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Why the insurance industry in Michigan thinks we are really, really dumb

August 12, 2010 by Steven M. Gursten

Personal injury attorney exposes insurance companies threats and scare tactics – and huge profits – following McCormick v. Carrier

The insurance industry in Michigan sure must think we are pretty dumb. Within hours of the monumental McCormick v. Carrier being issued by the Michigan Supreme Court on August 1, 2010, a lobbying group representing 90 Michigan insurance companies issued a press release to the media threatening to raise auto insurance premiums. They say, the McCormick case will “seriously undermine the viability of the state’s No-Fault statute.”

In 1995, the same insurance industry promised us we would see rates fall when the Republican Michigan Legislature agreed to enact the harsh insurance “reforms” (including the harshest auto accident threshold law in America). In case you didn’t notice, not only did car accident lawsuits and insurance company payouts dramatically fall over the past 15 years, but, you guessed it – our auto insurance rates continued only to go up.

This is also the same insurance industry that promised us again in 2004, after the Michigan Supreme Court issued Kreiner v. Fischer – making the nation’s harshest auto accident threshold law even harder for people to recover compensation for pain and serious personal injury – that our auto insurance rates would fall.

Broken promises from Michigan insurance companies

In reality, between 1995 and 2010, Michigan auto accident lawsuits fell by half. They dropped to 50 percent of what they were back in 1994. So where are the auto insurance rate reductions to our insurance premiums that these insurance companies promised to us?

In 2008, the State of Michigan Department of Energy, Labor and Economic Growth (DELEG) reported that the average miles traveled has dropped to the lowest level in Michigan in 17 years. Yet our auto insurance premium rates continued to go up. Where are the rate reductions?

The answer is simple: falling lawsuits, falling payouts and reductions in miles traveled resulted in profits that were never passed along to the consumer in the form of lowered insurance premiums and rates. Instead, these auto insurance companies made record-breaking profits.

According to independent studies, Michigan auto insurance companies lead the nation in profitability. And none of those fat profits have been passed along to us, Michigan consumers, in the form of rate reductions.

Why the insurance companies continue to have control

The problem, unfortunately, is that while Michigan requires by law that its residents purchase No-Fault insurance, our state’s insurance commissioner is one of the only insurance commissioners in the nation that does not have the power to regulate the amount of profits that Michigan insurance companies can make.

It is a problem that needs to be fixed. Now.

Back to the insurance industry thinking we are all really, really dumb. Remember credit scoring? The Michigan Supreme Court gave the insurance industry a huge win, after years of hard lobbying by the Insurance Institute of Michigan. Fat profit margins are about to become fatter. Now, insurance companies are allowed to factor credit scores to determine your auto insurance rates.

But one month later, the Michigan Supreme Court reverses Kreiner v. Fischer, returning our law to the very same law that the insurance industry lobbied so hard for in 1995. But back then in 1995, they promised us huge savings on our insurance rates. In 2010, we return to the exact same law, but now the insurance industry threatens us with rate increases.

What is the change in our auto accident law that’s causing threats of insurance rate increases?

And what exactly is this cataclysmic-the sky is falling-change in our law that’s causing the insurance industry’s lobbying group to threaten new rate increases? It McCormick v. Carrier, a change allowing people who are completely innocent, and who have suffered personal injury that is still serious, but no longer life-altering, the ability to receive compensation in court.

It is the law that a Republican Legislature passed in 1995, signed into law by a Republican governor, and found constitutional by a Republican Michigan Supreme Court in 1996. But now, 15 years later, this same insurance industry group puts out a press release – within hours of the McCormick v. Carrier ruling – saying that Michigan drivers will now suffer insurance rate increases to their auto insurance premiums.

What the insurance industry in Michigan isn’t telling us about our No-Fault insurance coverage

Let’s get this straight. The insurance industry lobbied hard to enact new laws to restrict the rights of people in this state to sue for injuries suffered in car accidents in 1995, and promised us dramatic rate savings in exchange. The law they wanted passed. The amount of car accident litigation dropped, and then dropped even more dramatically after Kreiner v. Fischer in 2004.

Over the next 15 years, thousands of seriously injured people lost important legal rights and received nothing for serious auto accidents, and the number of miles traveled by Michigan residents fell to the lowest levels in 17 years. But our insurance rates have continued to climb, and profit margins for the companies that do business in this state continued to swell to record levels. And now the same insurance companies can use credit scoring, a perniciously evil practice that further hurts people, to further increase profits.

If rates kept going up when accident litigation went dramatically down, it seems absolute folly to assume, as they threaten, that insurance rates must now go up. And the insurance industry fails to tell us that roughly only 20 percent of a person’s total auto insurance liability premium represents auto tort liability payments (as versus the almost 60 percent represented by collision and comprehensive insurance coverages); so the math doesn’t add up to even cause insurance rate increases, even assuming there is more legitimate litigation for seriously injured people.

The real crime here is that the auto insurance industry in Michigan keeps lying to us. And, adding insult to injury, they can spend tens of thousands of our own insurance premium dollars on propaganda and lobbyists and phony press releases, like the one they issued on August 2, 2010 threatening everyone with more rate increases, blaming personal injury lawyers and lawsuits.

And what’s really sad is how insurance companies in Michigan have mostly gotten away with it. Consumer advocacy groups don’t have the kind of money to correct the lies and shameless insurance industry propaganda.

Boy, the insurance industry must think we are really, really dumb. Shame on them for that phony press release. And shame on them for empty threats and using scare tactics, at the same time that they’re reaping huge profits.

It’s time for an insurance commissioner who has some teeth who can regulate the record-breaking profits that these insurance companies have been collecting in Michigan, and someone who can stop them in their lies and broken promises when they keep raising our insurance premiums.

Steve Gursten is recognized as one of the nation’s top personal injury attorneys handling serious car and truck accident injury cases and auto insurance No-Fault litigation. Steve speaks and writes extensively on McCormick v. Carrier and Michigan’s No-Fault laws. He is available for comment on Michigan’s new auto accident law.

Related information about McCormick v. Carrier:

The big insurance company lie: Michigan rates will raise after McCormick

Insurance companie lie No. 2: rising car accident settlements after McCormick

Dealing with auto insurance companies in Michigan

Insurance defense perspective on McCormick v. Carrier

Michigan Auto Law is the leading largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state for more than 50 years. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you.

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One Reply to “Why the insurance industry in Michigan thinks we are really, really dumb”

  1. Excellent points you have stated in this article. I am currently doing a short report on the overturning of Kreiner for my insurance law class at UDM downtown. I was wondering how the insurance company had reacted right after Kreiner was overturned, so I stumbled upon the press release and continue to stand in awe. Not because this press release was awe-inspiring, but that the insurance advocacy would assume that citizens would believe that this case would be the “straw to break the camel’s back”.

    Great post and I look forward to future developments.

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