Senate rejects bill that would have increased insurance rates for most Michigan residents
Wednesday, October 28, 2009
LANSING--The state Senate today rejected a proposal that would have increased auto insurance rates—some by nearly 50 percent—for three out of four Michigan drivers.
Senate Bill 166 would have prohibited territorial insurance rating, which considers geographically based risk factors when setting insurance premiums.
“Do you want your constituents to pay for auto insurance based on their own risk, or do you want them to pay to cover someone else’s risk?” Sen. Alan Sanborn, R-Richmond Township, asked his Senate colleagues before today’s vote. “It is unjust to require drivers in low-risk areas to subsidize drivers elsewhere.”
Under territorial rating, the factors used to set insurance premiums include traffic density, claiming behavior, auto theft rates, the percentage of uninsured motorists, and others. Because risk is higher in certain areas than in others, rates are higher in certain areas and lower in others.
Sanborn noted that if territorial rating were prohibited, some residents would see only slight rate increases, such as a 5 percent rise in Mount Clemens. But most others would be hit with significantly higher increases, such as a 37 percent rise in Jackson and a 46 percent jump in Lansing.
“There is no such thing as a free lunch,” said Sanborn. “The rate decreases for a few will be paid for through rate increases for the majority of residents of Lansing, Jackson and most other communities across the state.”
The auto insurance industry in Michigan would neither gain nor lose money if territorial rating were eliminated; the overall claim losses and total premiums collected would remain the same.
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