On March 5, 2009, I received two different e-mail communications.  The first contained 2008 year end results for one of the insurance companies that I represent. An erupt follows:

“Here are the year-end combined ratios for the some lines of business:                  

                        Personal Auto                       117.2

                        Homeowners                         110.7

Clearly, our challenge lies in the personal lines numbers.  We continue to believe that market rates are grossly inadequate.”

The second was a comment from the agents association observations to the insurance company’s reaction regarding Gov. Granholm’s request to freeze auto rates for the next 12 months.

“To date 12 out of 100+ companies have “pledged” to comply with the Governor’s request for a voluntary auto rate “freeze” as listed on OFIR’s web site.

The collective market share of those 12 companies would appear to be minimal.

We also understand that at least five companies have had filings for personal auto rate increases rejected by OFIR. Under Michigan “file-and-use”, at least one of those companies whose rate filing was retroactively “disapproved” has temporarily ceased issuing personal auto policies until its systems can revert back to the previous rates.

The reason for the rejection cited in at least two instances is for the “unfairly discriminatory” use of unreliable data from credit reporting agencies. The argument apparently is that since some credit reports have contained errors, the use of insurance scoring per se is unfairly discriminatory. Perhaps this is OFIR’s stand-in for banning the use of insurance scoring while everyone waits to hear whether the Michigan Supreme Court will hear case on appeal?”

Clearly there is a difference between the Governor’s hope to reduce insurance rates and the industry’s need for adequate rates to stay open to new business and profitable.  Michigan has higher than average auto insurance rates as we have the absolute broadest insurance coverage in the United States.  No other state requires unlimited medical benefits for auto related injuries. This is a unique and important benefit.  There are over 100 companies actively soliciting new auto insurance business in Michigan.  We have a free and competitive market that works.  With the Governor “freezing rates”, imposing a ban on credit scoring, or limiting the insurance companies ability discount rates for the best clients we all lose.  Average rates will increase, competition will decrease and Michigan will be a less desirable place for insurance company’s to do business.  Here is another example of a working free market system that the government wants to “fix”.  Insurance need to be available and affordable and the rates should represent the risks.