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How to REALLY improve No Fault and create savings on auto insurance

March 7, 2014 by Steven M. Gursten

How to improve Michigan No Fault

If the real goal of changing of Michigan’s auto No Fault  system is to improve benefits and legal protections for the injured, and to  provide meaningful, long-term savings on the cost of No Fault for consumers, there are much better ways to go about it than what Michigan House Speaker Jase Bolger (R-Marshall), Representative Peter Lund (R-Macomb County), and Governor Rick Snyder have  proposed.

Below are some ideas that I have written about  in Michigan Auto Law’s “Auto Insurance Consumers’ Guide To Michigan No Fault Reform & House Bill 4612”:

  • Cap Michigan auto insurance rates (i.e., total auto insurance expenditures, which includes premiums, fees, assessments and charges) at $200 less than the national average.
  • If an auto insurer wants to charge a rate in excess of the rate cap, then, as to that insurer, all of the No Fault changes in House Speaker Jase Bolger’s so-called No Fault “reform” plan are voided and the pre-plan No Fault Law controls.
  • Enact a No Fault 80/20 loss ratio rule which would 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 pay refunds to their insureds.
  • Get the facts!  It has consistently amazed me how Gov. Snyder, who campaigns as a number-cruncher and a businessman, would make massive changes to our existing No Fault system without getting the facts and data first. Let’s see, for example, what the real profit margins are of the state’s insurance companies, and if they are found excessive and unreasonable, let’s empower our state insurance commissioner to regulate excessive profit margins on a product – Michigan No Fault insurance – that we as citizens are required by law to buy.
  • Empower our state insurance commissioner to have the ability to regulate excessive profit margins. Why does every other state have this power? But in Michigan, do not give our insurance commissioner this power to protect consumers, even though we require citizens to purchase No Fault on all motor vehicles by state law.
  • Keep our No Fault benefits intact – and lower prices. If the profit margins are indeed beyond reasonable, as former insurance commissioner Jay Angoff concluded when he last studied Michigan’s auto insurance industry, and if the state’s auto insurance companies have indeed been price-gouging consumers on auto insurance, then we can have the best of both worlds. We could keep our No Fault PIP benefits intact and significantly lower the price of auto insurance for consumers statewide.
  • Enact insurance “bad faith” legislation, which is desperately needed for preotecting people from the state’s insurance companies. This would create  a “duty to deal fairly and in good faith” with their own insured customers.  It would at last  hold insurers “liable for compensatory, consequential, and exemplary damages … costs of litigation, including actual attorney fees” for failure to do so.  The best No Fault system in the nation doesn’t matter much if people can’t get what they’re promised because insurance company adjusters use crooked, biased IME doctors and cut people off from desperately needed PIP benefits.
  • Amend the Michigan Consumer Protection Act to make it applicable to Michigan auto insurance companies.

As I’ve alluded to above,  I’ve included below some of the proposals I have previously suggested to Gov. Rick Snyder  after he first came out in support of the No Fault plan that was ultimately introduced in the Michigan Legislature as House Bill 4612:

  • Michigan’s No Fault auto insurance companies should be required to disclose annually their loss ratios on their No Fault (PIP) coverage lines.
  • Michigan’s No Fault auto insurance companies should be required to disclose No Fault claims, payouts and insured/uninsured trends.
  • Michigan’s insurance commissioner should conduct an updated study of the excessiveness of Michigan auto insurance prices.
  • Compel the Director of the Michigan Department of Insurance and Financial Services (DIFS) to resume publication of an annual “Buyers’ Guide to Auto Insurance,” which uses four hypothetical auto insurance consumers (i.e., single, married couple without kids, married couple with kids and a retired couple) to provide auto insurance rates for approximately 60 Michigan auto insurers in 16 major Michigan cities.

For more information, please check out my blog post, “An open letter to Gov. Snyder regarding Michigan No Fault reform.”

Finally, here’s an excellent proposal from the Coalition Protecting Auto No-Fault (CPAN)’s President John Cornack:

“Real rate relief would involved stopping credit scoring and giving the insurance commissioner greater powers to approve rates to ensure they are fair.”

According to Kathy Gray of the Detroit Free Press, Speaker Bolger said the following about Michigan’s No Fault system and his reasons for wanting to make changes:

“Michigan has the best auto insurance in the nation, but also among the most expensive … We want to maintain the best but make it more affordable.”

Taking Speaker Bolger at his word, I believe the proposals discussed above are bound to get him a lot closer to his stated goals than his own proposals to reform the No Fault  laws in this state ever will.

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