Bill Could Change Auto Insurance Rates in Michigan

When you get a quote for a new auto insurance policy, do you know where that number comes from?

Right now, auto insurance rates are based on a wide variety of factors that can make policy prices vary drastically.

But a new bill could change auto insurance rates in Michigan. The bill, currently in the Michigan legislature, could change the way rates are calculated, and how much you will pay.

How Your Auto Insurance Rates Are Calculated

Michigan auto insurance rates are determined using a number of factors including:

• Age
• Gender
• Geography
• Vehicle type
• Marital status
• Accident history
• Driving record
• Annual mileage
• Credit score

Based on these factors, older men living in rural areas often pay substantial less for the same insurance than younger women in urban settings. Some consumer advocates say that including factors like geography and credit score can cause minority drivers in low-income ZIP codes to pay more than their more affluent, white counterparts for the same insurance. They say these price setting policies are a form of "redlining" that hurts poor Michigan drivers.

What Is Redlining?

Historically, in the 1960s, insurance companies would sometimes outline risky ZIP codes on their maps in red. They instructed their agents not to write policies in those high risk areas. They would also deny policies for homes over 50 years old or worth less than $100,000. These limits targeted minority residents who were more likely to live in "risky" zones. Explicit redlining is now illegal. But some experts say that by using factors unrelated to a person's risk of an accident, auto insurers are still making it more expensive to be a minority driver, which forces poor motorists to choose between auto insurance and other necessities of life.

New Bill Sets Auto Insurance Rate-Setting Factors

Now a Detroit senator has proposed a bill that could eliminate those unrelated criteria and make it harder for auto insurance companies to charge more based on where a person lives or how much they make. Senate Bill 312 would limit the criteria for setting auto insurance rates to:

• Anticipated repair costs
• Civil infraction history
• Insurance claims history

If it passes, the law would smooth out the cost of insurance across age brackets, and geography. Senator Morriss Hood, III (D-Detroit), told MLive.com it is an issue of fairness:

"What we're looking at is just making insurance rates fair to everyone. . . . If I have no claims, if I have no infractions on my drivers' license, then I'm not a higher risk. And so that should be reflected in my premiums," Hood said.

Opponents of the bill says it could shift insurance costs from urban centers to out-state residents. They say that higher concentrations of drivers increase the risk of claims, including auto thefts, carjacking, and accidents. The bill could cause insurance companies to subsidize the costs of urban insurance claims through rural policies. But Hood is hopeful that, rather than shifting costs, the bill will allow everyone to see lower rates.

It remains to be seen whether the bill will make it out of Senate Insurance Committee or receive a favorable reception in the broader legislature. But it is a different take on no-fault reform that addresses the cost directly and could help Michigan motorists in Detroit and beyond.

At Sachs Waldman, we have extensive experience helping auto accident victims recover PIP benefits from no-fault insurance providers. We can help you get your damages covered. Contact our Detroit personal injury law office at 1-800-638-6722.