required under law.

“Auto insurance rates must be fair and reasonable,” Whitmer said. “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 GOP-led House and Senate have spent the opening months of the 2019-20 session discussing potential reforms to the state’s unique no-fault auto insurance law during a series of public hearings.

The Senate is expected to unveil and start advancing its reform plan “soon,” Majority Leader Mike Shirkey said earlier Wednesday. “And we can measure that in days, not weeks, probably.”

As introduced in January, Senate Bill 1 laid out a framework for the pending plan, signaling an “intent” to end the state’s unique requirement that auto insurance plans include lifetime medical benefits by allowing motorists to choose other coverage levels.

The outline legislation also hinted at a possible fee schedule for medical providers that would limit them to collecting a “statutorily determined amount that is a reasonable payment” from auto insurers representing injured motorists.

Shirkey declined to offer specifics Wednesday but said work on the no-fault reform legislation is “progressing exactly like I hoped it would.”

Detroit Mayor Mike Duggan pushed a no-fault auto insurance reform package in the state House in 2017, but the plan ultimately failed amid opposition from other Detroit Democrats and a contingent of Oakland County Republicans.

Duggan testified in a Senate committee earlier this year and has said he sees “very, very different dynamics” in the Legislature this term, especially the Senate, where several candidates he backed last fall now hold seats.

Whitmer has not weighed in on those potential policy proposals but has taken some independent steps on the auto insurance front.

The East Lansing Democrat in late March ordered an accelerated state audit of the Michigan Catastrophic Claims Association after the private nonprofit's board voted to increase an annual auto insurance assessment 15 percent.

State law requires auto insurance companies to pay the assessment to cover the costs of lifetime medical benefits guaranteed under Michigan law.

The association is increasing the fee from $192 to $220 on July 1, a $28 increase that will ultimately be passed along to consumers in the form of higher premiums.

The claims association operates as a reinsurance program, reimbursing auto insurance companies for expensive medical claims for motorists who are catastrophically injured in auto accidents. The claim threshold is also set to rise this summer from $550,000 to $580,000.

Whitmer’s latest directive on non-driving factors and coordinated coverage options will “provide greater transparency, identify possible avenues for administrative action and shed further light on the need for legislative reform,” said Anita Fox, director of the Department of Insurance and Financial Services.