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Michigan auto insurance industry “highly profitable,” according to former insurance commissioner

November 10, 2011 by Steven M. Gursten

Insurance lawyer shares analysis by nationally renowned insurance expert Jay Angoff that Michigan’s No-Fault insurance companies are reaping record profits and charging excessive premiums

“Highly profitable” is how former Insurance Commissioner Jay Angoff describes Michigan’s largest auto insurance companies.

This comes as no surprise to our Michigan insurance lawyers. Michigan is one of the only states in the entire country that does not have an insurance commissioner with the authority to regulate insurance company profits.

Considering the record-breaking insurance company profits these companies are making today, it certainly puts the “reform” the insurance lobby is pushing – the No-Fault “reform” bills – in a much different light.

Why take away incredibly important protections, such as lifetime necessary medical care, when insurance companies are already making the highest profits in the country; and when there are no guarantees (or even any language) in any of the bills that taking these valuable No-Fault insurance benefits away from us will even result in lower rates? Lest we forget, we’ve gone down this road before and each time has turned out to be a lie. It is hard to see how this time will be different. The only real guarantees are that this No-Fault “reform” legislation will really harm significantly injured Michigan auto accident victims and their families, and that they will further boost profits of the Michigan insurance companies.

Angoff report on insurance company profits

“For the three leading Michigan auto insurers — State Farm, Allstate, and AAA — [doing business in Michigan has] been highly profitable …,” Angoff wrote in his May 2007 report, “An Analysis of the Profitability and Performance of the Michigan Auto Insurance Market.”

Angoff, who is currently Director of the Office of Consumer Information and Insurance Oversight for the Department of Health and Human Services, served as Missouri Insurance Commissioner from 1993 to 1998.

“AAA, which is the only one of the three leading carriers whose business consists predominantly of Michigan business, more than doubled its profits in five years, from $50.9 million in 2002 to $104.2 million in 2006,” Angoff declared in his 2007 profitability analysis.

Angoff also noted “that over the 1993-2002 decade … [Michigan auto insurers] were significantly more profitable than the national average,” according to the insurance industry trade journal, Auto Insurance Report (published by Risk Information, Inc.) in 2004.

Angoff determined that the premiums charged by Michigan auto insurance companies for mandatory coverage were too high.

“[W]e can say definitively that the liability and physical damage rates State Farm, AAA and Allstate have charged over the last five years have been excessive …” he concluded.

However, Angoff noted, “it is impossible to know how profitable … No-Fault coverage is in Michigan” because the public does not have access to the payment records for No-Fault claims that exceed a statutorily prescribed dollar amount.

Michigan mandatory auto insurance coverage

In Michigan, mandatory auto insurance coverage consists of:

o Personal protection insurance: Known as No-Fault PIP, covers medical expenses, wage loss and replacement services.

o Property protection insurance: This is insurance for vehicle and physical property damage.

o Residual liability insurance: This type of insurance covers liability for bodily injury.

More proof of profitability in Michigan’s auto insurance industry

Further proof of the profitability of Michigan’s auto insurance industry is found in the market’s composition. According to Pete Kuhnmuench, Executive Director of the Insurance Institute of Michigan, there are “hundreds of insurance companies” writing auto insurance in Michigan.

Certainly, so many auto insurance companies would not be clamoring to do business in Michigan if there were no profits to be had.

Angoff’s study also showed that the profits being pocketed by Michigan auto insurance companies were consistent with the national trend.

In 2005, the Auto Insurance Report said: “No one is allowed to complain about the auto insurance market in 2005. Everyone, and we mean everyone, made money, just as they did in 2004, and just as they will in 2006.”

And, in 2006, the Auto Insurance Report concluded that “[p]ersonal auto insurance reached its second highest after-tax profit margin in a generation in 2004.”

Angoff added that profitability for the property/casualty insurance industry, of which the auto insurance industry is a part, “reached new all-time highs” in 2004, 2005 and 2006.

We can fairly assume that these insurance company profits have gone up dramatically since. Amazing that the politicians that are pushing these insurance lobby bills in the Michigan Legislature and almost all of the Michigan media aren’t asking the simple question: just how much money are these insurance companies making today? And isn’t there a better way to reduce auto insurance premiums for the rest of us besides taking away our own no fault insurance protections?

Steven Gursten is recognized as one of the nation’s top insurance lawyers handling serious auto accident lawsuits. He frequently writes about Michigan No-Fault insurance, and is available for comment.

Related information to protect yourself:

Study highlights dangers of No-Fault “reform”

Michigan’s insurance industry gets $1 billion raise as drivers face losing No-Fault protections

3 possible cases after a Michigan auto accident

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (800) 777-0028 for a free consultation with one of our Michigan No-Fault insurance lawyers.

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