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Boo! The No Fault boogeyman is right behind you!

Fear, not facts, drives No-Fault “reform” propaganda –  tricking consumers out of benefits, but not treating them to auto insurance savings

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How appropriate that so close to Halloween, the Michigan House and Senate Insurance Committees are getting together at a joint meeting on Wednesday, October 23, 2013, to discuss so-called No Fault “reform.”

After all, it’s that time of year when people try to scare each other with things that aren’t real.

One can expect the auto insurance industry hobgoblins to lead with fear, trying to scare the public and the state’s lawmakers with their favorite ghost stories, such as:

  • Michigan’s auto insurance prices are “exorbitant.”
  • No Fault’s medical benefits coverage is “excessive” and “costly.”
  • Capping (and cutting) No Fault medical benefits is the only way to bring down auto insurance prices for consumers.

But ghost stories and the baseless fear they generate are no match for the following real No Fault facts … should anyone dare to speak them:

  • Fact #1: Michigan auto insurance prices are LOWER than they were in 2003-2005.
  • Fact #2: Capping No Fault medical benefits will not lower auto insurance prices.
  • Fact #3: No Fault medical benefit costs are not driving auto insurance prices.

On Wednesday, October 23, 2013, both house Insurance Committees will convene to hear about the Citizens Research Council of Michigan’s new report, “Medical Costs of No Fault Automobile Insurance.”

The report, which “did not focus on insurance premium costs, but rather the role of No-Fault insurance in driving medical prices overall,” is largely a rehash and repackaging of data and proposals from 2010 from the RAND Corporation and the RAND Institute for Civil Justice.

Fact #1: Michigan auto insurance prices are LOWER than they were in 2003-2005

The average automobile insurance premium in Michigan was lower in 2010 than it was in 2003, 2004, and 2005, according to data from the National Association of Insurance Commissioners (NAIC) and the Insurance Information Institute (III).

The NAIC data shows:

  • 2010 average Michigan auto insurance premium: $1,073.52
  • 2005 average Michigan auto insurance premium: $1,088.97
  • 2004 average Michigan auto insurance premium: $1,128.16
  • 2003 average Michigan auto insurance premium: $1,088.15

The III data shows the following about the average Michigan auto insurance expenditure, i.e., “what [Michigan] consumers actually spend for insurance on each vehicle”:

  • 2010 average Michigan auto insurance expenditure: $934.60
  • 2004 average Michigan auto insurance expenditure: $980
  • 2003 average Michigan auto insurance expenditure: $950

Significantly, the NAIC has been the go-to source for the politicians and insurance industry-backed trade groups that are pushing to dismantle Michigan’s No Fault auto insurance system.

In their efforts to sell the Michigan public on the so-called No Fault “reform” provisions in House Bill 4612, Gov. Rick Snyder, Rep. Pete Lund (R-36th District), who is the sponsor of HB 4612, and the Insurance Institute of Michigan have regularly relied on and cited to the NAIC as an authority on Michigan auto insurance prices.

(Sources: “Auto Rates – Premium Comparison by State,” Insurance Institute of Michigan website; Insurance Institute of Michigan’s “A Check of the Facts in the Michigan Automobile and Home Insurance Consumer Advocate Report to the Governor, 2009” (Page 13 (“Attachment B”); “Auto Insurance – Costs and Expenditures,” Insurance Information Institute’s website.

Fact #2: Capping No Fault medical benefits will not lower auto insurance prices

Comparing Michigan to other No Fault states where medical benefit caps have been implemented proves that caps will not guarantee lower auto insurance prices.

As the chart below shows, even though Michigan’s No Fault medical benefits coverage far exceeds the coverage provided in No Fault states with medical benefits caps, the price of auto insurance in Michigan is LOWER than it is in those states.

Chart capping No Fault benefits will not lower auto insurance

(Sources: Insurance Institute of Michigan’s chart, “Auto Rates – Premium Comparison by State,” 1/13 update, which is based on data from the National Association of Insurance Commissioners; No Fault Chart from Gov. Rick Snyder’s April 18, 2013, No Fault reform press release; “Auto Insurance Reform,” Insurance Institute of Michigan web site.)

Fact #3: No Fault medical benefit costs are not driving auto insurance prices

No Fault medical benefits costs are not driving auto insurance prices in Michigan.

If they were, then prices would be more than 200% higher than they are.

The auto insurance industry hobgoblins, including the IIM, have insisted that the average cost of a No Fault “medical claim” has increased 224% over the past 12 years.

If that were true and if those costs were actually driving auto insurance prices, then prices should have increased proportionately over the same period to the point they’d be 224% higher.

But they didn’t and they’re not.

As discussed above, Michigan auto insurance rates are LOWER than in previous years.

Related information:

14 truths about No Fault “reform” in Michigan

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Blog Author Steven M. Gursten
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