LANSING — State Rep. Isaac Robinson (D-Detroit) introduced House Bill 4651 this week to eliminate Michigan’s file and use system and require insurance companies to get approval before changing rates. The bill would also require the Department of Insurance and Financial Services to hire an additional 14 actuaries and to no longer consider competition when determining if a rate is excessive.

“Under current law, DIFS has limited authority to disapprove of excessive rates. A prior approval system with teeth is essential to ensuring long-term rate reduction,” said Robinson. “In addition to the robust enforcement, we need to solve the understaffing problem at the department. If we don’t, car insurance companies will continue to prey on Michigan’s drivers unchecked If we don’t give DIFS more authority to regulate rates, any language intending to prohibit non-driving factors may be meaningless.”

Currently, rate setting and the determination of whether a rate is excessive is determined by competition in the market. As a result, if companies all increase their rates at similar intervals, they are likely not to be determined unreasonable. California addressed this problem by prohibiting competition from being used as a metric to determine if a rate is excessive. HB 4651 would do the same here in Michigan.

          “Over the years DIFS has been stripped of its regulatory power by the Legislature and as a result, car insurance companies have been running all over Michiganders,” said Rep. Rachel Hood (D-Grand Rapids). “The department needs the necessary tools and resources to ensure Michigan drivers can pay affordable rates for auto insurance while protecting their health coverage when life does not go as planned.”

HB 4651 was introduced as part of an effort by the Realistic Equitable Auto Insurance Legislation (R.E.A.L.) Deal Caucus to aid in the overhaul of Michigan’s auto insurance. The R.E.A.L. Caucus is committed to diligently crafting legislation that will ensure long-term rate relief for Michigan drivers.

 “No one should have to choose whether or not to pay their bills and put food in their bellies,” said Rep. Jewell Jones (D-Inkster). “This issue has been going on for decades, so it's time to fix the root of the problem, and hopefully uproot many of the unfortunate systemic factors that continue to financially stress an overwhelming majority of our community.”            

In addition to restoring regulatory power to DIFS, the R.E.A.L. Deal Caucus is working on legislation to address the root causes of the high rates Michiganders pay for auto insurance by eliminating the use of discriminatory rate-setting practices such as non-driving factors and red-lining.

         “Right now, too many people in our state are priced out of diving by excessive rates based on discriminatory factors,” said Rep. Kevin Coleman (D-Westland). “Your gender, credit score, marital status and ZIP code have nothing to do with how safe of a driver you are.  House Democrats are fighting for a deal that will ban the use of red-lining and other non-driving factors because that is how we will be able to protect our citizens.”

          “Throughout our nation, car insurance is a required product to drive legally. When insurance rates are based on where you live, your credit score, your age, your gender and numerous other factors the result is in many cases discriminatory,” said Rep. John Cherry (D-Flint). “It results in a hidden tax on the poor,  those who live in urban communities, women, the young and the old. If we limit the factors that health insurance companies use to set rates; we should also limit the factors that car insurance companies use to set rates.”

HB 4651 was referred to the House Insurance committee for further consideration.