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Michigan drivers pay the highest 'credit penalty' for car insurance in the U.S.

Man, driving a car, in a suit
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Michigan residents with excellent driving records but low credit scores are charged hundreds or thousands of dollars more a year for car insurance than drivers with similar exemplary driving records and excellent credit.

Drivers in Michigan face the worst credit penalty in the nation when buying car insurance, according to a study by the Consumer Federation of America.

The study finds that Michigan drivers with spotless driving records—but poor credit—pay 263% more for car insurance than those with the same exemplary driving record and excellent credit.

Report author Doug Heller says a low credit score has nothing to do with added risk for insurance companies. Heller is a nationally recognized insurance expert with 20 years of experience in the field of insurance public policy.

"When you penalize people based on their credit rather than their driving record, you're penalizing people for being poor," he said. "And that does not belong in the Michigan insurance market."

Heller said the credit penalty in Michigan is so huge, it prices many lower income drivers out of the insurance market altogether. That increases the number of uninsured drivers, something he said is dangerous for everyone on the road.

Heller also said someone with a drunk driving conviction and excellent credit is charged the same premium for car insurance as a much safer driver with poor credit.

"That's because insurance companies aren't really interested in risk or fairness," he said. "They're thinking about the customer with excellent credit who will buy lots more products, like home insurance, umbrella policies or investment services. They're willing to absorb the problems of drunk driving in order to get those customers."

Michigan's 2019 auto no-fault law banned the use of credit scores in setting car insurance rates, but not the use of insurance scores.

Insurance scores and credit scores are virtually identical methods of determining if someone has good or poor credit.

The Insurance Alliance of Michigan attacked the study as "bogus," without further explanation.

However, other consumer groups have published similar research, supporting the finding that Michigan drivers pay the highest credit penalty in the nation.

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