The Following Statement Should be Attributed to NAMIC State Affairs Manager Erin Collins
In her State of the State Address on Tuesday, Gov. Jennifer Granholm called “upon every auto insurance company to freeze rate increases for 12 months while the Legislature works to enact comprehensive insurance reform."
As a basis for her instructions, the governor relied on the 2008 annual report issued today by Michigan Insurance Consumer Advocate Butch Hollowell. The assertions made in the report are highly questionable and disregards research and scientific data on topics such as credit-based insurance scoring and the affordability of insurance products. Hollowell's report claims statistics used by the industry are inherently tainted and contrived.
NAMIC cautions the Legislature and governor to tread carefully regarding Hollowell’s recommendations. There are multiple assertions in the report relating to affordability, underwriting, and profitability that are not substantiated by scientific data and in most cases give only a portioned view of the insurance market in Michigan.
The governor’s recommendations are premature and dangerous. Michigan has more than 55,000 jobs invested in the insurance industry. In such a tenuous economic time, the governor's recommendations would make Michigan one of the most arduous and least attractive insurance markets in the country and could threaten the future existence of insurance jobs.
The Michigan Insurance Consumer Advocate’s report cites a rise in premiums without comparing them to the obvious and staggering rise in costs of vehicles, accidents, and every other factor considered in premium determination.
Both Granholm and Hollowell criticize the industry for growth of premium during the last 20 years. In 1989, the average price of a car was $15,350 while in 2008 it was $28,715 – an increase of 87 percent. Milk was $2.62 per gallon in 1989 and today is $3.38 – a 29 percent increase. Does the governor want to freeze these prices, too?
Of course, insurance is going to cost more. By the governor’s own numbers, the average increase is 3.45 percent per year since 1989 – hardly staggering. In fact, in direct conflict with the governor's and Hollowell’s assertions is a National Association of Insurance Commissioner’s report finding that for the two-year period of 2004-2006, Michigan average premiums declined 6 percent.
NAMIC urges the Legislature in the strongest terms possible to gather a complete set of facts regarding Michigan’s insurance markets before setting a course of action. The cost of business in Michigan is one of the highest in the country due to alterations to no-fault, the rising costs of health care, and absence of Personal Injury Protection reforms.
Acting without the benefit of a complete set of facts would ultimately raise costs for business and citizens, and potentially jeopardize jobs. The Advocate’s assertions of fact must be thoroughly vetted considering an industry response, true scientific data and independent research, and crucial expert testimony before lending any credence to the recommendations set forth in the report.
The governor’s instruction is a critical error. She’s erroneously placed too much faith in an opinion report that will negatively impact both her citizens and the vital employment that insurers bring to Michigan during this economic crisis.
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Posted: Wednesday, February 04, 2009 12:00:00 AM. Modified: Thursday, February 05, 2009 10:27:58 AM.
317.875.5250 - Indianapolis | 202.628.1558 - Washington, D.C.