October 10, 2005
October 10, 2005
LANSING – Governor Jennifer M. Granholm and members of the House and Senate Democratic Caucuses today announced a comprehensive reform package to address the rising cost of insurance in Michigan. The multi-part package will lower the cost of insurance, strengthen consumer protection, and improve industry accountability.
“Affordable, reliable insurance is a critical part of our families’ financial security,” said Granholm. “I am proud to stand with my Democratic colleagues in support of a package that will reduce rates for all customers in Michigan, ensure fairer treatment and greater accountability.”
The Democratic package consists of twenty specific initiatives that will strengthen regulations to bring fair, affordable, and accessible auto and homeowners’ insurance to Michigan citizens. The package addresses three primary areas of concern: rates, consumer protection, and industry accountability.
“For too many years, Michigan law has focused mainly on making insurance available to everyone,” said Senator Martha G. Scott (D-Highland Park). “What good is access to a product that you cannot afford? It’s time we do something to bring down the cost of insurance.”
A recent report by the National Association of Insurance Commissioners on the average cost of auto insurance rates found that rates in Michigan are the tenth highest in the nation and the highest in the Midwest. The Democratic reform package will reduce the cost of insurance for everyone in Michigan by:
• requiring insurance companies to immediately roll back rates by 20 percent;
• providing stronger tools to the Insurance Commissioner in determining where rates are excessive and ordering refunds where found;
• providing flexibility in setting base rates to provide more affordably priced insurance;
• prohibiting insurance companies from using an individual’s credit history or credit score for determining insurance rates.
“We are in desperate need of insurance reform,” said Representative Morris Hood III (D-Detroit). “Insurance companies must be accountable for the unaffordable rates they charge. It is time for them to open themselves up to the public and base their rates on fair, objective criteria. These bills will help ensure that the insurance industry treats all consumers fairly.”
The comprehensive plan outlined today provides a series of new consumer protections that recognize the unique and fundamental role that insurance plays in society. The plan will protect consumers by:
• establishing an Office of Insurance Ratepayer Advocate dedicated solely to representing and protecting the interests of insurance consumers;
• creating new consumer awareness programs and educational material to help identify actions consumers and community leaders can take to reduce rates;
• prohibiting insurers from being able to deny coverage to a driver with no evidence of prior insurance;
• protecting the legal rights of consumers to bring action against an insurance company that breaks the law and to receive all benefits due to them.
“Insurance is often the lifeline that provides financial stability in times of tragedy or crisis,” said Senator Buzz Thomas (D-Detroit). “To protect consumers we must hold insurance companies to higher standards.”
A series of legislative changes and judicial decisions in recent years have limited both the Insurance Commissioner’s and the consumer’s ability to hold insurance companies accountable for their actions. The Democrats’ comprehensive reform package will hold the industry to higher standards by:
• requiring insurance companies to deal fairly with policyholders who file a claim by providing them with a cause of action against an insurance company that fails to negotiate and settle an insurance claim in good faith;
• requiring a clear, complete and accurate explanation of all charges on a consumer’s insurance bill;
• requiring disclosure of producer compensation information to ensure consumers are provided the information necessary to understand the manner in which brokers are compensated for the sale of insurance products;
• requiring insurers to send annual reports to the Office of Financial and Insurance Services (OFIS), summarizing certain claims data;
• increasing civil and criminal penalties for violations of the Insurance Code.
“This comprehensive reform package will reduce rates and provide my office with the tools necessary to ensure that consumers are protected and treated fairly,” said OFIS Commissioner Linda A. Watters.
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