LANSING – Insurance companies doing business in Michigan would have to rollback both automotive and homeowner rates by 20 percent, and the use of credit scores for setting rates would be banned under a multi-part insurance plan Gov. Jennifer Granholm and legislative Democrats are set to announce on Monday.

According to sources, who would not be identified, the proposal will include 14 bills that would deal with assessing levels of competition to set rates, allow the Michigan Automotive Insurance Placement Facility have greater flexibility to set rates, and require open meetings for the Michigan Catastrophic Claims Association.

There would also be several executive actions, including creation of an advocate for insurance ratepayers.

Liz Boyd, spokesperson for Granholm, said only that the package represents a fair compromise because it was clear some reforms were needed in the industry.

The full package is to be released at press conferences in Lansing and Detroit on Monday, where the governor will appear, as well as in press conferences by Democratic legislators in Flint, Saginaw and Southfield. The press conferences come one day before Sen. Martha Scott (D-Highland Park) is scheduled to host a rally on insurance and the effect of high rates on residents in Detroit at the Capitol.

For more than a year, every day she has been in Senate session, Scott has made a statement attacking high insurance rates and calling on the Legislature to do something to help bring the costs down. Sen. Burton Leland (D-Detroit) said he has heard from his constituent that no other factor plays a greater role in the decision of residents to leave Detroit.

The proposal will focus on three different areas: rate reform, consumer protection and insurance company accountability.

Some of the issues have been evergreen among Democrats, especially demands that the MCCA – which establishes a rate all auto insurance customers must pay to cover the cost of unlimited medical insurance – conduct open meetings and be subject to freedom of information requirements.

On the use of credit scores to set rates, Financial and Insurance Commissioner Linda Watters promulgated a rule earlier this year outlawing the practice. The insurance industry sued and won a ruling stopping the rule in Barry Circuit Court. Briefs are still being filed in an appeal to the Court of Appeals and arguments have not been scheduled yet.

Pete Kuhnmuench of the Insurance Institute of Michigan said the industry could be supportive of a proposal similar to legislation sponsored in the 92nd Legislature by former Republican Rep. Mary Ann Middaugh that regulated the use of credit scoring. That would set limits on the practice while still allowing its use, he said.

The insurance industry has said an individual’s credit score may be a good indicator how much of a liability a person could be, but critics have said there is no relationship between insurance risk and credit scores.

The rollback, Kuhnmuench said, is “incomprehensible” and goes against Ms. Watters’ own findings on insurance rates. According to a report, Kuhnmuench said, OFIS found that since 1994 the home insurance industry in Michigan has had a higher loss ratio than other states. The average return on investments was a negative return for homeowners’ coverage, he said.

Auto insurance has also shown a higher than average loss, he said, and, while its rate of return was not a negative, it was lower than average.

But Boyd said the 20 percent rollback is “a reasonable compromise” given the profits the industry had seen and the rate increases that had been charged over the last several years.

Among other parts of the package would be provisions that would allow the Michigan Automotive Insurance Placement Facility – the so-called insurer of last resort that assigns coverage to drivers whose records keep them from getting coverage in the open market – to set lower rates.

Other provisions would also end the current requirement that an absence of competition be shown in an area before rates be declared excessive.

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