Posted on 09/20/2016 10:45:26 AM PDT by MichCapCon
Since its enactment in 1973, Michigan’s no-fault automobile insurance law has been blamed for steep increases in premiums paid by drivers. Michigan car insurance premiums are twice the national average.
Previous efforts to reform the law failed to gain a consensus, but several legislators are pursuing changes they claim will bring automobile insurance costs more in line with the $1,325 per year national average. The average cost of insurance for Michigan motorists is $2,738 per year. Proponents of these changes argue that more affordable premiums would reduce the number of uninsured drivers in the state.
$1,325 national average $2,738 Michigan average At present, nearly 20 percent of Michigan drivers are uninsured, many because they cannot afford the cost. An estimated 50 percent of Detroit drivers are uninsured, according to 2012 statistics provided by the National Association of Insurance Commissioners. The association reported that the average premium for drivers was $3,400 in Detroit but $1,700 in neighboring communities.
Policymakers and analysts generally agree that Michigan’s mandatory and unlimited personal injury protection (PIP) is the main culprit behind the high costs. Insurers and studies contend that the mandate allows hospitals and other health care providers to extract higher medical care reimbursements for auto crash victims.
“Michigan doesn’t have the highest auto insurance rates in the country, but unlimited benefits for personal injuries should get them there at some point,” said Alan Smith, a senior fellow at the R Street Institute, a nonpartisan policy research organization that has conducted state-by-state research into automotive insurance.
“Every other major payer in the health care system operates under some form of fee schedule, and this would be helpful [if adopted for Michigan automotive insurance],” said Smith. “Otherwise you will continue to have two Michigan accident victims in hospital beds on the same hall with identical injuries. But the guy who fell down the stairs will be paying half or a third as much per day as the woman whose vehicle contests space with a large tree.”
Senate Bill 313, introduced last year by Sen. Marty Knollenberg, R-Troy, would impose price controls on medical services provided by hospitals and doctors to patients covered by PIP.
In the House, Rep. Jason Sheppard, R-Temperance, is advocating a different approach in legislation he has yet to introduce. Under current law, vehicle owners must pay an insurance assessment to a reinsurance entity called the Michigan Catastrophic Claims Association, which pays crash victims' medical claims once they exceed $540,000. Sheppard’s preference is to let drivers buy personal injury coverage in a tiered fashion, with benefit caps of either $250,000 or $500,000.
Sen. Joe Hune, R-Fowlerville, authored SB 248, which passed the Senate in April 2015 and is under review in the House of Representatives. If passed into law, the bill would replace the catastrophic claims association with a state agency. It would also impose new assessments on insurers (and indirectly their customers) to pay for expanded anti-fraud efforts.
“As the cost of auto insurance continues to rise, I took action to provide reasonable reforms that will ensure Michigan drivers have access to good benefits at a lower cost,” said Hune. “We have passed legislation to address the out-of-control insurance costs in the Senate and we await the House to take action to deliver this important reform bill to the governor’s desk.”
Gary Wolfram, the William E. Simon professor of Economics and Public Policy at Hillsdale College and a member of the Mackinac Center for Public Policy Board of Scholars, also blames unlimited PIP coverage for Michigan’s high premiums. Wolfram notes other states cap PIP insurance at $50,000, including New York, which is second only to Michigan in PIP requirements. “We are the only state with unlimited PIP,” he said. “You’d think if it were a net positive, other states would follow suit. But they haven’t.”
Wolfram explained that unlimited PIP encourages doctors to order tests and procedures that aren’t necessary. He continued: “If I fall off a ladder and injure myself, the type of treatment I’d receive in a hospital would be entirely different from the treatment I’d receive in the same hospital for similar injuries incurred in an automobile accident.”
Smith concluded that Michigan’s no-fault insurance problems will take far less time to fix than they did to develop. “Every form of unlimited benefit will eventually be abused, and the folks in Michigan have had more than 40 years to figure out how to do it,” he said. “Not necessarily by dishonesty, just overuse of a system beyond its original design. A medical fee schedule is what preserved the auto insurance system in Pennsylvania when they got rid of the last other unlimited medical no-fault auto insurance system over 30 years ago. This should be tried in Michigan.”
Good God.
In the 'old days' ie before mandatory uninsured motorist protection they told us that premiums MUST rise to cover the cost of uninsured motorists and that such coverage would prevent wild spikes due to accidents involving said uninsured motorists.
Now they have the brass neck to claim that lowering premiums will encourage the irresponsible to become responsible?
Here's an idea: impound and auction off the cars of uninsured motorists who are caught driving.
A Republican pushing price controls.
Sounds about right.
I dont know why these clowns are bitching about this. I;m from Canada and Americans should be lucky they have at least 200 companies offering car insurance in their cities.
In my province, we have ONE and that is the government. You deal with the govt. You either pay up or dont drive AND they have govt agents waiting for you at each car dealership. You cant even move out of the car lot before you sign your insurance papers. Effing draconian..
Tort reform
So, the legislators are confused (again) about the fact that laws they passed have increased the cost of something - proving once again that some people are just too slow-witted to ever learn.
OBAMACAR -
Set up national exchanges offering government subsidized car insurance. It’s worked so well for healthcare that it would be a YUGE success for auto insurance. What could go wrong?
Get rid of multi-million dollar judgments from plaintiff attorneys. They always go after policy limits and file false claims.
In Florida Congress mandated that insurance companies MUST pay for the “free” replacement of up to (I believe) two cracked windshields. (Safety, don’t-cha-know. It’s for the chhiiildren!)
While I was rebuilding a Mercedes I went to a windshield supplier. They were doing a booming business from those come-to-your-place and replace it windshield people. This was in Tampa and the supplier was as busy as McDonald’s at lunch.
The replacement glass for my Mercedes was $550. I asked if they could do any better as I was rebuilding this car and parts were killing me. Oh, it’s not for insurance? It’s $109.
This is how the law distorts the marketplace. This is a different take on “the broken window theory.” It does create lots of employment, but at a five hundred percent markup. Of course, that rent seeking gets spread across several million forced users so it is just a few dollars each. But how many rent seekers have their finger in the auto insurance pie?
Insuring a new vehicle can cost several thousand dollars a year. I have opted to sell my newer cars and have bought old beaters. I have the minimum allowed insurance which runs about a thousand each. No collision.
In over forty years of driving I have had one insurance claim. I scrapped somebody’s old beater with my trailer tag. You had to look hard to see it. I don’t know how much they paid out to repaint that spot, but a painted spot on that car would have stood out like a gold-plated hog trough in the mud pen.
Lawmakers have demonstrated time and again that they can’t fix anything.
The problem is that most of the uninsured are democrats so this won't fly.
ObamaCAR
That’s what they did here in Pennsylvania.
Scrapped our No-Fault law (which was resulting is as
many as 1/3 of Philly drivers being uninsured) and
offering a Limited Tort option.
When you buy a policy you can choose either Full or Limited Tort. Limited Tort restricts your right to sue if you are injured. But the premiums are quite a bit lower.
I keep expecting the lawyer community to find some loophole and punch a hole in that, which will send rates skyrocketing again.
If you like your car insurance, you can keep your car insurance.
and you can expect to see an extra $3000/yr in your pocket after we ‘fix’ this problem.
I just learned that if an air bag is activated (which can happen even in a parking lot bumper hit), then the car is totaled. This is because the lawyers will find the insurer who replace the air bag guilty if it is ever needed again, so they just replace the car.
This has GOT to cost all of us a bunch of money!
Ditching no-fault will help, but let’s be honest: Michigan drivers are the worst drivers in North America, perhaps the world.
My advice is that Michiganians move to Ohio and learn how to drive.
That might seem cheap for a year, but I have discounts for safe driving, ect..
I’m a BC boy myself (stupid ICBC). Who was your private? My comprehensive was $136/month a year ago but if i stuck with it, it would only lower by $2 and I never was in any accident. My basic theft is $40 and my car has been sitting there for close to a year now.
Oh, yes, it was HUB Barton Insurance. Is comprehensive the part that insures against accidental damage to the car? I know I would have had to pay a $500 premium for the rock that hit my window. Sucks in those cases.
Oh, and mine is pleasure only, so that will totally explain why mine is much cheaper.
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