Citing auto-insurance rates they said are the nation’s highest, a trio of southeast Michigan legislators introduced bills last week to repeal the state’s no-fault insurance system while grandfathering benefits to recipients of its most generous coverage.
“Should Michigan continue to do nothing about having the highest insurance rates in the nation?” State Rep. Jason Sheppard (R., Temperance) said in a prepared statement. “... We’ve got to do something to fix this broken system and lower rates for all drivers.”
In particular, Mr. Sheppard said both in the statement and during an interview, the package of bills would end a state requirement that motorists buy “unlimited medical coverage” as provided through the Michigan Catastrophic Claims Association, which pays unlimited benefits to people severely injured in traffic crashes.
Instead, accident victims “will have the ability to sue at-fault drivers for economic damages and non-economic damages such as pain and suffering,” as is now the case in Ohio and 37 other states.
The catastrophic-claims coverage is unique to Michigan. People already receiving MCCA benefits would continue to do so, with the legislation providing for a “legacy fee” to fund the MCCA unit “until it is no longer needed.”
Mr. Sheppard said that program alone costs every Michigan vehicle owner $180 a year.
“We’re paying these huge premiums to cover the cost of lifetime benefits that 98 percent will never tap into,” he said, estimating that many Michiganders’ auto insurance cost will be cut by half if no-fault is eliminated.
Eight bills, of which seven were formally read into the record Tuesday, are needed because of different sections of Michigan statute that need to be changed, Mr. Sheppard said.
Also co-sponsoring the bills are state Reps. Joe Bellino (R., Monroe) and Bronna Kahle (R., Adrian).
“Our auto insurance is too expensive,” Ms. Kahle said. “Michigan’s unique no-fault system has led to the highest auto rates in the country. The hard-working families and seniors in Lenawee County deserve relief.”
While declining to endorse the local Republicans’ specific proposal, the Insurance Alliance of Michigan said action needs to be taken to address Michigan drivers’ burdensome premiums.
Michigan drivers “are demanding the Legislature fix Michigan’s broken, outdated auto no-fault system.”
“Although the Insurance Institute of Michigan doesn’t have a specific position on the newly-introduced bills to eliminate no-fault and enact a tort system, we welcome debate and discussion on real reforms to fix no-fault and control costs,” Pete Kuhnmuench, the group’s executive director, said in a prepared statement. “Previous legislative reforms would have changed our current no-fault system, but the new proposal would actually change Michigan to the tort system, which is in place in 38 other states.”
House Democratic Leader Sam Singh of East Lansing said the minority party supports reducing Michigan drivers’ insurance rates but urged Republican leadership to also allow consideration of a bipartisan reform proposal whose 14 bills have been parked in committee since their introduction last summer.
“House Democrats have always been open to reforming the state’s auto insurance system and lowering rates for Michigan drivers,” Mr. Singh said. “However, before we throw out the entire system, it’s imperative that a bipartisan group of bills that have been sitting in committee for months get a fair hearing to ensure accident victims are protected moving forward.”
Exactly where Michigan falls in premiums rankings seems to depend on who’s doing the calculating, but even sources that don’t rank its auto insurance as the nation’s most expensive put it high on their lists.
The latest edition of an annual database compiled by the National Association of Insurance Commissioners, released in December and reflecting data through 2015, found the average Michigan premium for liability, collision, and comprehensive coverage to be $1,364, third highest behind Louisiana and New Jersey.
That number had climbed more than $250 over the previous four years, putting it higher on the list than several other states it previously trailed.
It also was the highest average premium, by far, among neighboring states. The average Ohio auto-insurance buyer paid just $788.56 for those three forms of coverage in 2015, while Wisconsin and Indiana drivers paid even less, and Illinois motorists paid about $100 more.
In its report, however, the insurance commissioners’ association cautioned that rate comparisons between states are fraught because the minimum coverage requirements and benefits vary significantly.
The association reported a national average of $1,009.38 for the basic three forms of auto coverage in 2015, which incorporated gradual increases of about $25 per year since 2011.
According to the Insurance Information Institute, the 11 other states with no-fault insurance are Florida, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah.
Michigan, Florida, New Jersey, New York, and Pennsylvania all have “verbal thresholds” establishing when crash victims may sue, meaning that a minimum degree of injury is specified by statute, while the others specify a monetary amount of medical expense that must be reached before litigation is permissible.
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