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An open letter to Gov. Snyder regarding Michigan No Fault reform

January 23, 2013 by Steven M. Gursten

My 8 reforms to really reduce auto No Fault insurance rates and protect Michigan citizens

Gov. Rick SnyderIn his January 16, 2013, State of the State address, Michigan Gov. Rick Snyder spoke of  reforming Michigan’s No Fault auto insurance system in order to reduce “the high auto insurance costs”  that drivers must pay for mandatory No Fault insurance.

“We are the tenth most expensive state in the nation” he said. “It’s time for some reforms, folks. …[W]e should reform no-fault. It is time to do that in a thoughtful way.”

Because I share the Governor’s concern that Michigan drivers are paying too much for their No Fault auto insurance, I decided to write the following “open letter” to Gov. Snyder sharing my proposals for 8 “thoughtful” reforms to reduce auto insurance rates and improve the overall functioning of Michigan’s outstanding No Fault law system.

For more information, click here to read a comprehensive analysis of Michigan No Fault reform and the latest developments.

Dear Gov. Rick Snyder:

I agree that something must be done about the high – and often outrageous – auto insurance rates that Michigan drivers are forced to pay for their mandatory No Fault coverage.

Indeed, No Fault insurance reforms are needed.

But I mean real reform. Not the same “darlings” from Michigan’s  insurance industry that have been soundly (and wisely) rejected time and again over the years.

Instead, I’m thinking about real reforms that fit your philosophy of “relentless positive action.”

In other words, reforms that will actually save Michigan drivers money on their auto insurance, unlike the auto insurance industry’s past so-called “reforms” which were nothing but a series of one-way, profit-driven wish lists by the insurance special interests: pages and pages of bills dedicated to reducing drivers’ legal protections, but not a single word about how those sacrifices were guaranteed to result in savings.

You said in your State of the State address that reform needed to be done in a “thoughtful way.”

Well, I’ve been an insurance lawyer in this state for nearly 20 years, so I thought about it and I have come up with the following 8 reforms.

I believe their implementation will both enable Michigan drivers to save money on their car insurance and protect the citizens of this state. It will also further improve the overall health of Michigan’s excellent No Fault law system.

Accordingly, I submit my “thoughtful” reforms for your consideration:

1. Michigan’s No Fault auto insurance companies should be required to disclose annually their loss ratios on their No Fault (PIP) coverage lines.

An auto insurance company’s “loss ratio” reflects how much of each premium dollar is paid out in claims. It is calculated by dividing the insurer’s “incurred losses” by its “earned premiums.”

Accordingly, a high loss ratio, such as 90%, means that insureds are getting good value for their money because for every dollar the insurer collects in premiums, the insurer pays out $.90 in claims.

In reporting its loss ratios for No Fault coverage, it is also crucial that No Fault insurers include in their “incurred losses” calculation only those losses actually paid by the insurer – not the catastrophic claims payments made by the Michigan Catastrophic Claims Association.

2. Demand that Michigan’s auto insurance companies provide value or refunds by enacting a No Fault 80/20 loss ratio rule.

To ensure that Michigan No Fault auto insurance is affordable for all Michigan drivers, the No Fault Law should be amended to demand two things of the auto insurers who provide the auto insurance mandated by Michigan’s No Fault Law:

  • Require Michigan’s No Fault auto insurance companies to spend no less than 80% of their insureds’ premium dollars on their insureds’ No Fault benefits. Or:
  • Require non-compliant Michigan’s No-Fault auto insurance companies to refund money to their insureds in the form of rebates.

The Federal “Affordable Care Act” imposes a similar obligation through its 80/20 Medical Loss Ratio rule, requiring that the insurers who are providing the health insurance coverage mandated by the ACA “spend at least 80% [to 85%] of annual premiums they take in on health care costs … as opposed to profits and administrative cost, including executive salaries, overhead and marketing,” according to HealthCare.gov, a federal government website managed by the U.S. Department of Health and Human Services. Here’s a blog I wrote about how Michigan needs an “Affordable Care Act” for our No Fault insurance system.

3. Michigan’s No Fault auto insurance companies should be required to disclose No Fault claims trends.

In the ongoing debate over so-called Michigan No Fault “reform,” the state’s auto insurance industry keeps beating the drum about how much the average No Fault (also called personal protection insurance or PIP) claim has increased.

However, what the insurance industry fails to include in its fear mongering campaign is the necessary contextual information.

For instance, for Michiganders to know whether the apparent increase in the average No Fault claims is something to be alarmed about, the auto insurance industry should disclose:

  • No Fault claim trends: Whether No Fault claims are increasing or decreasing.
  • No Fault payout trends: Whether No Fault auto insurance companies’ payouts on No Fault claims are increasing or decreasing.
  • No Fault consumer trends: Whether the number of premium-paying No Fault insureds in Michigan is increasing or decreasing.

4. Michigan’s insurance commissioner should conduct an updated study of the excessiveness of Michigan auto insurance prices.

In 2003, a former Michigan Insurance Commissioner arranged for a study and analysis of Michigan’s auto insurance market to determine its competitiveness and the excessiveness or non-excessiveness of auto insurance prices.

(Both can be found in the publications/reports sections of the Michigan Department of Insurance and Financial Services).

The impetus for the study was “a substantial number of consumer complaints … regarding high … auto insurance premiums …”

The study, which was completed in September 2004, and the commissioner’s summary, which was completed in March 2005, provides invaluable insight into the inner workings of Michigan’s auto insurance market.

Notably, in another study, “An Analysis of the Profitability and Performance of the Michigan Auto Insurance Market,” former Missouri Insurance Commissioner Jay Angoff concluded that Michigan’s auto insurance market was “highly profitable.” Angoff also quoted a source that Michigan auto insurers had been “significantly more profitable than the national average …”

5. Compel the Director of the newly-created Department of Insurance and Financial Services to resume publication of an annual “Buyers’ Guide to Auto Insurance.”

With saving Michigan drivers money on their car insurance as the goal, providing drivers with useful, up-to-date consumer information is one of the best ways to accomplish that goal.

And, the “Buyers’ Guide to Auto Insurance” is the perfect vehicle for that information. Using four hypothetical auto insurance consumers (i.e., single, married couple without kids, married couple with kids and a retired couple), the Guide provides auto insurance rates for approximately 60 Michigan auto insurers in 16 major Michigan markets (i.e., cities).

The most recent Guide, which came out four years ago in 2008, was published by the Office of Financial and Insurance Regulation (OFIR).

Prior to that, there was a 2007 Guide and it appears from a search on the OFIR website that Guides were published in 2003 and 2004.

The press releases for the Guide describe it as “an annual survey of automobile insurance companies and their rates for different policies for different areas of the state …”

Additionally, in order to ensure that Michigan auto insurers engage in fair business practices, act in “good faith” when handling their insureds’ claims and otherwise follow the rules, I offer the following three reforms for you to consider:

6. Restore the usefulness of the Michigan Consumer Protection Act (MCPA).

In a nutshell, the Michigan Consumer Protection Act needs teeth when it comes to regulating the business practices of Michigan’s auto insurance companies. Indeed, the MCPA prohibits “[u]nfair, unconscionable, or deceptive” business practices and allows aggrieved parties a private cause of action to sue for damages and remedies such as declaratory judgments and injunctions. But the Michigan Supreme Court has ruled that auto insurance companies are in general exempt from the restrictions and sanctions available under the MCPA.

7. Put a high price on insurer ‘bad faith.’

Michigan law on insurer “bad faith” is so weak and ineffectual that it provides no deterrent whatsoever against insurer wrongdoing. Consequently, auto insurers can act with impunity in the way they handle and arbitrarily deny insureds’ claims. Michigan’s “bad faith” law needs an overhaul akin to the measures passed by the Michigan House of Representatives in 2009: An auto insurer who is “obligated to pay benefits or claims … has a duty to deal fairly and in good faith with an insured claiming those benefits” and a breach of that duty renders the auto insurer “liable for compensatory, consequential, and exemplary damages … costs of litigation, including actual attorney fees.”

8. Put the ‘punitive’ back in damages.

For too long, Michigan has been among the smallest minority of states that deny their citizens the right to sue wrongdoing parties for “punitive damages.” This must end. When deciding how to treat their insureds, Michigan auto insurers need to know that through arbitrariness, complacency and greed, they risk being held accountable for their misdeeds.

Gov. Snyder, thank you for your time and your consideration of my proposals and I welcome the opportunity to have a “thoughtful” discussion about reform and Michigan’s No Fault system.


Steven M. Gursten


So, that’s my “open letter” to Gov. Snyder.

And, those are my 8 “thoughtful” reforms to reduce auto insurance rates and improve the overall functioning of Michigan’s outstanding No Fault system.

As for the possibility of Gov. Snyder taking me up on my offer to get together, well, I look forward to telling you all about our meeting.


For more information, click here to read a comprehensive analysis of Michigan No Fault reform and the latest developments.

[Community Guidelines]

11 Replies to “An open letter to Gov. Snyder regarding Michigan No Fault reform”

    1. John, Thank you for your comment. CPAN has been an important force in educating lawmakers on the importance of No-Fault. I encourage everyone to visit the CPAN website.

  1. I’m a recent college graduate working at my first major related job, well outside of my city of residence. Just Monday, a lady smashed into the back of my car at a stop sign.

    Michigan only allows her insurance to pay a capped sum of 1000 dollars… and to fix my car it will cost more than a thousand dollars. How is this a fair or just law? I can no longer make it to work to even make the money to pay for my car that was damaged. I can’t afford higher insurance, so full coverage was not an option. I feel as though the law should protect me from events such as this when I made no wrong action.

    My fear is losing my job because I no longer have transportation. I don’t know what to do.

  2. Great letter, Steve! Clearly the use of references for your assertions indicates that you have researched this area thoroughly. Keep us all posted on any reply he might send you. My toughened cynical side, however, compels me to predict that you will be granted a sit-down meeting with him “when donkeys fly.” Please prove me wrong. Best regards from Arizona, Richard

    1. Richard, we have to hope the Governor means what he says and this is not simply a payback to the insurance companies for their political contributions to the Republican party to boost their profit margins.

  3. Steven:

    A couple of thoughts:

    1) Insurance companies make huge profits hanging on to the premium and investing it. The loss ratio numbers alone are misleading without also disclosing those numbers.

    2) Snyder should also order the MCCA to stop playing games in CPAN’s FOIA suit.

  4. Dear Steve:

    I think N0-Fault should reform to operate similar to Work Comp. I think there should be an initial determination of benefit letter. I think disputes should be placed in writing with specific reasoning and the corrective action an insured or provider may initate. I think that claims pended or delayed for an investigation should be done objectively and not on mere suspicion, (ex: a material issue on the policy such as an address, undisclosed driver). I think the underlying reason should be made available upon request and what the insured or provider may do to redress the dispute. I agree with your 1st and 5th proposal; however, I offer no opinion on the remaining. Some of my other thoughts are shared below.

    1. Should the State of Michigan reform the definition of a motor vehicle to include a motor cycle? And if not, should the State change the law to now require motor cyclists to carry their own PIP coverage? (This would eliminate the motorist’s insurer from providing PIP). I think when you step back and look at it, the motor cyclist has a greater risk of harm than the occupant of a motor vehicle.
    2. Reform 3104 so that MCCA only accepts assessments sufficient enough to reimburse insurers on existing CAT claims; and then modify 3107 to place monetary caps. Once those CAT claims are resolved, what ever remaining money should go to the State’s general fund.
    3. Should the State of Michigan reform 3105 and 3113 to exclude coverage from fleeing motorists, or occupants alighting from a moving vehicle and/or occupants of a stolen vehicle (unless they lack in mental capacity/not reached the age of reasoning).
    4. Adopt a fee schedule similar to workcomp and require AC to be provided by licensed medical practioners?
    5. Adopt a wage determination similar to work comp?
    6. Amend 3019 so that it only applies seting off benefits received from work comp. In my opinion, there is no gain in COB. But at the same time, eliminate the right to double dip. The concept of insurance is to restore, not to enrich.
    7. Get rid of Mini-Tort. One of your readers had it right. Most people cannot reasonably afford full coverage on an older vehicle. There should be a right of recovery including de-valuation and loss of use claims; thus amend 3135.
    8. I agree with a bad faith remedy system but nothing extreme. When there is a dispute between the auto insurers (ie. two policies insuring the resident relative, one shall pay and subrogate 50% of the claim paid).
    9. Allow minors and the mentally incapacitated to collect benefits without regard to the one year rule.
    10. Require insurers to accept demands for non-binding arbitrations.
    11. Require insurers to allow insured/claimant access to seeing their claims and benefit determinations.
    12. Require insurers to develop electronic submissions and electronic fund transfers (the later might not be suited for 2 party settlement payments).

  5. I think reform is badly needed I don’t know how any senior on medicare can afford to pay for it a medicare doesn’t pay because of the no fault so therefore wee have tho pay a higher rate I mean alot higher. Seniors are penalized bad. We have even thought of selling our house and moving to Indiana so we can afford ins better!

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