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Michigan no-fault deal stops rate setting based on gender or education level

Education plays role

Auto insurers typically offer discounts to motorists with higher levels of education. Under a deal cut this week, insurers will not be able to use non-driving factors like gender, credit score and education. Below are AAA's proposed 2019 discounts for education – before the proposed law change.

Education level Discount
No high school diploma or GED no discount
High school diploma or GED 2 percent
Vocational/Trade school degree 3 percent
Some college 6 percent
Currently in college 6 percent
College degree 9 percent
Graduate work or degree 10 percent

Source: AAA filing with state

For decades motorists across Michigan have paid higher or lower auto premiums based on where they live, whether they are a man or a woman, or are a doctor.

On Friday, Gov. Gretchen Whitmer, a Democrat, and the GOP-led legislature agreed on broad reform of the state’s costliest-in-the-nation auto insurance, and part of the deal calls for the elimination of many non-driving factors like credit score, gender, education and occupation.

For some, that will bring relief – for others, a lost discount (though proponents say all motorists will see overall rate reduction).

Related: What the no-fault auto reform deal means for Michigan drivers

For instance, under the current law:

  • If you are a college grad or, better yet, a PhD, AAA gives you a 9 or 10-percent discount.
  • If you are a 20-year-woman, Progressive hit you with less of a young-driver penalty than they do for a 20-year-old man.
  • If you have good credit or own your home rather than rent it, some insurers, like Auto-Owners, cut you a break.

Under Friday’s landmark deal, auto insurers will no longer be able to use those factors, as well as marital status.

But though the legislation says a person’s ZIP code cannot be used, it still allows for variation among geographies. AAA, for instance, uses census tracts, which are typically smaller than ZIP codes.

Related: Bipartisan Michigan auto insurance deal reached between Whitmer, Republicans

Bridge Magazine looked through the documentation that auto insurers must file with the state to see what factors currently exist. They show, in great detail, the different factors –  discounts or surcharges – that insurers apply to motorists. Others are so complicated it’s difficult to determine the impact of the factors.

What they do not show, however, is the justification for why a high school dropout should not get a discount that a lawyer or doctor would. Or why a 52-year-old woman would pay 50 percent more for towing service than a 52-year-old man.

Insurers look closely at tickets and crashes –  rewarding good drivers and punishing those with claims and bad records. Also factoring in: the vehicle itself, including its age and what brand and model.

But they also consider a wide-ranging number of factors that have irritated motorists and legislators for years. In Detroit, State Rep. Sherry Gay-Dagnogo, D-Detroit, has bristled at the non-driving factors that she says wrongly punish poor Detroiters with high auto insurance rates.

Insurers have long defended non-driving factors as accurate predictors of claims and costs.

One of the most common complaints: Motorists in Detroit pay higher rates that punish them for being poor, pushing rates so high that many either register cars at addresses in the suburbs or drive without insurance.

For personal injury protection, mandatory for motorists and the most expensive part of a premium, residents in parts of Detroit are quoted prices that are pay triple or more, surcharges that are common from carriers that include Auto-Owners Insurance Compay, AAA and Progressive.

Meanwhile, AAA gives motorists in Lowell, a suburb of Grand Rapids, a 67 percent discount for PIP.

Geography a driver in car insurance rates

Motorists in Detroit and much of the metro area -- as well as those in the Flint area -- are charged substantially more for car insurance because of where they live. Here is the territory rate map for AAA from 2017; other carriers show similar territorial rate differences.

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