Sen. Chang introduces bill for commonsense rating factors for auto insurance

LANSING, Mich. — Sen. Stephanie Chang (D–Detroit) today introduced bipartisan legislation that would bring transparency to how Michigan auto insurance companies set drivers’ insurance rates and require them to consider driving-related factors first, and weight them more heavily than other variables.

Senate Bill 88 would require all auto insurance companies selling auto insurance in Michigan to set auto insurance rates for drivers based on the (1) individual’s driving record; (2) number of miles driven annually; and, (3) years of driving experience. These three factors must be weighted with the highest weighting going to the first factor of the three and the others in descending order.

“Detroiters and Michiganders deserve a commonsense solution, and I have heard from residents for years now about how we need change,” Sen. Chang said. “We have a broken system where non-driving factors, such as zip codes and your educational level, determine whether you can afford to pay your car insurance or not because they can be weighted however heavily an insurance company wishes.”

Insurers may propose additional factors for approval, except for credit score, sex or marital status — which are prohibited as rating factors in the legislation.

Other proposed factors must have less weighting on insurance rates than the third mandatory factor, so insurers could still consider non-driving factors like zip code to set one’s rate, but these factors could not be weighted as strongly as the three mandatory, driving-related factors. This would lessen the impact that where someone lives, or what educational level they’ve obtained, has on the price they pay for car insurance.

According to insurance search engine Zebra, which tracks auto insurance rates across the country, the average annual annual auto insurance premium in Michigan is about $2,600, which is nearly twice the national average. Detroiters pay even more — $5,414 on average.

“Michigan has the highest auto insurance rates in the country, with Detroiters paying the most,” Sen. Chang said. “My bill would dramatically lessen the impact that non-driving factors currently have on premiums, making coverage more affordable for many people who currently can’t afford car insurance.”

The bill is modeled after California’s rating factor system which was put in place after the passage of Proposition 103 in 1988. According to the Consumer Federation of America, auto insurance rates decreased in California between 1989 and 2010 while the national average went up 43.3 percent.

This legislation is identical to House Bill 5419 of 2018, also introduced by Sen. Chang, which had bipartisan support. SB 88 has both Democratic and Republican co-sponsors, and has been referred to the Senate Insurance and Banking Committee.

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