Skip to comments.Time to Overhaul Auto Insurance Laws
Posted on 05/01/2013 6:42:39 AM PDT by MichCapCon
Michigan is unique among states in that it has both no-fault insurance and unlimited personal injury protection for automobile drivers. That results in car insurance rates among the highest in the nation.
However, that may soon change.
Gov. Rick Snyder has unveiled a proposal to reform the law. According to the Detroit Free Press, the plan would cap benefits from the state accident fund at $1 million and could save the average family $250 per year. Under the current law, insurers are reimbursed for all costs above $500,000 from the Michigan Catastrophic Claims Association (MCCA), which is supported by an annual fee of $175 (soon to be $183) from drivers. The change would still leave Michigan with the nation's most generous auto medical coverage.
No other state guarantees unlimited, lifetime benefits. As a result of the mandate, the Insurance Industry Institute reports that the average cost per no-fault claim is $45,016 more than twice that of the second most expensive state, New Jersey. The average claim in Michigan has tripled since the year 2000.
The reason is a lack of incentives. Unlike private insurance companies and other government programs, there are limited cost controls on the amount medical providers can charge for care when it comes to injuries sustained in automobile accidents.
According to the state's catastrophic claims association, the comparative average hospital billings for the same procedures are much higher for the patients receiving no-fault coverage than those on Medicare or workers' compensation. For example, the average cost of an MRI is $484 for someone on Medicare; $766 for a person on workers' compensation; and $3,279 for an individual with no-fault coverage.
The main worry about reforming the system is for the small number of people needing lifetime medical care costing more than the state cap of $1 million. Everyone should be allowed to buy insurance guaranteeing unlimited medical care if they so choose, but if they do not, the governor's proposal would shift many of those to Medicaid. At the same time, a review of bankruptcy filings by state shows no correlation between a higher auto insurance cap and a lower rate of financial failings or lower mandated coverage resulting in a higher rate.
Catastrophic car accidents are horrible and the issue of insurance is touchy because it involves people who experience life-altering circumstances. But there is no free lunch in life or public policy and the state should strive to consider the effects on all people. And one major problem with the current system is the cost to low-income residents.
Since they have less disposable income, sky-high car insurance rates harm poor Michiganders the most. In Detroit, car insurance costs $3,059 to $8,403 per year. That makes owning a vehicle difficult, which in turn keeps many people in poverty. It's hard to have a job when you don't have a vehicle and it's hard to have a vehicle if the insurance costs are too expensive.
There are plenty of ideas for how to reform Michigan's auto insurance industry. Gary Wolfram, a Mackinac Center adjunct scholar, and D. Joseph Olson, a board member, authored a study a few years ago on the problems and some proposed solutions. In it, they summarized a main issue:
Consumers are not allowed to choose a policy that fits their risk preferences, and are forced to buy more expensive insurance than they would choose. This is a particular problem for low-income residents, who when faced with high insurance premiums may choose to evade the law and not purchase insurance. The fact that Michigan ranks so high in its number of uninsured drivers can be explained in good part by the inability of drivers to choose less expensive policies. The result of the current system has been the high cost of Michigan automobile insurance. This can be better solved by more closely aligning the incentives of those buying car insurance, the insurance companies providing it, and the medical providers caring for those who get in accidents.
With MCCA, I pay more to the state for my motorcycle than I do to the insurance company for actual coverage, even though they collect it for the state. And this is on every vehicle, even if I’m the sole driver and have more than one, like I’m driving them all at the same time.
If anything, it should be per driver, not per vehicle.
I Heartily agree, for the same reason and others (like driver claims history).
It would benefit the public for the government to work to end “routine” and “maintenance” insurance coverage for many different kinds of expenses, such as minor repairs and even routine health care coverage.
While the benefits of offering these seem to appeal to people, the truth is that they cost society more money than it can afford to pay. The worst case being in health care.
A normal, older person may see doctors 20 times a year for every petty reason imaginable. It is a boon to hypochondriacs. If they had to pay for minor care themselves, even those of means would see a doctor perhaps three times a year.
What they don’t see is that 90% of the costs of seeing doctors 20 times a year are paid for by the taxpayers and insurance premiums for everyone else.
Most older people are fine with that. “Hey we put money into the system”, leaving unstated that for every dollar they put in they are getting 50 dollars in benefits.
Importantly, doctors who refuse insurance, Medicare and Medicaid have such vastly lower expenses they can and do offer the same procedures for 50% less! Cash up front only.
And the money saved can be used for the real insurance needs that truly matter: catastrophic insurance. When you absolutely have to have insurance because the costs up front are enormous.
That was the real purpose of insurance at the beginning, and what it should be today.
It’s not really auto insurance. It’s “Lawyer Income Insurance.” The slimball lawyers manipulate and abuse every government law and regulation to their maximum financial benefit. We pay much more than we should to keep greedy lawyers in business.
In my area (TampaBay) we have so many ambulance chasers advertising in the Bay area it’s astonishing.
The most aggressive marketer of abusive lawsuits is atty John B Morgan. His advertising is prolific. He claims to be “For The People.” I can only imagine how much he is costing “The People” by taxing us through pursuit of his greedy lavish lifestyle.
We pay him indirectly through the purchase of insurances and services which must increase their costs to handle his over reaching lawsuits.
Oh, and just like John Edwards, Mr Morgan has higher ambitions with all his ill-gotten loot. He has hired our x-Florida Governor (RINO) Charlie Suntan Crist. Now there’s a match made perfect for sticking it to “The People.”
I’d like to see a reform that bases insurance rates on your actual driving record. I have had two tickets and no accidents in the last 40 years of driving, but I’m considered “high risk” because of credit problems.
Exactly. Insure the individual not the vehicle. It is stupid.
In 2009, I sent this ltter to my Senator and Congressman. (This was before I was “blown away” and forced to move out of state.
April 2, 2009
Dear Senator Sanborn,
This morning, while listening to US Rep. Candice Miller on WJR, she was discussing the “cash for clunkers” proposal going through the US Congress. While I think the idea has some merit, let me explain why I will not be able to participate.
I am the sole breadwinner for my family of six and I make a healthy income. However, I drive older used cars and always have. We own three cars. Mine is a 2001 Mercury, My wife has a 1999 Chevrolet van and my daughter has a 1999 Mercury Sable. (note the pattern of American cars?)
Currently, Michigan has a very onerous policy of charging extreme rates for insurance. When my daughter bought her well used car, our rates immediately doubled to over $2400 per year. That is for PLPD on each car. No collision or comprehensive coverage. Through some good shopping and assistance by our insurance agent, we were able to find another insurance company based in northwestern Michigan that lowered the rate to about $1400 per year.
For the record, in a collective 63 years of driving, members of my family have received one moving violation and zero accidents.
I will not buy new cars because I can either afford a car payment or an insurance payment. The main cost of this coverage is the hundreds of dollars we are forced to pay for unlimited catastrophic care and uninsured motorist coverage.
Here is a solution I would like for you to spearhead. If it were me, I would call it something like the “I can’t afford to care about your personal problems automotive insurance reform bill.”
“I don’t care that you cannot afford insurance. Hitch a ride, take a bus, get a bike or walk.” If someone gets caught driving a vehicle without insurance, or gets into an accident, they go to jail. Pure and simple. The first 10-15 people who get 3-5 year sentences will completely fix the problem of uninsured cars
“I’m sorry that you got hurt in a wreck.” The State of Michigan will help you up to $250.000.” Beyond that, the responsibility of the State is complete. Stuff happens and it’s not always good, but we cannot afford to expend unlimited treasure.
This would immediately save every vehicle owner in the state about $400.00 per year. The threat of imprisonment would rid the roads of many bad drivers and pollution belching cars barely fit for a scrapyard.
Is this cold? Yes..
Is it heartless? Yes.
Is it the right thing to do for Michigan citizens who are working within the system? Absolutely.
Will it immediately help our economy and our automotive companies? Without question.
We simply cannot afford to care about lawbreakers in this State anymore.
I urge you to sponsor such legislation.
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