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Sen. Virgil Smith plan for Michigan auto No-Fault is a terrible idea

March 22, 2012 by Steven M. Gursten

Proposed law hurts injured Detroit auto accident victims and those who need No-Fault most

Sen. Virgil Smith, Detroit
Sen. Virgil Smith, Detroit

Sen. Virgil Smith of Detroit says he wants to help Detroiters and low-income people with his proposal to provide a bare-bones auto insurance to Detroit residents. But, as I wrote in a previous blog, Who’s really behind Sen. Virgil Smith’s plan to destroy Detroit residents’ No-Fault insurance rights?, Smith’s plan would devastate people who are seriously injured in auto accidents. If he really wants to lower – even slash – the price of No-Fault for his constituents, there are much easier, and much better, ways to do it that don’t take away vital protections from those who would be hurt the most under his plan.

Smith now wants to take his bill statewide. SB 514 would essentially allow private auto insurers to offer stripped-down policies. The Senate Insurance Committee discussed the legislation in Lansing last week.

I was interviewed by a Detroit MLive reporter Jonathan Oosting about Smith’s proposed bill on bare-bones auto insurance. Here’s the full story: Smith looks to take low-income, low-cost auto insurance proposal statewide.

I told Oosting that there are much smarter and more effective ways to lower auto insurance that Smith’s proposal. Getting rid of credit scoring and red-lining, which harms minorities, low income people and people who live in Detroit would be a basic first step to stop discrimination.

But the question that Smith keeps avoiding is this: why do auto insurance companies in Michigan make more money than anywhere else in the country? Michigan is a highly profitable market for auto insurance companies (the Angoff report said it was “excessively profitable”). Why is Michigan one of the only states in the entire country were the insurance commissioner can’t cap excessive and unreasonable profits that auto insurance companies conspire to charge consumers?

If we really want to lower the cost of auto insurance AND protect the interests of struggling Michigan residents in cities like Detroit and Flint, let’s allow our state insurance commissioner the same power that they have in other states to cap unreasonably large auto insurance company profits.

Why must auto insurance companies be allowed to make more money here in Michigan than almost anywhere else? And isn’t this a much easier and better idea to lower the cost of auto insurance than taking away critical, vital No-Fault protections from those who likely don’t have other insurance and would be hit – and harmed – the hardest if Virgil Smith’s plan becomes law?

Virgil Smith’s No-Fault plan: from bad to worse

During an initial five-year trial period, Smith’s proposal would allow Michigan residents who make around $30,000 or less, have a clean driving record and own a vehicle worth less than $20,000 to qualify for a “special policy” that could cost around $100 a month. But, as Oosting reported, these savings would come at the great expense of medical coverage.

Our comprehensive Michigan No-Fault law currently requires auto insurers to cover all expenses related to an auto accident, and provides unlimited lifetime medical expenses. Smith’s proposed law would lower minimum personal protection coverage to $50,000 or $100,000.

For example, the “basic” No-Fault cap that Smith is pushing is so ridiculously low, that it would be wiped out before someone leaves the emergency room if he or she suffered a serious injury from an auto accident. In turn, the costs for the injured driver’s medical care would be shifted to Medicaid, and the financial burden shifted to our public taxpayers.

Steven Gursten is a head of Michigan Auto Law. He handles auto accident lawsuits and No-Fault insurance litigation. Steve is president of the Motor Vehicle Trial Lawyers Association. He frequently writes and speaks on auto insurance and Michigan No-Fault reform, and is available for comment.

Related information to protect yourself:

Michigan auto insurance industry “highly profitable”

7 things to know about Michigan No-Fault “reform”

Michigan No-Fault insurance resource center

Michigan Auto Law exclusively handles car accident, truck accident and motorcycle accident cases throughout the entire state of Michigan. We have offices in Farmington Hills, Sterling Heights, Ann Arbor, Grand Rapids and Detroit. Call (800) 777-0028 or to speak with one of our insurance lawyers today.

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