Why it’s the Michigan auto insurance industry that is likely behind the latest price increase from the MCCA
On March 27, 2013, the Michigan Catastrophic Claims Association, or MCCA, announced a price increase. Again. This time it announced it was increasing its annual, per-vehicle assessment from $175 to $186.
This is a 6% rate increase. Last year’s MCCA rate increase was a 21% increase, putting the assessment at $175.
But there are 4 dirty little secrets about the MCCA’s most recent increase in its per-vehicle annual assessment that no one is talking about:
- Michigan auto insurance companies, who run the MCCA and are currently engaged in an all-out pr campaign to change Michigan’s No Fault law, imposed the assessment increase.
- The auto insurers who run the MCCA collect hundreds of millions, if not billions, of dollars, in auto premiums every year.
- Michigan’s auto insurers will raise their auto insurance rates based on the MCCA assessment increase, which THEY approved.
- Auto insurance rates could be lowered instantly if Michigan auto insurance companies refused to pass along the MCCA assessment costs to consumers. This is not wishful thinking. Michigan’s auto insurance companies are already some of the most profitable in the entire nation, when compared to other states.
The funds raised by the assessment are used by the MCCA to provide mandatory 100% reimbursement to Michigan auto insurers for No Fault benefits that are paid out to catastrophically injured auto accident victims after the costs of those benefits have exceeded $530,000.
Michigan auto insurance companies, who run the MCCA, imposed the assessment increase
Don’t be fooled. It’s not the faceless, impersonal entity known as the Michigan Catastrophic Claims Association that has imposed yet another assessment increase, which will certainly result in another round of jacked-up auto insurance prices.
It’s a group of Michigan’s insurance companies who together have decided to raise rates and impose the assessment increase. These are the same insurers, who, through their trade organizations and through sympathetic Republican lawmakers, are pushing the senseless spin that No Fault reform and elimination of the MCCA are necessary to the lower the auto insurance prices that THEY chose to charge.
As the MCCA’s March 27, 2013, press release makes clear, the “MCCA Actuarial Committee recommends to the MCCA Board of Directors the annual assessment” that should be charged and the Board of Directors ultimately decides what the annual assessment will be.
And, who’s on the MCCA’s Board of Directors and its Actuarial Committee?
You guessed it. Michigan auto insurance companies.
Auto insurers who run the MCCA collect hundreds of millions of Dollars (if not billions) in auto premiums every year
I’ve written before about how the MCCA is broken, and how we’ve created this quasi-government entity that essentially operates without oversight or accountability to the public, and that we’ve allowed the inmates to run the asylum.
The auto insurers who run the MCCA collect billions or, at least, hundreds of millions of dollars in auto insurance premiums every year, according to data maintained and published by the Department of Insurance and Financial Services, which is headed by Insurance Commissioner R. Kevin Clinton, a non-voting member of the MCCA’s Board of Directors and a former high-ranking insurance industry executive. Clinton was president and CEO of an insurance company before being appointed director of the newly created Department of Insurance and Financial Services by Michigan Gov. Rick Snyder on March 18, 2013. Before the name change, Mr. Clinton was insurance commissioner since 2011.
One other point: Consider the “Written Premiums” data the for the five Board of Director member-insurers as well as other prominent insurers serving on the MCCA’s Standing Committees, which includes the Actuarial Committee:
State Farm Mutual Automobile Ins. Co.: $1.1 billion in written auto insurance premiums in 2011
Auto Club Insurance Association: $78 million in written auto insurance premiums in 2011
Auto-Owners Insurance Company: $157 million in written auto insurance premiums in 2011
Citizens Ins. Co. of America: $141 million in written auto insurance premiums in 2011
Farmers Insurance: $109 million in written auto insurance premiums in 2011
Progressive Michigan Insurance Company: $298 million in written auto insurance premiums in 2011
Frankenmuth Mutual Insurance Company: $174 million in written auto insurance premiums in 2011
Liberty Mutual Insurance Company: $133 million in written auto insurance premiums in 2011
What we don’t know about the auto insurers who run the MCCA
As can be seen above, we know about the billions or, at least, hundreds of millions of dollars Michigan auto insurers are bringing in annually in auto insurance premiums.
But, strangely, we don’t know anything about how much of the premium dollars collected are paid out by each insurer on auto claims.
Strangely – despite the constant complaining by insurance trade organizations such as the Insurance Institute of Michigan and the Michigan Insurance Coalition and lawmakers such as Rep. Pete Lund and Sen. Virgil Smith about the costs that auto claims – the public is provided zero information about insurers’ payouts on auto claims. This is also much to the complete exasperation of fiscal conservatives such as L. Brooks Patterson, who have demanded and been denied access to this information as well.
We’ve allowed this to somehow exist when there is supposedly “out of control” costs associated with auto claims is the purported justification for dismantling or otherwise “reforming” Michigan’s No Fault insurance system.
But it’s doubly odd given that the annual payout amounts could be easily collected and shared by the Insurance Commissioner, just as he does every year for other lines of insurance coverage in his Annual Reports.
For instance, in his 2011 Annual Report to Gov. Snyder, the Insurance Commissioner reported (as he and his predecessors have done every year for more than a decade) both the year’s “Direct Written Premiums” and the year’s “Direct Losses Paid” for the “Top 20” writers of insurance in the following lines: all categories; accident and health; annuity; life; property and casualty; and title insurance.
Clearly, it would be next to no trouble to include premium and losses information for auto insurance companies.
Yet, the benefit to the public, Michigan’s auto insurance consumers and lawmakers would be beyond measure. Michigan’s auto no fault insurance system has served the people of Michigan incredibly well for 40 years, but we are on the verge of making major changes to the laws based only on the say so of the insurance companies who simultaneously are refusing to release the data and information that would allow lawmakers to make educated decisions on how to proceed.
Michigan auto insurance companies will raise rates based on the MCCA assessment increase they approved
Although the MCCA assessments are technically charged to Michigan auto insurance companies, it is the Michigan auto-insurance-buying public who gets stuck with the tab.
Significantly, the assessments charged to the No Fault insurers “are generally passed on to auto insurance policyholders” and “are reflected in the auto premiums all Michigan policyholders pay,” according to the MCCA’s website.
The Insurance Commissioner, in a September 10, 2012, document, entitled “Michigan Catastrophic Claims Association (MCCA),” concurred:
“Your auto insurer is responsible for, and pays, the MCCA assessment. However, the cost is often passed on to policyholders. Some insurance companies include the MCCA assessment in the Personal Injury Protection (PIP) portion of your insurance premium. Other companies sometimes list this as a “statutory assessment” or “MCCA assessment” on the declarations page of your policy.”
Auto insurance rates could be lowered instantly if auto insurers refused to pass assessment costs to consumers
Simple as that, auto insurers could lower auto insurance rates overnight.
And, if Michigan auto insurers were really serious about lowering auto insurance rates, then they could also drop their prices on liability and collision coverage where the profit margins are particularly significant.
For more information, click here to read a comprehensive analysis of Michigan No Fault reform and the latest developments.