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MCCA transparency case deserves ‘supreme’ review

September 18, 2014 by Steven M. Gursten

When Michigan Catastrophic Claims Association’s income exceeds payouts by $153 million, consumers deserve to hear from Michigan Supreme Court as to FOIA’s effect on revealing the assessment-rate calculation process

Michigan Supreme Court
The Michigan Supreme Court

I’m 100% in favor of requiring transparency into the Michigan Catastrophic Claims Association’s (MCCA) assessment-rate calculation process.

And I’m just as much in favor of the Michigan Supreme Court hearing the case of CPAN & BIA of MI v. MCCA to say whether – or not – Michigan’s Freedom of Information Act requires the MCCA to reveal its assessment-rate calculation process.

There’s a lot that Michigan motorists deserve to have explained to them, especially given that it’s their money that’s being used to pay the assessments that fund the MCCA.

For instance, think Michigan motorists deserve answers to the following questions:

  • Why aren’t MCCA assessment rates (the cost of which are passed along to consumers by the auto insurance companies) declining, given the MCCA’s income from assessments exceeded its reimbursement payouts in 2013 by $153 million?
  • Why aren’t MCCA assessment rates declining, given the MCCA’s reserves increased by nearly $1 billion to more than $16 billion in 2013?
  • Is it true that Michigan motorists are being charged MCCA assessments that are 15% to 26% “higher than necessary,” according to the July 2014 study by former Missouri Insurance Commissioner Jay Angoff, “An Analysis of Profitability and Pricing In the Michigan Auto Insurance Market”? (Stay tuned for our forthcoming blog post on this topic.)
  • What’s the truth about the MCCA’s billion-dollar deficit?

Kathy Hoekstra summed up very well the need for a Supreme Court ruling on the MCCA transparency issue in her recent “Politics Blog” column in The Detroit News, “Michigan Supreme Court must hear no-fault FOIA case”:

“The Michigan Supreme Court has a chance to do right by the citizens who elect it by allowing us to know exactly how no fault automobile insurance is calculated.”

*    *    *

“No matter what side Michigan citizens are on regarding no-fault insurance itself, we deserve to know how the MCCA calculates the use of our own money. And it behooves the Michigan Supreme Court to at least hear out C-PAN and BIAMI.”

*    *    *

“The weak and unconvincing arguments to retain the MCCA cloak and dagger approach to our no-fault insurance rates need serious review. Our Supreme Court justices can and should clarify the public’s right to know …”

Ms. Hoekstra hit the nail on the head.

No increase in MCCA assessment

The MCCA assessment did not increase this year. The MCCA assessment for July 1, 2014 through June 30, 2015 is $186, which is the same amount it was for July 1, 2013 through June 30, 2014, according to the MCCA’s March 20, 2014, and March 27, 2013, press releases.

Until this year, the MCCA’s annual assessment increased every year since the 2009/2010 assessment period, according to the MCCA’s “Assessment Rate History.”

MCCA assessment income exceeds reimbursement payouts by $153 million in 2013

In 2013, the MCCA’s income from assessments exceeded its reimbursement payouts by $153 million. In 2012, the MCCA income exceeded payouts by $69 million.

MCCA assessment income

(Sources: Michigan Catastrophic Claims Association Annual Report to the Director of Department of Insurance and Financial Services (DIFS) – Fiscal Year Ended June 30, 2013; Michigan Catastrophic Claims Association Annual Report to the Commissioner – Fiscal Year Ended June 30, 2012)

The purpose of the MCCA is to pay for the medical expenses of catastrophically injured Michigan auto accident victims. The MCCA raises the funds to make those payments (i.e., reimbursement payouts) by imposing assessments or premium on all of the auto insurance companies licensed to do business in Michigan. That’s called the MCCA’s “assessment income.”

Ultimately, Michigan motorists bear the financial burden of the MCCA’s assessments, because the auto insurance companies pass along those costs to motorists in the form of higher auto insurance premiums.

MCCA’s claims reserves increased by nearly $1 billion

The MCCA’s reserves increased by nearly $1 billion between 2012 and 2013, bringing the MCCA’s total reserves amount to $16,336,755,000.

Between 2011 and 2012, the MCCA’s reserves increased by $1,674,863,000 from $13,743,306,000 to $15,418,169,000.

The MCCA’s reserves, which are identified as “Discounted loss reserves” in the MCCA’s Annual Statement and Annual Report to the Insurance Commissioner, is the amount of money the MCCA sets aside or saves to use to pay for present and/or future open catastrophic claims.

(*The loss reserves information above reflects reserves from July 1, 1978, date of inception for the MCCA, through June 30 of the years indicated.)

What’s the truth about the MCCA’s deficit?

Michigan motorists, lawmakers and the public deserve a straight, truthful answer about the MCCA’s deficit. To date, that has not happened.

If you believe its press releases from March 30, 2009, through March 20, 2014, the MCCA’s deficit has fluctuated between $2.2 billion, $2 billion and $1.1 billion.

But the actual deficit figures for those years – from the MCCA’s Annual Reports to the Director of Department of Insurance and Financial Services – paint a very different picture:

MCCA deficit



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