Credit score influences auto insurance rates in Michigan more than any other state


In almost every state, your credit score affects how much you pay for car insurance.

But according to a new insurancequotes.com report, that matters more in Michigan than anywhere else.

According to the study, a hypothetical driver – with the same background and demographics other than credit score – with fair credit pays 89.6% more than a driver with excellent credit. The disparity swells even more when that driver goes from fair credit to poor credit – to 229.4%.

Although insurance companies question the underlying data and methodologies of some of these studies, similar research seems to confirm the outsized impact of credit scores on Michigan auto insurance rates, although some numbers differ.

One March 2018 nerdwallet.com study found that Michigan drivers with bad credit pay $5,571 more than drivers with good credit, a whole number disparity greater than in any other state. A 2015 Consumer Reports Watch when asked, Michigan drivers with low credit pay about $3,000 more; again, the greatest disparity of any state.

Insurers do not use ratings from major credit bureaus to determine creditworthiness. It’s based on the same information, but uses a different model to determine who is most likely to file a claim.

The role that non-driving factors such as credit scores play in rising auto insurance rates in Michigan plays into the larger and everlasting debate about reforming America’s auto insurance laws. State.

This talk has warmed considerably over the past two years, largely due to Detroit Mayor Mike Duggan’s aggressive efforts to change these laws. Duggan and a group of drivers from Detroit filed a federal complaint on the issue last week, blaming Michigan’s current no-fault system for making rates unaffordable.

State Rep. Sherry Gay-Dagnogo, D-Detroit appeals to Duggan and other leaders to focus more on the role non-driving factors play in driving up rates, especially for Detroit drivers. She says using factors like credit scores and zip codes to determine rates amounts to a discriminatory tax on the poor.

“It’s time to open up the conversation to look at all the factors that create these exorbitant rates,” Gay-Dagnogo said. “Non-driving factors are a big part of that. And [using] credit scores really target people who are dealing with the effects of poverty.

“We have to think about people who are locked into neighborhoods, who are locked into a cycle of poverty, and these issues, these non-driving factors are hurting them and the red line is hurting them.”

But the state insurance industry says credit-based scoring does not contribute to the high overall cost of insurance. He champions the practice as a proven way to assess risk and predict who will file expensive claims.

“We found a very strong correlation between these insurance scores, which are based on your credit history, and insurance loss,” says Peter Kuhnmuench, executive director of the Insurance Alliance of Michigan.

Kuhnmuench says calls to ban the use of non-driving factors like credit to determine rates won’t help most people or reduce the overall cost of car insurance.

“If you ban the use of credit score in Michigan, you haven’t reduced the cost of insurance one penny,” Kuhnmuench said. “All you did was demand better insurance risks to pay more.”

Kuhnmuench could not explain why auto insurance rates seem to be more credit dependent in Michigan than elsewhere. But he says the conversation around lower auto insurance rates should focus on three main cost drivers: tackling fraud in the system; establish medical fee schedules for hospitals limiting what they can charge for treating car accident victims; and provide Michigan drivers with lower-cost insurance options with less medical coverage, allowing some to opt out of Michigan’s current unlimited medical coverage for accident victims.

A 2017 Bridge magazine survey found that personal injury protection costs are primarily responsible for rising auto insurance rates in Michigan, and that “motorists in Detroit and much of the metro area – as well as those in the Flint area – are charged a lot more for auto insurance because of where they live.”

Reports consistently reveal that Detroit is the most expensive city in the nation to insure a car, costing over $5,000 a year.

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