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July 8, 2010 Thursday
AIA STATEMENT ON MICHIGAN SUPREME COURT DECISION REGARDING INSURERS’ USE OF CREDIT-BASED INFORMATION
States News Service
The following information was released by the American Insurance Association:
David Snyder, vice president and associate general counsel of the American Insurance Association (AIA), issued a statement today on the Michigan Supreme Court’s 4-3 decision in (Insurance Institute of Michigan, et al v. Commissioner, Michigan Financial and Insurance Services, Department of Labor and Economic Growth) which clearly states the Michigan insurance commissioner does not have the authority to arbitrarily ban the use of credit-based information by insurers in pricing and underwriting.
Mr. Snyder’s statement is below:
We are encouraged by this decision. Today’s opinion by the Michigan Supreme Court means that most insurance consumers throughout the state can continue receiving the benefit of lower insurance premiums. At issue in today’s decision was the authority of the insurance commissioner to arbitrarily prohibit insurers from using insurance/credit scoring for the underwriting or pricing of car insurance. The court ruled that the insurance commissioner’s attempt to prevent the use of insurance scoring was invalid and unenforceable. In addition, the court ruled that insurance scoring accurately predicts risk and is not unfairly discriminatory.
In reality, the majority of consumers benefit from the use of insurance scoring through lower insurance rates. Insurance scoring is highly predictive of risk and helps increase the availability of insurance products because this tool enables insurers to accurately write virtually any risk. The vast majority of states (46) permit insurance scoring subject to regulation, including Michigan. Insurance scoring is subject to close regulation including non-discrimination provisions and actuarial standards.
July 8, 2010