Why the Michigan Catastrophic Claims Association has lost all credibility with latest proposed rate hike
On Monday, I wrote about why the public should know more about how Michigan No-Fault auto insurance is priced, given the country’s third most expensive insurance rates and some of the largest profit margins in the entire country. Now there is news about a whopping 21 percent proposed increase in the Michigan Catastrophic Claims Association (MCCA) fund assessment to Michigan drivers.
Let me be clear: it’s no “accident” that Michigan drivers are forced into an intentional “information blackout” when it comes to the Michigan Catastrophic Claims Association, which is part of the No-Fault auto insurance we are all legally obligated (forced) to buy.
The MCCA reimburses No-Fault insurance companies for medical claims that exceed $500,000. It recently announced a $30 or 21 percent increase in its annual per vehicle assessment. The assessment, which is charged to the No-Fault insurers and is used to reimburse them for claims exceeding $500,000, is “generally passed on” to and paid for by auto insurance consumers.
It’s also no coincidence that this shadow agency has engineered a giant hike in its assessment at the exact same time that the insurance industry in Michigan is in full-court press to change our No-Fault law and cap No-Fault benefits. One need not be a conspiracy theorist to wonder why?
The MCCA’s $2.8 billion reserve
Many insurance lawyers and veterans of the No-Fault wars in Michigan were simply astounded when it was recently disclosed by a CPAN-sponsored analysis that the MCCA has a $2.8 billion dollar reserve set for claims that have been incurred, but not yet heard about and passed on to the MCCA. What astounded these insurance lawyers and observers familiar with the Michigan No-Fault law is that the reserve period the MCCA sets (this $2.8 billion dollars) is set for an open claims period of five years – even though Michigan has a very strict one year statute of limitations on No-Fault claims. After that one year, the No-Fault claim is time-barred.
So why set a five year period as a reserve for potential claims?. This would mean the $2.8 billion number, and this 30 percent proposed hike in our MCCA assessments, would include catastrophic No-Fault claims that would be time-barred. These are claims that could never be submitted to the MCCA because they would fall outside the one year statute of limitations!
The CPAN study is called: CPAN Analysis Raises Red Flags About Recent MCCA Increase.
What the public needs to know about how the MCCA charges
I’ve been a No-Fault lawyer in Michigan for nearly 20 years. This is how I would improve transparency into the MCCA’s process for calculating the assessment it is going to charge No-Fault insurers:
1. Remove Freedom of Information Act (FOIA) exemptions that may apply to the MCCA.
In a lawsuit filed in January 2012, the Coalition Protecting Auto No-Fault (CPAN) seeks a declaratory judgment that the MCCA’s claimed exemption (MCL 500.134(4) and (6)(c)) to FOIA (MCL 15.231) is unconstitutional.
Moreover, legislation pending in the Michigan Senate and House of Representatives proposes to close the MCCA’s FOIA exemption “loophole” in MCL 500.134. (Senate Bill 74, which was introduced on January 26, 2011; House Bill 4785, which was introduced on June 16, 2011)
2. Amend the Open Meetings Act to apply to the MCCA.
Under Michigan’s Open Meetings Act, the meetings of “public bodies” are required to be open to the general public so that anyone can attend. Further, any deliberations and/or decisions of the public body must be made during the public, “open meeting.” (MCL 15.261, et al.)
Legislation pending in the Michigan Senate and House of Representatives proposes to amend Michigan’s Open Meetings Act to specifically include the MCCA as a covered “public body.” (Senate Bill 75, which was introduced on January 26, 2011; House Bill 4786, which was introduced on June 16, 2011)
In light of the recent developments concerning Michigan auto insurance prices and the ongoing, roiling debate over so-called Michigan No-Fault “reform,” there has never been a greater need for transparency into the pricing decisions of those entities authorized by the state to sell a product that the law requires the state’s more than 8 million drivers to purchase.
Related information to protect yourself: