The Rating Game

How Auto Insurance Giants’ Pricing Practices Drive Up Rates for Safe Drivers Across Michigan

All drivers must buy auto insurance, but insurance companies raise rates on good drivers based on personal and economic characteristics

Every driver in Michigan – whether rich or poor, married or single, male or female – must buy auto insurance. Although the state regulates consumer behavior with this mandate, the insurance companies that sell coverage have been allowed to price policies however they want. As a result, insurance companies slice and dice and price Michiganders in ways that are unfair to safe drivers, including:

  • Higher premiums for good drivers with working class job titles than to white collar professionals
  • Higher premiums for good drivers with high school diplomas than those with master’s degrees
  • Higher premiums for good drivers who rent their home rather than own it
  • Higher premiums for single women than single men
  • Higher premiums for widows than married drivers
  • Higher premiums for good drivers with good, average, or poor credit scores than those with excellent credit scores

Other insurance company pricing strategies hamper Michigan’s goal of ensuring that all drivers have coverage

Research conducted by CPAN has found that insurance companies either dramatically increase premiums or refuse to insure drivers who have had a break in coverage, even if the break was due to military service. For example:

  • One major insurer quotes a 5% higher premium to service members who had a break in coverage while on active duty than to civilians with no break in coverage
  • Another major insurer refuses to provide an online quote to service members who had a break in coverage while on active duty
  • Several insurers surcharge good drivers between 12% and 63% if they report having had a break in coverage, even if they have never caused an accident, gotten a ticket, or filed a claim

Allowing insurance companies to raise premiums by hundreds or thousands of dollars, or deny coverage to people trying to re-enter the insurance market and comply with the law, adds additional barriers to coverage and leaves many safe drivers uninsured.

Punishing lower‐income good drivers limits economic opportunities, leads to increased levels of uninsured motorists, and raises premiums for all Michigan drivers

When basic insurance prices unnecessarily rise for safe drivers because of non-driving related factors, many working families, the unemployed and underemployed, single women, and others struggling financially either cannot drive or they drive uninsured. Choosing not to drive dramatically limits economic opportunity, while driving uninsured exposes motorists to fines, license suspension, and possible jail time.

These pricing practices also weigh on drivers who purchase coverage. With as many as a million or more Michigan drivers uninsured, and more simply not driving because insurance is unaffordable, drivers paying for coverage face higher rates. When so many good drivers are squeezed out of the insurance pool and risk is not as widely spread as it could be, those in the market pay higher premiums. More fairness in pricing would make the market affordable to more Michigan drivers, which would help lower premiums for everyone.

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