Can you imagine how outraged you would be if you had to pay 365 percent more for something as essential as, say water, than your neighbor just because you lived where you live. If you can imagine it then you can begin to feel some of the same frustration as Sen. Martha Scott, D-Highland Park.
For the past three years Scott has fought against the practice known as insurance “redlining.” Redlining means an insurance company refuses to insure an auto or home based solely on the geographic area where the person lives, provides an inferior product based on geography or at a higher price. Scott said studies have shown drivers in Detroit pay a much as 17 percent more in insurance rates than people in similar-sized cities, and insurance premiums for Detroit drivers have increased four times the rate of inflation. A recent report in the Detroit News reported on a study that showed a typical driver would be charged $1,624 in Kalamazoo, but the same driver would be charged $5,933 for the same insurance if they lived in Detroit, a 365 percent difference.
“But you folks don’t need a study to tell you how outrageous these premiums have become,” Scott said.
There is one thing you can count on occurring every single day in the Michigan Senate, and that is Scott getting up and speaking on the Senate floor about the long-standing problem of redlining. Scott said some three years ago a House bill was introduced to call for reimbursement of the fine for drivers ticketed for not having proper proof-of-insurance if they could provide a copy within a reasonable amount of time. When it got to the Senate Scot introduced an amendment to the bill that would require auto insurance rates be based solely on distance drove, the type of vehicle and driving record. It was soundly defeated in the Republican-controlled Senate.
“That day, I will tell you, was my worst day in the Legislature,” Scott said. “I will tell you I stood on the Senate floor that day and I made a promise that I would speak every session day on fair insurance rates.”
Redlining is a discriminatory practice that has been around for more than 50 years when certain people buying a home were directed to certain geographic areas based on the color of their skin. That’s illegal, but the powerful insurance industry is apparently allowed to do so legally.
It seems a little unfair that under Michigan’s no-fault insurance law that a state law makes everyone buy their product under heavy monetary penalty if they don’t. In my former profession, I wondered why we didn’t have a state law that required every homeowner to subscribe to a daily newspaper of their choice. That seems fair.
Redlining has ensured Detroit drivers and homeowner pay some of the highest premiums in the country, and it’s not just happening in Detroit. It’s also unfair when the rates are so high for people who may be the least able to pay them. The Supreme Court ruled in 1978 that insurance is an essential product, and that the state has a duty to ensure people have equitable and affordable access to insurance coverage. The state has failed in that duty.
There are more than a million uninsured drivers in the state who cannot afford the premiums, and half the drivers in Detroit are uninsured.
It is that failure by the state that has ensured insurance companies are making excessive profits. A study released last month, according to the Detroit News, concludes that Michigan auto insurance companies have been piling up big profits and excessive surplus funds. The report was authored by Jay Angoff, who served as Missouri's insurance commissioner from 1993-98. He said AAA's – the largest provider in Michigan - profit more than doubled to $104.2 million last year from $50.9 million in 2002.
In January Scott introduced Senate Bill 37 that will create an affordable and accessible insurance task force within the Office of Financial and Insurance Services, and she also introduced SB 38 that prohibits insurance rates from being based on where the person lives. Both bill were referred to the Committee on Economic Development and Regulatory Reform where they have yet to be taken up.
There is much more information on redlining available on the web site Scott has set up, and you can also sign an online petition against redlining. Scott has vowed to speak every session day until fair and equably priced insurance premiums are available to everyone.
UPDATE: It occurred to me I should have posted some of the floor speeches Sen. Scott made on the Senate floor, courtesy of Senate Democratic Caucus Communications. The speeches are excellent and entertaining, and she does a wonderful job of making her case for the legislation.
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