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Who’s really funding the MCCA? Auto insurance consumers, not insurers

January 13, 2014 by Steven M. Gursten

During arguments before the Michigan Court Of Appeals in MCCA “transparency” case, lawyer absurdly obscures reality of who’s actually funding MCCA

MCCA fund

A “funny” thing happened during the recent arguments before the Michigan Court of Appeals in the case involving transparency – or lack of transparency – at the Michigan Catastrophic Claims Association (MCCA).

For those of you who are unfamiliar with the MCCA: It’s a private, nonprofit association made up of a five-person board (comprised from the insurance industry) who manage the fund that compensates auto insurance companies when a no-fault claim exceeds $500,000.

Here are my thoughts from the arguments last Wednesday.

The lawyer for the MCCA made an argument that everyone who knows anything about the MCCA knows is absurd.

The MCCA is in the Court of Appeals because it’s contesting the ruling of an Ingham County Circuit Court judge which directed the MCCA to comply with the public disclosure requirements of Michigan’s Freedom of Information Act (FOIA) and, thus, “disclose [its] general rate calculation information.”

In other words, the judge’s ruling told the MCCA it could no longer keep secrets about how it determines what to charge for its annual per-vehicle assessments.

The funding from assessments is used by the MCCA to pay for the No Fault medical benefits of catastrophically injured auto accident victims

In making her pitch for why the MCCA should be able to continue keeping secrets, the lawyer insisted the auto insurance consuming public wasn’t entitled to disclosure because it was the auto insurers, not the consumers themselves, who paid money to the MCCA, according to MIRS.

What a ridiculous argument!

Insurers may be paying, but they’re paying with consumers’ money.

The reality, which the MCCA’s lawyer shrewdly obscured with her absurdly narrow argument, is that the money that funds the MCCA originates from one place and one place only:

Auto insurance consumers, not auto insurers.

Everyone knows that! For instance:

  • The Ingham County Circuit Court judge who ordered the MCCA to comply with FOIA knows it: In his ruling, from which the MCCA is appealing, he wrote that “…Michigan citizens have a right to know how the MCCA rate charged to insurers is calculated, because citizens ultimately end up paying that rate as part of the premium charged by insurers …”
  • The MCCA knows it: The MCCA’s “assessments are generally passed on to auto insurance policyholders” by “auto insurance companies operating in Michigan …”
  • The Insurance Institute of Michigan knows it: “The assessments paid to the MCCA by insurance companies are reflected in the auto insurance premiums paid by Michigan policyholders.” (2013 IIM Fact Book, Page 22)
  • Lawmakers know it: The No Fault law provides that the “[p]remiums [i.e., assessments] charged members by the association [MCCA] shall be recognized in the rate-making procedures for insurance rates in the same manner that expenses and premium taxes are recognized.” (MCL 500.3104(22)
  • Even the MCCA’s lawyer knows it. During the Court of Appeals argument, she acknowledged the cost of the MCCA assessment  rate “is passed on to the policyholders,” according to MIRS (which did not quote the lawyer verbatim).

Most importantly, Michigan’s driving public knows the reality about who is truly funding the MCCA: They’re reminded every time they pay their auto insurance bill.

Related information:

The MCCA should not operate in greater secrecy than the CIA

Fire the MCCA board of directors for financial mismanagement

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