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5 reasons the No-Fault reform bills barring drunk drivers, illegal immigrants, felons from MI PIP benefits are a terrible idea

June 7, 2012 by Steven M. Gursten

Proposed House Bills 4993 and 5587-5589 are huge boondoggle to Michigan auto insurance companies at the expense of taxpayers

This week, I blogged about House Bills 4993 and 5587-5589, which would ban drunk drivers, felons and illegal immigrant drivers from receiving Michigan No-Fault benefits if they’re hurt in an auto accident.

Yesterday I was interviewed by Michigan Lawyers Weekly for a story on the possible repercussions of this discriminatory and senseless legislation.

Here are five key points I made to Lawyers Weekly on why this latest round of No-Fault “reform” bills are a terrible idea.

1. Taxpayers are forced to foot the bill.
House Bills 4993 and 5587-5589 hurt Michigan residents, as they will force taxpayers to pay the full burden of these peoples’ medical care for life as they’re pushed on to Medicaid — instead of the auto insurance companies that have already figured in these costs into their risk premiums.

2. These GOP bill sponsors either don’t understand how insurance companies work, or do not care and want to give a giant gift to insurance company campaign contributors.
Fundamentally, House Bills 4993 and 5587-5589 show that the legislative sponsors have no idea of how auto insurance companies make money. Or they don’t care and are doing it anyways because of the whopping insurance company campaign contributions they receive. Thank you again US Supreme Court for the Citizens United case, the greatest blow to our functioning democracy in a century. Below are a few points to this matter:

  • Auto insurance is a “highly profitable” industry. It works on paying money to protect against an unlikely event occurring. Insurance companies assess the risk of this unlikely event, and then charge a premium for it.
  • Auto insurance companies are very good at assessing risk. This is why they make so much money. Over large population samples, very reliable statistical trends emerge. They know very well what to charge to make money.
  • If a customer pays $2,000 in auto insurance premiums, but does not have a car accident, the insurance company keeps the entire $2,000 insurance premium. Likewise, if a customer pays $500 in auto insurance premiums and has an accident that causes $50,000 in damage, the insurance company will pay out $50,000, regardless of the fact that the customer paid far less.
  • With bigger numbers, statistical trends become very, very accurate. Our payments already reflect pay-outs insurance companies must make because of people driving intoxicated, felonies that occur while driving, and the very small number of cases that might involve illegal immigrants each year. With illegal immigrants, this is somewhat silly, as it involves very few people, as those that are truly here illegally are already driving without insurance. It’s really just red meat for the base.
  • These bills reward a very small group of highly profitable insurance companies and makes them much more profitable by carving out exceptions on unpopular groups that they’ve already calculated a premium on for potential accidents. So on the backs of Michigan taxpayers, these insurance companies can now save millions on the risks they’ve already been paid to insure against!

3. Credit scoring already reduces risk. Auto insurance companies take a driver’s credit score into account when determining rates. And this is legal, though sad and unfortunate, in Michigan already. This practice already reduces risk by essentially economic discrimination. Here’s a blog about the subject: Credit scoring: Auto insurance companies win big, Michigan drivers lose big

4. These proposed bills turn the fundamental principle of No-Fault insurance on its head. House Bills 4993 and 5587-5589 shows no understanding whatsoever of what No-Fault is or what it means. Again, the point of Michigan No-Fault is that it doesn’t matter who you are, what you have done, or who is at fault for a car accident. If you pay into the No-Fault system, you get your medical expenses and expenses related to your auto accident injury covered. That’s why we call it “No Fault.” Now someone please explain this to the bill sponsors.

5. It’s discriminatory against unpopular groups. This is politics at its ugliest. The legislative sponsors can say these laws are tough on drunk drivers, felons and immigrants. But they’re really not. They are only increasing the taxes for the rest of us.

Steve Gursten is an insurance attorney handling auto accident lawsuits. He is head of Michigan Auto Law and president of the Motor Vehicle Trial Lawyers Association. Steve frequently writes and speaks about Michigan No-Fault “reform” and auto insurance, and is available for comment.

– Photo courtesy of Creative Commons, by See-ming Lee

Related information:

More on the 7 things to know about No-Fault reform

More transparency needed in the pricing of Michigan No-Fault auto insurance

Your Michigan No-Fault benefits

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. Call (248) 353-7575 to speak with one of our Michigan attorneys.

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