Appeals court rejects credit-based insurance rates; Case heads to Supreme Court

Chris Rizo Aug. 22, 2008, 11:00am

Michigan Supreme Court building

LANSING, Mich. (Legal Newsline)-Insurance companies may not continue using customers' credit ratings to help set home and auto policy premiums, the Michigan Court of Appeals ruled Friday.

The 2-1 appeals court decision reverses a 2005 ruling by a Barry County trial judge who said insurance companies could use credit information to set individual rates.

State regulators sued saying the practice is unfair to, among others, lower income earners and young policy holders who might not have established credit.

Typically, those insureds with good credit receive better rates than do those with less than desirable credit scores.

An appeal to the Michigan Supreme Court is expected. However, in the meantime insurance companies may continue to use credit scores to help set rates pending the outcome of the case.

In its majority opinion, the appeals court said: "The order and injunction of the circuit court is vacated and the stay imposed on enforcement of the Rules is lifted. We do not retain jurisdiction."

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