Jul 9, 2010

Insurance companies keep their undefeated streak alive in MI Supreme Court


The rightwing Michigan Supreme Court struck a blow for justice for the downtrodden insurance companies and their record profits against the powerful poor and middle class consumers on Thursday when it ruled on a split 4-3 vote that insurers can continue to consider customers' credit scores when setting rates for auto and homeowners insurance.

In Insurance Institute of Michigan vs. Insurance Commissioner, the Republican majority on the court held that then-Office of Financial and Insurance Services Commissioner Linda Watters exceeded her authority under the insurance code to ban credit scoring through rules she issued in 2004. The “Gang of Four” helped insurance companies keep their undefeated streak alive, and insurance companies have not lost a case in the Michigan Supreme Court in 12 years.

There is no better reason to unseat Justice “Sleepy” Bob Young this November so people can get justice. It’s amazing that Young didn’t recluse himself from the case. He was the head attorney for AAA insurance for many years.

“This is a discriminatory decision by Bob Young and his Republican cronies on the Michigan Supreme Court,” said Mark Brewer, Chair of the Michigan Democratic Party. “This decision will increase premiums for drivers and drive up the cost of auto insurance coverage. Once again, Young and Republicans on the Court side with their campaign donors - the insurance companies - over Michigan consumers.”

I have no idea how your credit score, as well as your education level, zip code and even job title, determines what kind of driver you will be. Your rate should be based on your driving record and the value of your car.

The Republican’s had to twist themselves into a pretzel to please their moneyed donors to justify this discriminatory decision.

According to subscription only Gogwer, Justice Maura Corrigan, writing for the majority that included Stephen Markman, Elizabeth Weaver and Young, said “offering a discount for a good credit score is no different than one for safety devices in a vehicle.”

"Discounts for anti-lock brakes are offered because they reduce the risk of loss, and discounts for high insurance scores are offered because they reduce the risk of loss," she wrote. "The more insureds there are with anti-lock brakes, the lower the risk of overall loss. Likewise, the more insureds there are with high insurance scores, the lower the risk of overall loss."

Say what? A high credit score is the same as anti-lock breaks? That will be good to know when someone with a high credit score is speeding through a residential area and slams on the breaks to avoid hitting a kid who ran into the street.

Once again, the Republican majority on the court stiffed the consumers in favor of their insurance company masters.

4 comments:

Not Anonymous said...

It has been documented that people that have higher credit scores have fewer claims on their insurance. This does not mean that all drivers with higher credit scores are perfect drivers. It also doesn't mean that all drivers with lower credit scores are bad drivers.

What it does mean is that statistically, if you have a higher credit score, you're more likely to have less accidents.

Your example of a child running out in front of a speeding car is not a good one. Did the child choose to run out in front of the car of a person with a high credit score? Of course not. Just like they wouldn't choose to run out in front of a car driven by someone with a lower credit score. Children run out in front of cars without thinking let alone choosing the car they want to be hit by.

According to the statistics, the likelihood of the person speeding through the neighborhood is greater that it will be someone with a lower credit score.

Insurance companies are not descriminating against people with lower credit scores. They are rewarding those with higher credit scores with a discount.

The incentive is for people to have a better driving record to get the discount. The incentive in this case is for people to get better credit scores so they too can have the discount. If people aren't responsible with their money, they get a lower credit score. If they aren't responsible with their driving, they get higher rates. The stats show that those that are responsible with their finances, are also responsible with their driving habits.

If you take 10 people with high credit scores, and you get one accdident out of that ten, and then compare it with 10 people with low credit scores and get three accidents out of ten, the natural conclusion is that those with higher credit scores have better driving records.

Just like a 16 year old driver is much more likely to have an accident than a 30 year old driver. Oh wait, that would be profiling. How dare a cop ask the age of a driver. How would they know to pull that person over except that they had spiked purple hair?

The Michigan Surpreme Court made the right decision. The real question should be, why are these decisions always based on party rather than on the law or the merits of the case?

Communications guru said...

The only thing that has been documented, anonymous coward is that you are a liar. The simple fact is a credit score has nothing to do with how safe a driver you are.

My “example of a child running out in front of a speeding car is not a good one?” It sure is. Corrigan is comparing a credit score to anti-lock brakes.

“According to the statistics, the likelihood of the person speeding through the neighborhood is greater that it will be someone with a lower credit score?” I’m not buying it. The two are simply not related, and if you said it, with your record of lies, I don’t believe it.

Insurance companies are discriminating against people with lower credit scores. A high credit score has absolutely nothing to do with how well or how safely anyone drives.

Sorry, anonymous coward, age is not profiling. A 30-year-old driver has more experience behind the wheel than a 16-year-old, and at would go to their driving record.

Again, anonymous coward, I’m still waiting for you to back up your bold face lie that we were “nearly shoulder to shoulder once.”

carraig said...

If there is statistical correlation between credit score and claim history then why shouldn't they use it.

You're mixing correlation and causation, and you're conflating independent variables which have very limited covariance.

Insurance companies only care about driving record to the extent that it indicates risk of paying out more in claims. In the same way, they only care about credit score to the extent that it indicates risk of paying out claims.

As long as the segmentation and the math/underlying data for setting rates is actuarially correct (so that they're not jacking up rates by 50% when the correlated risk adjustment is 10% (for example)) why is this such a big deal ?

On the other hand, knowing how the actuaries have screwed up the gov retirement funds, there is a huge concern with the specific competency of any actuaries hired by the state and used to analyze the insurance co submissions so that rate hikes are substantiated.

Remember the underlying problem with the financial crisis is that through the CRA, Fannie Mae and Freddie Mac, the gov risk arbitrators didn't have the horsepower to recognize the underlying risks of their transactions.

Communications guru said...

I don’t believe there is “ statistical correlation between credit score and claim history,” and even if there is, it’s still discriminatory.

No, Insurance companies care more about profit above all else.

Do I remember the underlying problem with the financial crisis?” Yes, and it had more to do with Wall Street’s unfettered and unregulated greed.