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4 reasons No Fault “reform” won’t make auto insurance more affordable

August 2, 2013 by Steven M. Gursten

When you receive your mass propaganda mailing from the insurance industry, consider that you will likely end up paying more for car insurance under HB 4612

No Fault reform won't make insurance more affordable

Today, I’m continuing our series on the mass propaganda mailing that hundreds of thousands of Michigan drivers have received in recent weeks from the insurance industry pushing for No Fault “reform.”

Our attorneys are reviewing the arguments in this mailing, which are either completely untrue or misleading, in a series of blog posts called 7 reasons why this auto No Fault “reform” junk mail is trash.

According to its junk mail, the auto insurance industry’s plan is to:

  • Make auto insurance rates more affordable: “If these reforms are passed, auto insurance rates will be more affordable.”
  • Help drivers who do not have auto insurance: “Pilot new programs to help drivers who currently aren’t insured afford insurance and help those living in Detroit, who suffer from paying the highest rates in the nation.”

The obvious problem is that none of this is ever likely to come to fruition with what the auto insurance industry is proposing. I’ve previously compared it to historic swindles, like the story of the Dutch settlers buying Manhattan from the Native American Indians for a handful of beads. The insurance company is the Dutch. We’re the Native Americans. Our guarantee of reasonably necessary and reasonably priced lifetime medical care is Manhattan. And the trade? About $150 in savings. Only guaranteed for one year.


The $150 auto insurance savings for one year, which is provided for in the No Fault Reform plan currently pending in the House of Representatives, House Bill 4612, is not going to make auto insurance “more affordable.”

Here are four reasons why:

1. Rates will only drop for the first year. Rates would only drop from $1,073.52 to $923.52 for the one year that savings were guaranteed. And Michigan auto insurance rates would still be higher than the national average ($907.38).

2. The premium savings won’t make a dent in high insurance cost areas: Moreover, $150 in “premium” savings for one year would barely make a dent in the auto insurance prices for consumers in Detroit, Novi and Muskegon where they pay $6,456, $2,890 and $2,711, respectively. (“Snyder troubled by Novi’s No. 6 ranking in car insurance rates,” Chad Livengood, The Detroit News, 2/5/2013)

3. There are many other hidden fees and assessments that will likely cost you more: And don’t forget the fine print. There’s a potential whopper hidden in the proposed insurance industry plan that not only would potentially quickly negate any savings, but substantially add on to the price of auto insurance in this state. The one year of  savings would come with  new No Fault fees and assessments such as:

  • The new Catastrophic Claims Fee;
  • The new annual $21 million assessment for the insurance fraud and theft prevention authorities;
  • The ongoing Michigan Catastrophic Claims Association annual assessments;
  • The new $25 Medicaid charge.

For more information, read our blog post on how consumers may actually pay more under HB 4612.

4. “Savings” would have to be balanced against rate increases for other types of insurance that will make up for the shortfall: Finally, potential savings on No Fault auto insurance will also have to be balanced against expected rate increases for health insurance, and under- and uninsured motorist insurance, as well as increased taxes to account for increased Medicaid and Medicare liability.

For more information, take a look at my blog on how the “savings” could actually cost Michigan taxpayers an additional $630 million a year, since they will be the ones footing the bill for auto accident victims’ medical claims exceeding $1 million, in place of the auto insurance industry.

As for the pilot programs “to help drivers who currently aren’t insured afford insurance,” what are they?  And more importantly, who’s going to put up the money that the uninsured in cities like Detroit, Flint, and Battle Creek will use to join the ranks of the insured?

The insurance industry won’t.  They clearly don’t want to insure people in these areas, which is why they use credit scoring (Michigan is one of a minority of states that allows insurance companies to use credit scoring), and why I’ve written that much of our auto accident law, such as the draconian penalties against uninsured drivers is really a civil rights issue.

Will Michigan drivers have to pay a new “uninsured-driver-remediation” assessment from the insurance industry?

Or maybe a new “uninsured-driver-bailout” tax that the Republicans that control the Michigan House and Senate will propose for taxpayers to insure these uninsured drivers, now estimated at over 50% of the population of Detroit?

Or maybe all this will happen when pigs fly.

Yesterday, we wrote about how wrongdoing and fraud by auto insurance companies will continue to go unpunished under No Fault reform. Tomorrow, our attorneys will discuss who care for people with catastrophic personal injury would be drastically reduced under HB 4612.

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