LANSING - State Rep. Gino H. Polidori (D-Dearborn) today said the insurance industry is wrong to sue Michigan so companies can keep using credit scores to set an individual's home and auto insurance rates. Under rules to take effect July 1, that practice would be banned.
The lawsuit by the Insurance Institute of Michigan, which represents Michigan insurers, is an assault on consumer protections and would raise the premiums for people with poor credit histories, Rep. Polidori said.
"Using credit scores to determine insurance rates is like reading chicken bones or tea leaves to determine the future," Rep. Polidori said. "Credit scores are notoriously unreliable at predicting whether a motorist or a homeowner will be a liability.
"Insurance rates for a motorist should be determined by relevant factors, such as driving records, and not by whether he or she paid a few bills late. The insurance industry's lawsuit goes against a rule that aims to make insurance firms more accountable to consumers."
The Office of Financial and Insurance Services filed the new rules last week. In addition to banning the use of credit scores to set insurance rates, the rules would also reduce base rates.
"A personal catastrophe can strike at any moment and they can have devastating financial consequences," Rep. Polidori said. "Getting laid off could hurt one's credit score. A medical emergency can hurt one's credit score. To further penalize a person by charging a higher insurance rate is wrong."
Using credit scores to set insurance rates also disproportionately affects minorities, younger insurance holders who have no credit history and poor people, Rep. Polidori said.