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4 reasons the MCCA should lower its car insurance assessment

lower MCCA assessment

Yesterday, I wrote that it’s time for the  Michigan Catastrophic Claims Association (MCCA) assessment to be reduced for Michigan drivers in 2015-16.  This was based upon strong financial news as reported in the MCCA Annual Report.

Cutting the assessment would save drivers money – right now – on car insurance. Currently, the MCCA’s assessment is $186, where it has remained for the past two fiscal years. Here’s more information on why I believe the MCCA should cut its assessment.

1. MCCA’s deficit shrunk $1.4 billion between 2013 and 2014

Astonishingly, the MCCA’s deficit shrunk by nearly $1.5 billion in just one year.

Specifically, the MCCA deficit amount dropped by $1,461,790,000.  The deficit has been reduced from $1,872,322,000 in 2013 to $410,532,000 in 2014.

Of course, $410 million is still a ton of money. But it’s a lot better than a deficit of $2 billion, which is where we were only two years ago.

Significantly, in the MCCA’s Annual Report for the fiscal year ending June 30, 2014, the MCCA credits two factors with the reduction in its deficit:

  • “Better than expected performance in the stock market.”
  • “The deficit recoupment of $29.19 per car that was included in the assessment rate of $186 per car.”

The chart below shows the MCCA deficit trends from 2010 through 2014:

MCCA deficit trends 2010 to 2014

(Sources: Michigan Catastrophic Claims Association Annual Report to the Director of Department of Insurance and Financial Services (DIFS) (For fiscal years ending June 30, 2014 and June 30, 2013); Michigan Catastrophic Claims Association Annual Report to the Commissioner (For fiscal years ending June 30, 2012, and June 30, 2011))

Note: The actual deficit figures are reported as “Total Deficit” or “Total Surplus” in the “MCCA Financial and Statistical Highlights” section of the MCCA’s Annual Report.

2. MCCA’s claims reserves increased more than $500 million

The MCCA’s reserves increased by more than $500 million between 2013 and 2014, bringing the MCCA’s total reserves amount to $16,855,230,000.

As the chart below shows, the MCCA’s reserves increased $918 million between 2012-13 and $1.6 billion between 2011-12.

MCCA claim reserves 2010 to 2014

(Sources: Michigan Catastrophic Claims Association Annual Report to the Director of Department of Insurance and Financial Services (DIFS) (For fiscal years ending June 30, 2014 and June 30, 2013); Michigan Catastrophic Claims Association Annual Report to the Commissioner (For fiscal years ending June 30, 2012, and June 30, 2011))

The MCCA’s “reserves,” which are identified as “Discounted loss reserves” in the MCCA’s Annual Report to DIFS Director/Commissioner, is the amount of money the MCCA sets aside or saves to use to pay for present and/or future open catastrophic claims.

(*The loss reserves information above reflects reserves from July 1, 1978, date of inception for the MCCA, through June 30 of the years indicated.)

3. MCCA’s assessment income exceeded reimbursement payouts by $253 million – an increase of more than $100 million

In 2014, the MCCA’s income from assessments exceeded its reimbursement payouts by $253 million – an increase of more than $100 million over 2013 when the MCCA’s assessment income exceeded payouts by $69 million.

MCCA assessment income 2010 to 2014

(Sources: Michigan Catastrophic Claims Association Annual Report to the Director of Department of Insurance and Financial Services (DIFS) (For fiscal years ending June 30, 2014 and June 30, 2013); Michigan Catastrophic Claims Association Annual Report to the Commissioner (For fiscal years ending June 30, 2012, and June 30, 2011))

4. Reported catastrophic injury claims are lower today than five years ago

The number of catastrophic injury claims reported to the MCCA were lower in 2014 than they were five years ago.

In 2014, there were 1,669 “reported claims” whereas in 2010 there were 1,684. However, reported claims did increase by 280 between 2013-14.

The chart below shows the MCCA’s “reported claims” trends for 2010 through 2014:

MCCA catastrophic claims 2010 to 2014

(Sources: Michigan Catastrophic Claims Association Annual Report to the Director of Department of Insurance and Financial Services (DIFS) (For fiscal years ending June 30, 2014 and June 30, 2013); Michigan Catastrophic Claims Association Annual Report to the Commissioner (For fiscal years ending June 30, 2012, and June 30, 2011))

How does the MCCA work?

The MCCA reimburses No-Fault insurance companies for medical claims that exceed $530,000. No Fault insurance companies charge auto insurance consumers an annual per-vehicle assessment to cover the cost of the claims.

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Blog Author Steven M. Gursten
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