Paul Egan

Detroit Free Press Lansing Bureau

LANSING — The cost to look up someone’s driving record is going up 38% under Gov. Rick Snyder’s 2017 budget, part of what auto insurers say is close to a $90-million hit on their industry that ultimately will impact rates.

Under the budget handed down Feb. 10, the cost of a driver record look-up will increase to $11 from $8 on Oct. 1 — a move the state says will raise an extra $14.1 million next year to help upgrade computer systems at the Secretary of State's Office.

It's the most significant fee increase in what was mostly a stand-pat budget on the revenue side. Aside from the increased look-up fee, other fee hikes recommended in the budget, taken together, amount to less than $2 million a year.

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Snyder's proposed budget also rescinds a tax-credit loophole that inadvertently gave an annual bonus to auto insurers that is expected to hit $80 million next year.

An authorized purpose is needed to get someone else’s driving record. Auto insurers and data companies such as LexisNexis are the biggest users of the service.

In 2015, the Michigan Secretary of State's Office sold 4.8 million driving records, collecting $38.6 million in revenues, spokesman Fred Woodhams said.

"The department supports this fee increase," he said. "It will support our efforts to replace our legacy mainframe (computer) system with a modern one."

Peter Kuenmuench, executive director of the Insurance Institute of Michigan, said the two budget measures amount to a double whammy on the auto insurance industry that is sure to push up auto insurance premiums.

Auto insurers will pay the vast majority of the extra $14.1 million in driver record look-up fees because they are big users of the service, sometimes buying driving records directly from the Secretary of State and sometimes from data companies such as LexisNexis, which also will pass on the increased costs.

It's wrong to assess the cost of a new secretary of state computer system to auto insurers because the system is used for much more than just driver record look-ups, such as vehicle registrations, Kuhnmuench said.

Other authorized users of the driver record look-up service include towing companies and news organizations, including the Free Press, Woodhams said.

The budget also proposes to fix Public Act 204 of 2012, which produced what state officials say was an unintended consequence when it moved the Assigned Claims Facility — a fund that acts as a safety net for people injured in auto accidents in cases where no auto insurance is available to pay personal injury claims — from the secretary of state to the Michigan Automobile Insurance Placement Facility.

The shift made auto insurers eligible for tax credits they weren't eligible for when the fund was housed in the Secretary of State, resulting in a sharp cut in how much the state collected through its insurance tax. By rescinding the credit, the state anticipates a $60-million boost for state revenue in the current 2015-16 fiscal year, and an $80-million boost in 2017.

Kuhnmuench said auto insurance premiums for 2016 are already set, based on anticipated revenues that included the tax credit, so it would be wrong for the governor and Legislature to retroactively remove it for 2016.

He also said that although it's true the tax credit was issued inadvertently, it should remain in place because it relates to the growing problem of people without auto insurance who are injured in accidents, such as passengers in a two-vehicle crash in which neither driver was insured. It' s more equitable that those costs be distributed among all taxpayers, rather than just among all insured drivers, Kuhnmuench said.

Asked why the change would have to increase premiums, rather than coming from insurance company profits, Kuhnmuench said the workers' compensation and homeowner insurance sectors are reasonably profitable, but the auto insurance sector is not, and profits from one sector can't be used to subsidize another sector.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.