Detroit, Mich. (WiredPRNews.com) Although the process through which car insurance companies calculate premium prices for customers often seems to be an esoteric matter, a recent court decision by the Mich. State Supreme Court turned that process into a topic of public debate. In the interest of conscious consumerism, auto insurance buyers may want to take note of the case in an effort to become more familiar with the factors used to assess motorists’ levels of risk.
The issue at the center of the recently decided state Supreme Court case has its roots in 1996, when Michigan car insurance companies began incorporating “policyholders’ record of paying bills, as well as their occupation and level of education” into premium rates, according to the state’s Department of Energy, Labor and Economic Growth (DELG).
The Insurance Institute of Michigan defends the use of credit scores in determining rates, stating that a number of studies have shown a clear correlation between frequency of losses and severity of claims. Among those studies is a Federal Trade Commission report on the subject, which was published in 2007, that concluded that consumers’ credit history does indeed correlate with the total amount of claims paid out through those consumers’ policies. The study, however, was inconclusive as to why such a correlation existed.
Although a number of states allow insurers to offer discounts for good credit scores, the Wolverine State’s Office of Financial and Insurance Regulation attempted to ban the practice in 2004, which was met with legal challenges. The state alleged that the practice violated a number of its insurance laws; one of the main arguments made by the state for banning the practice was that it was “unfairly discriminatory,” with the regulatory office stating, “Credit information has been found to contain such a high rate of errors that there is an unacceptable likelihood that persons will be misclassified.”
The state Supreme Court ultimately began hearing arguments for the case in October 2009. Despite the case made by the state regulatory office, the state Supreme Court in July of this year ruled that Mich. insurers could indeed continue to use credit scores as a factor when determining premium prices. Although the reasons to maintain a good credit score are vast, the ruling highlights just one more reason why Michiganders should maintain healthy credit.
Consumers wishing to learn more about Mich. insurance can go to http://www.onlineautoinsurance.com/michigan/, where visitors can also input minimal personal information in order to generate a quick and free online quote comparison.