Michigan takes center stage in congressional hearing on auto insurance

A U.S. House panel hearing Wednesday on discrimination in auto insurance and loan rates took a familiar turn, with Michigan playing a key role.

The debate in the U.S. House Financial Services Subcommittee on Oversight & Investigations was similar to discussions in Michigan’s Legislature, with Republicans pointing fingers at Michigan’s one-of-a-kind no-fault system for high insurance rates in the state.

Democrats, led by U.S. Rep. Rashida Tlaib (D-Detroit), said that red-lining by ZIP code was the real culprit. Democrats noted that women and people of color are particularly impacted by discriminatory loan and insurance practices.

Tlaib and state Rep. Tyrone Carter (D-Detroit) last week held a news conference in Detroit criticizing the use of credit scores to set car insurance rates.

Tlaib questioned one of the experts on the panel, Joshua Rivera, a policy advisor from the University of Michigan’s Poverty Solutions program.

“Would it surprise you to know that a driver with a DUI [driving under the influence] and good credit score will pay less in auto insurance than a driver with no DUI and a good driving history but has a decent credit score [that is] not so great?” she asked.

Rivera said he “was shocked” to discover that in his research.

The ranking Republican, U.S. Rep. Andy Barr of Kentucky, did note that Michigan has the highest auto insurance premiums in the nation. He said the “high prices in Michigan reflect decisions by the state Legislature and the insurance commissioner.”

Echoing the sentiment of many Michigan Republicans, Barr said that “insurance experts have drawn a direct correlation between the no-fault insurance law and Michigan’s high rates,” since the system provides for unlimited lifetime medical benefits.

“The key to lower prices is free markets,” he said.

During her line of questioning, Tlaib said she knows of a woman who worked at Beaumont Hospital for 25 years and saw her auto insurance rates go up $350 after she retired because it hit her credit score. She added that the woman is now driving less and not getting any tickets.

“How is this legal?” Tlaib asked. “How is this possible?”

“Many Americans, their credit score is influenced by factors out of their control — a family emergency, loss of a spouse, getting behind because the high cost of college,” Rivera said.

Tlaib said that the argument is that people with lower credit scores are more likely to make a fraudulent claim. She asked, “Isn’t that discrimination” toward poor people?

“Yeah, I believe so,” Rivera said.

Tlaib said that residents who live on Mack Avenue in Detroit pay $3,000 more than their neighbors across the street in Grosse Pointe. She asked James Lynch, chief actuary and vice president of research and education for the Insurance Information Institute, why that was.

“It’s because of how the territories have been drawn,” said Lynch.

Tlaib said it’s based on ZIP codes, “not driving history.”

She said that “even though we’re talking about this being like a white-Black issue — we talked about this — I don’t see this as a white-Black issue anymore. I am talking to people and it’s true — African Americans in my district pay a lot more.”

Tlaib added that 97 percent of Michigan ZIP codes “pay unaffordable insurance rates” and it has “nothing to do with no-fault.”

She said high insurance rates aren’t just an issue for Michigan and “the use of non-driving factors is really putting more people in poverty.”

Subcommittee Chair Al Green (D-Texas) noted at the beginning of the hearing that almost every American household has at least one car.

“I think that we owe it to ourselves, as a country, to make sure every person is treated fairly when making a purchase,” Green said.