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How will Dem. insurance reform plan uncover the secrecy around your policy?

May 15, 2014 by Steven M. Gursten

Lawmakers’ plan will increase transparency by subjecting MCCA to FOIA and open meetings laws, protect whistleblowers who report unfair and deceptive insurance practices

Rep. Brian Banks (D-Harper Woods)
Rep. Brian Banks (D-Harper Woods) addresses insurance company transparency in recent Democratic package of insurance reform bills.

On May 1, the Michigan House Democrats previewed a  14-bill package of proposed laws that would reform Michigan’s auto insurance system. Yesterday, I wrote about how these proposed bills would help make insurance more affordable.

But the Democratic House plan would also do much more. The plan would hold the Michigan Catastrophic Claims Association (MCCA) accountable (finally) for providing its financial information to the public, and protect whistle blowers who report unfair practices in the insurance industry.

As an insurance attorney, I believe these proposed reforms would be monumental.  They would directly impact the lives of thousands of the most severely injured auto accident victims who depend on the MCCA for attendant care nursing services and other critical No Fault insurance benefits. I will review these proposed ideas today.

The MCCA is a private, nonprofit association made up of a five-person board (unfortunately, comprised from the insurance industry – talk about the fox guarding the hen house!) who manage the fund that compensates auto insurance companies when a No-Fault claim exceeds $530,000. Auto insurance consumers pay an MCCA assessment, which is a small part of your No Fault insurance premium.

So, why should Michigan auto insurance consumers care about – and demand – greater transparency in the state’s auto insurance industry and at the Michigan Catastrophic Claims Association?

Because, said Rep. Brian Banks (D-Harper Woods) in a written statement on his website:

“Michigan consumers, and Detroiters in particular, deserve to know how and why insurers set their rates, so they can be sure they are not getting gouged.”

*    *    *

“Making insurance companies accountable and transparent will keep rates down and make it less likely for people to illegally forgo insurance.”

At a press conference on May 1, 2014, top Democrats in the Michigan House of Representatives discussed their package for reforming Michigan’s auto insurance system. The plan includes proposals for transparency at the Michigan Catastrophic Claims Association contained in House Bill 4551.

HB 4551, which was introduced by Rep. Phil Cavanagh (D-Redford, Michigan ) on April 16, 2013, provides for the following:

  • Calling out excessive MCCA assessments: By allowing Michigan’s Insurance Commissioner to reject the Michigan Catastrophic Claims Association’s annual assessment as “excessive.” (Page 6 of HB 4551)
  • A non-insurance industry member on MCCA board: By requiring that one of the MCCA’s Board of Directors be a “member representing the general public.” (Page 10 of HB 4551)
  • Bringing MCCA into the public: By requiring the MCCA’s Board of Directors conduct the MCCA’s “business” at “a public meeting …” (Page 12 of HB 4551)

(Source: May 1, 2014, statement on the Michigan House Democrats website)

To discover more about the proposals for MCCA transparency in House Bill 4551, please check out Michigan Auto Law’s blog post, “Pressure for transparency builds for Michigan Catastrophic Claims Association (MCCA).” You can also read Rep. Phil Cavanagh’s guest blog for Michigan Auto Law, “Rep. Phil Cavanagh calls for scrutiny of the Michigan Catastrophic Claims Association.”

Whistleblowers would provide information about insurance company abuse to the public

Rep. Banks also said the No Fault reform plan’s “transparency” measures would accomplish the following:

  • Protect whistleblowers: An “insurance company employee who reports an unfair or deceptive act or practice” is covered by the “rights and protections of the Whistleblower Protection Act.”
  • Pay whistleblowers: Payments from the Whistleblower Protection Fund would be provided to employees whose information about unfair or deceptive acts or practices “is used to expose or end a violation of the Insurance Code …”

These are the latest measures to address whistleblower protections in quite some time.

For a while in 2009, things were looking up in terms of providing whistle blower protection to auto insurance industry employees who dared to report “unfair or deceptive” acts or practices engaged in by Michigan auto insurance companies. Unfortunately, after passing out of the House, the bills proposing this Whistleblower protection died from inaction once they landed in the Senate.

They are desperately overdue in this state.

The bills provided the following protections for consumers:

  • House Bill 5144 and House Bill 5149 provided that insurance company employees who report “an unfair or deceptive act or practice in the business of insurance” are “entitled to the rights and protection of the Whistleblowers’ Protection Act” and “may be entitled to a payment from the Insurance Whistleblower Protection Fund …”

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