So, Not Bad Faith?
A majority of the Michigan Supreme Court in a confusing cluster of opinions apparenty resulting in a 4-to-3 decision, has ruled that in Michigan at least, Insurance Companies can base their Premium Rates on applicants' credit scores. The use of credit scores that are contained ordinarily in credit reports (called "insurance scoring" in the opinions) to calculate Premiums is not affirmatively prohibited by the Michigan Insurance Code, the Michigan Supreme Court ruled in this case. Download Insurance Institute of Michigan, Hastings Mut., Farm Bureau Gen., Frankenmuth Cas., et al v. Commissioner (Mich. Consol. Case Nos. 137400 and 137407 Opinion Filed July 8, 2010). Accordingly the use of credit scores or "insurance scoring" is permissible to calculate Premiums for many different types of Insurance Policies in Michigan.
The decision is the subject of reporting by Ed White for the Associated Press in a copyrighted story, "Court: Insurance Rates Can Reflect Credit Scores" (published in Washington Post Online, Thursday, July 8, 2010). The AP report quotes a spokesperson for the Insurance Institute of Michigan, one of the named Plaintiffs and an insurance industry trade association, to the effect that this decision is good for Policyholders in their opinion.
One case, especially one decided by one vote, does not necessarily make a trend. On the other hand, the issue of underwriting Insurance Policies based on credit reports is far from resolved. The effects on increasing Premiums are potentially enormous. See generally Associated Press Copyrighted Story Published in the Los Angeles Times Online, "More Americans' Credit Scores Sink to New Lows" (latimes.com, Monday, July 12, 2010).
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