Auto insurers illegally charge women more in Michigan, study says

A group defending Michigan's auto insurance system says it has uncovered instances of insurers illegally selling more expensive policies to women and widowed drivers, raising questions about state oversight of rating practices as the industry pushes lawmakers to contain high premiums.

State law prohibits insurance companies from basing rates on sex or marital status. But an expert for the Coalition Protecting Auto No-Fault - a group of health care providers and plaintiffs' attorneys - said at least three insurers are doing so.

Doug Heller, a California insurance researcher, found the discrepancies in online quotes and, in one case, an insurer's own filing with the Michigan Department of Insurance and Financial Services. San Francisco-based Esurance and Ohio-based Progressive, he said, charge women in Detroit with perfect driving records as much as 33 percent and 38 percent more than men with the same record, vehicle and address despite evidence that women are safer drivers. His study discovered similar pricing in Brighton, a city between Lansing and Detroit.

Liberty Mutual, based in Boston, applies a 5 percent surcharge on drivers who become widowed, regardless of their sex. Premiums at Progressive and Esurance drop for men who are widowed, according to the findings, which prompted Democratic lawmakers to criticize the insurers.

"It's both a failure on the part of the department to not find this, but also it's part of what comes along with a weak regulatory system," Heller said, noting that Michigan requires vehicles to be insured and that women are generally safer drivers. "There's a special obligation on the part of the state to go through these filings and check for compliance."

But state regulators appear unlikely to initiate a probe on their own.

"DIFS is not aware of any open complaints regarding illegal rating practices but monitors company compliance on a continuous basis," spokeswoman Andrea Miller said.

A consumer complaint would need to be filed before the state can investigate, she said. Miller said that while the law bars insurers from using sex or marital status as rating factors for policies issued on an individual basis, policies issued on a group basis are exempt.

Heller said he examined individual policies, not those offered to members of groups or associations. CPAN is exploring if it can bring complaints against the companies.

The study's release in recent days came as legislators returned from a summer recess and a month after no-fault advocates issued findings showing that good drivers can face higher premiums if they have working-class jobs, less education or rent their home rather than own it. While the use of those non-driving factors is legal, CPAN hopes to draw attention to other reasons it says Michigan has some of the highest auto premiums in the U.S.

Insurance executives blame the state's unique requirement that drivers buy unlimited personal injury protection coverage, a cost that is exacerbated by a provision letting health providers bill auto insurers much more than regular health insurers for the same medical services. Republican legislative leaders and Gov. Rick Snyder want to enact auto insurance changes by year's end, though reforms have been elusive for years.

"We think it's important that as the Legislature looks toward reforming auto insurance, any changes that are made need to be about fairness and affordability," CPAN spokesman Josh Hovey said. "Let's go into this debate with our eyes wide open about all the challenges the system has."

The insurance industry, however, questioned CPAN's motivations, saying its members profit from a "broken" no-fault system.

"This latest 'study' is a distraction from real reforms that could lower the cost of auto insurance, including: cracking down on rampant fraud and scams that cost families hundreds of dollars each year, adopting a fee schedule to rein in outrageous medical costs and giving consumers the freedom to choose a level of medical coverage that works best for their family," said Dyck Van Koevering, general counsel for the Insurance Alliance of Michigan.

Hovey countered: "Holding insurance companies to follow the law and charge people fairly isn't a distraction. It's a consumer right that everyone should have."

The accused insurers defended themselves and said insurance pricing is highly competitive.

"Our rating factors are actuarially justified and in compliance with all state laws and applicable insurance statutes," said Progressive spokesman Ron Davis.

"Our pricing is based on many different factors used to determine overall risk, and we work closely with state regulators to ensure we're in compliance and using approved risk-based rating criteria," Esurance spokeswoman Dolleen Cross said.

Liberty Mutual, spokesman Glenn Greenberg said, "looks at dozens of factors when determining a customer's overall risk, all of which must comply with state insurance regulations."