Michigan Insurers Can Use Credit Reports

Since 2005 Michigan Gov. Jennifer Granholm’s administration has attempted to prevent insurance companies in the state from using customers’ credit scores to determine their premium rates.

On Thursday, July 8, 2010, however, the Michigan Supreme Court ruled that the state’s regulators do not have the authority to label and ban the practice as discriminatory, thus handing the insurance industry a major victory.

Insurers and their advocates insist that customers with solid credit ratings file fewer claims and are thus deserving of lower rates than their counterparts with poor credit scores. In a 4 to 3 ruling, the Court agreed that companies can offer lower rates based on credit reports.

In the majority opinion, Justice Maura Corrigan wrote, “It is difficult to see how offering discounts to come insureds on the basis of good insurance scores is inconsistent with the (law’s) general purpose of availability and affordability of insurance for all consumers.”

The director of the Insurance Institute of Michigan, Peter Kuhnmuench, representing 39 companies, said, “This decision is a win for Michigan policy holders. Insurance carriers will continue to be able to offer discounts to policy holders who are less likely to have a claim.”

Chief Justice Marilyn Kelly and justices Diane Hathaway and Michael Cavanagh were in agreement with the regulators. Kelly wrote, “I would . . . hold that the uncertainty surrounding the accuracy of credit reports is evidence per se that a classification system based on those reports is unreasonable.”