Friday, November 6, 2009

Find compromise on car insurance rates

car insurance

A bill by state Sen. Martha Scott, D-Highland Park, that would ban insurance companies from using territorial ratings to help set rates was soundly defeated last week in the Republican-controlled Senate. That action, without a public hearing, was a big disappointment for Scott and for many others who believe, with reason, that insurance companies shouldn't penalize drivers for where they live.

Still, the defeat of Scott's bill should not end efforts to control unaffordable urban insurance rates. Give some credit to Sen. Alan Sanborn, R-Richmond, chairman of the Senate Economic Development and Regulatory Reform Committee, for at least acknowledging the problem and calling on the Legislature to find ways to lower rates for residents of Detroit and other cities. Peter Kuhnmuench of the Insurance Institute of Michigan also appears to grasp how unaffordable urban insurance rates have become and says he's eager to work on solutions.

It's a call legislators ought to heed. They should come to the table willing to negotiate and compromise, as should the insurance, medical and consumer lobbies. Unaffordable insurance rates have become an urban crisis, driving people out of cities like Detroit and practically forcing more than half the drivers in some neighborhoods to go without insurance, or in some cases commit fraud to secure coverage at more reasonable rates.

Paying $4,000 a year for auto insurance isn't unusual in Detroit, the nation's poorest big city. But the problem goes far beyond Detroit. Statewide, an alarming 17% of motorists drive uninsured, up from 11% in 1989. Uninsured drivers put themselves at great risk and can even reduce what insured drivers collect in accidents. Government requires people to buy insurance. It should also help control the costs.

Any solutions must be effective and politically attainable, but all sides must be willing to give. Efforts to reduce insurance fraud and encourage more customers to shop around for rates deserve universal support. The insurance industry, however, must be willing to negotiate on using credit information to help set rates -- a risk-indicating tool that critics say is discriminatory -- and must also consider restrictions on the use of territorial ratings, similar to those that were in place in the 1990s. On the other side, consumer and medical groups need to find ways to control costs. They might have to rethink Michigan's unique and mandated unlimited medical coverage, and consider a fee schedule for medical treatments and services similar to the worker's compensation system. The average personal injury claim in Michigan has more than doubled since the late 1990s.

Whatever remedies emerge from the messy political process won't be perfect, nor will they satisfy all. But continuing to do nothing about Michigan's insurance crisis is unacceptable.