Abolish Insurance Redlining in Michigan

Introduction: Insurance Redlining in Michigan is out of control. Laws have been passed giving Insurance Companies greater freedom to continue Redlining. In fact, The Consumer Protection Act has been rendered useless. A few steps have been taken, like Our Govenor Granholm has created An Insurance Czar. Also, as noted in the following; The Senate Democratic Caucus formed its Consumer Protection Task Force. Chaired by senators Gilda Z. Jacobs (D-Huntington Woods) and Martha G. Scott (D-Highland Park), the task force will hold hearings across the state to
take testimony on insurance reform.

"Insurance reform is a top priority for our caucus," Sen. Jacobs said. "From the large
volume of constituent calls to our caucus, it is clear that Michigan citizens are looking for
answers to questionable rates and practices promulgated by the insurance industry.

For some folks, the issue is auto insurance related. For others, it's home and health insurance. We want to hear from all these concerned people. Their input is essential to the
development of legislation to address these issues."

Sen. Scott said, "The citizens of Detroit have been dealing with redlining for far too long. We understand that this issue is not exclusively a problem plaguing the city but many communities across the state. Now is the time to work with our new insurance commissioner to resolve redlining and other long-standing insurance problems and create a fair and level playing field for everyone in Michigan.

As noted on May 16, 2002 then Attorney General Jennifer M. Granholm released the results of a statewide survey
her office conducted into the practice of insurance redlining in Michigan. In releasing the results - which showed disparities in auto rates of up to 17 percent in cities with similar
population sizes and auto theft rates, but with differing racial make-ups - Granholm announced that she has asked the insurance providers for an explanation of the rate differences.
She said: "The findings of the study are compelling - and disturbing - to say the least. The time has come for the industry to be more up front with their customers. Consumers pay
thousands of dollars a year to keep their homes and cars insured - they deserve to know how their rates are calculated." "Redlining" in the insurance industry is a discriminatory practice in which insurance
companies restrict the availability of insurance to people in particular geographic areas. In recent years, it has also been associated with the practice of tying credit scores to
insurance rates. Since redlining based solely on racial factors is illegal, Granholm has asked the insurance companies for an explanation of the rate disparities her study found.
Granholm's office reviewed 60 auto insurance quotes obtained for six pairs of Michigan cities that were similar in size and auto theft rates, but had different racial compositions.
The results showed that in five out of the six city pairs, the same individual in a community with a sizeable African-American population paid a higher rate by an average of 14
percent. The unscientific study compared insurance rates for a 33-year-old single, female home-owner attempting to insure a 2001 Chevy Cavalier in Madison Heights and Inkster; Burton and Oak Park; Sturgis and Albion; Dearborn and Southfield; Taylor and Pontiac; and Melvindale and Benton Harbor. Staff requested on-line insurance quotes from Allstate, GMAC Insurance, Progressive Insurance, Geico, and Esurance.com.

A second study, using the same female and the same auto, compared rates between neighborhoods in the city of Detroit versus its border cities. The follow-up survey demonstrated average disparities of nearly 30 percent between rates based on addresses as
close as a few blocks away. In one instance, the six-month premium to insure the Cavalier at a Detroit address on Jefferson was $5,000, more than 67 percent higher than the
premium to insure the same automobile at a Jefferson address just a few blocks away in Grosse Pointe Park.
Granholm began the study - and a general review of discrimination in the financial industry - earlier this year after her Consumer Protection Division received a number of consumer
complaints regarding potential insurance redlining and the use of credit scores in insurance rate setting. Recent court decisions and changes in Michigan law, however, have stripped the Attorney General's office of its ability to use the Michigan Consumer Protection Act to
challenge potentially unfair business practices in the insurance industry. Granholm forwarded the study results - and complaints received by her office -to Michigan Insurance Commissioner Frank Fitzgerald for his review and analysis earlier this month.
Granholm asked Fitzgerald to join her in encouraging the insurance companies to interject more transparency into their rate-setting and suggested that the two work together to explore the practice of using credit scores to set insurance rates. In her letter, Granholm said: "...The lack of transparency within the industry will continue to erode public confidence and increase public skepticism concerning industry underwriting and rate-setting practices. I look forward to working with you on these
issues..."

And Finally, our various local government representatives are holding many townhall meetings across the state to discuss Insurance Redlining.