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The real reason your auto insurance rates in Michigan keep going up

December 2, 2010 by Steven M. Gursten

Record-breaking insurance company profits and the propaganda machine – insurance executives hoping for natural disasters so they can make more money!

It’s frustrating watching the spin game. Insurance companies make more money in Michigan than in any other state, but then spend millions of our own auto insurance premiums blaming auto accident lawyers, so they can then raise rates even more.

I recently found a very good analysis behind the real reason auto insurance rates rise and fall, and I want to share it with Michigan drivers, so they can understand that rising rates are not caused by auto accident lawyers and personal injury lawsuits, as the insurance industry propaganda machine likes to spin. The author, Joanne Doroshow, dispenses with this hogwash. Here is the insurance industry’s propaganda machine explanation for insurance rate hikes:

“This was all the fault of lawyers, jury verdicts and everyday Americans who sue wrongdoers, and whose claims are paid by insurance companies. It was a most convenient excuse for the industry, since convincing people that the legal system was to blame led only to one solution: changing the legal system. This specifically meant cutting off people’s legal rights so that insurers could hang onto more of their money. Sadly, lots of states have succumbed to insurer pressure over the years. As a result, the legal rights of just about every reader of this post have been weakened, and in some cases, eliminated.”

Doroshow goes on to explain what’s really behind the cycle of rate increases:

“When insurance rates are stable as they are now, this is called the “soft market.” When rates shoot up, this is called the “hard market.” (The fact that the insurance industry is exempt from anti-trust laws allows them to raise rates collectively.) During soft market periods, insurance companies engage in fierce competition for premium dollars to invest. Due to this intense competition, insurers may actually underprice their policies (with premiums growing below inflation) in order to get these premium dollars. That’s exactly what is happening now, but don’t just take our word for it. Insurance execs around the country are complaining about this. They hate these soft market periods, because the intense free market competition keeps them from raising everyone’s insurance premiums.”

Take a look at the full column in the Huffington Post: Here’s really why your insurance rates go up – and then don’t.

What the insurance executives are saying about raising auto insurance rates

Doroshow backs these statements with some great quotes from insurance executives. For example:

* Nick Cortezi, chief executive officer at All Risks, a national specialty insurer based in Hunt Valley, Md., said he was “pessimistic” about the end of the soft market.

“We are all competing more aggressively with more capital for a pie that keeps shrinking,” he said, explaining why the market is not hardening. “It’s going to take outside forces. … I think a natural disaster, a natural property disaster, could be a causative event that could turn the market.”

(Translation: There is way too much competition in the insurance market and we need a huge disastrous hurricane to turn this all around so we can start raising rates again.)

* Thomas Phelan, president and CEO of the Injured Workers Insurance Fund (IWIF), said, “2010 will be as bad as 2009.”

(Translation: That’s bad as in “low insurance rates for businesses.”)

Phelan doesn’t expect things to improve much until next year. “By the second or third quarter of 2011, things should start to go in the right direction,” he said.

(Translation: That’s “right direction,” as in “the direction that will help us start raising rates again.“)

* William R. Berkley, chairman and CEO of W.R. Berkley Corp., said he sees an end in sight to the current soft market that’s affecting most of the industry.

“I’ve always said to people my expectation is that prices will start to go up in the fourth quarter,” he stated in an earnings conference call in which the company announced a slight drop in third-quarter net income to $94 million from $98 million. … “There will be modest price increases beginning in the fourth quarter. We’re starting to see positive signs.”

(Translation: Even though we’re making a ton of money right now, we just can’t stand it when we can’t raise rates on our customers!)

No talk about tort reform, auto accident lawyers or personal injury lawsuits

It’s evident that none of the insurance executives are citing lawsuits, the impact of tort reform on insurance rates or auto accident lawyers. As you can see, the only things these executives seem to be wishing for are major catastrophes as an impetus to raise rates.

Doroshow couldn’t have said it better to wrap things up:

“No matter where you live, the flattening of rates has nothing to do with whether lawmakers weakened your civil justice system or kept injured people from suing… but rather to modulations in the insurance cycle everywhere. Just as liability insurance sudden rate hikes are driven by this cycle and not by any lawsuit “explosion” as insurance lobbyists and others claim, the “tort reform” remedy that they push is a failed solution. It will fail again.”

Steve Gursten is recognized as one of the nation’s top auto accident lawyers handling serious car and truck accident cases and insurance No-Fault litigation. Steve speaks and writes extensively on Michigan’s No-Fault law and insurance company abuse, and is available for comment.

– Photo courtesy of Creative Commons, by stuartpilbrow

Related information:

Why the insurance industry thinks Michigan drivers are really dumb

Auto accident lawyer calls out Michigan insurance company for selling coverage it has NO intention of providing

Car accidents plunge in Michigan, yet auto insurance companies still threaten to raise rates

Michigan Auto Law is the leading and 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, Ann Arbor, Detroit, Grand Rapids and Sterling Heights to better serve you. Call (248) 353-7575 for a free case evaluation with one of our auto accident lawyers.

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One Reply to “The real reason your auto insurance rates in Michigan keep going up”

  1. Insurance Companies are businesses…..businesses exist for profit, not to be fair. Investors seek profits, and when the margins are small they take their money elsewhere…so capital is tough to get for these companies right now.

    If only there was a way to take the “business” out of insurance…hmmmmm…

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