Rep. Derek Miller (D- Warren, MI) would require MCCA to finally ‘disclose’ its assessment ‘computation’ in HB 4752
How does the Michigan Catastrophic Claims Association (MCCA)’s calculate its annual assessments, which are ultimately reflected in the price Michigan drivers pay for No Fault auto insurance?
That’s what most of us want to know when we see the MCCA assessment. We’ve speculated that at least a big part of assessment increases are politically motivated by the insurance industry, as it pushes for so-called No Fault insurance “reform” in the state.
Rep. Derek Miller (D-Warren) wants to know, too.
So, on June 18, 2015, Rep. Miller – and 53 of his Democrat and Republican colleagues in the Michigan House of Representatives – introduced House Bill 4752, which would require the MCCA to explain why it sets the assessment rates that it sets.
Specifically, HB 4752 proposes:
“Annually, within 15 days after the [MCCA announces its annual assessment], the [MCCA] shall disclose to the public on its website all data used in computing the premium [i.e., the assessment] and expected losses and expenses …”
The purpose of the MCCA is to pay for the No Fault medical benefits of catastrophically injured auto accident victims that exceed $530,000. The MCCA accomplishes its mission by charging annual “assessments” or “premiums” (just like the auto insurance premiums auto insurers charge) that are ultimately paid for by Michigan auto insurance consumers.
Borrowing from the strategy used by the Coalition Protecting Auto No-Fault (CPAN) in its ongoing legal battle to require transparency into the MCCA’s assessment-calculation process, HB 4752 proposes that the MCCA’s annual “disclosure” include 13 items, encompassing computations, documents, evaluations, reports, models and memorandum.
In particular, the MCCA would be required to disclose the following:
- “The actuarial computation used in making determinations of unpaid losses and loss adjustment expenses.”
- “All documents used in establishing the following: (i) the calculation of the present value of disbursements expected to be made in the ultimate settlement of the claims reported; (ii) the actuarial tables used to reflect the probabilities of each claimant surviving to incur the costs projected; (iii) the calculation of incurred but not reported losses; (iv) the actuarial assumptions and calculations used in producing the short-term discount rate and the long-term discount rate; (v) the forecasts producing the economic assumptions for claim cost inflation and investment returns used; (vi) the current economic data and historical long-term consumer price index data for any cost component categories used in producing inflation assumptions; (vii) the loss development analysis undertaken in connection with the provision for unpaid losses and loss adjustment expenses; (viii) the trend analysis for both frequency and severity undertaken in connection with the provision for unpaid losses and loss adjustment expenses.”
- “The annual actuarial evaluation used in establishing the premium [i.e., MCCA assessment].”
- “The annual assessment reports of [Michigan auto insurance companies] used in establishing the premium [i.e., MCCA assessment].”
- “The annuity model used by the [MCCA’s] opining actuary in his or her actuarial opinion projecting future payment streams at the claimant level and the mortality adjustment applied.”
- “Any explanatory memorandum explaining the various components of the premium and the judgments made to produce the premium [i.e., MCCA assessment].”
The items in HB 4752’s proposed MCCA “disclosure” (Page 11 (lines 18-27) and Page 12 (lines 1-22)) are in many respects verbatim statements of the “requests” for documents and records that CPAN made to the MCCA in early 2013:
- As part of its lawsuit seeking disclosure under the Freedom of Information Act (FOIA) of information pertaining to the MCCA’s rate-calculation process, around the time of February 15, 2013, CPAN filed a “Request for Production” of “documents and tangible items” directed to the MCCA.
- Similarly, on May 21, 2013, CPAN submitted to the Michigan Insurance Commissioner (i.e., the Director of the Department of Insurance and Financial Services (DIFS)), a “Request for records pursuant to the Michigan Freedom of Information Act (FOIA).”
To learn more about CPAN’s “transparency” lawsuit against the MCCA, take a look at my blog post, “CPAN asks MI Supreme Court to require MCCA transparency.”
No $1 billion raid on MCCA
Thankfully, Rep. Miller’s quest for MCCA transparency through HB 4752 doesn’t include his previous plan – which he supported earlier this year – of taking $1 billion away from the MCCA to pay for road repairs.
In a June 18, 2015, statement on the Michigan House Democrats website, Rep. Miller offered up the following justification for his proposals in HB 4752:
“[H]ow the MCCA determines this fee [i.e., the MCCA assessment] is a mystery. It’s time the public knows exactly how the MCCA manages this fund.”
Fortunately, this appears to represent a shift in Rep. Miller’s thinking away from the position he espoused in his May 18, 2015, Macomb Daily column, where he defended the proposal in HB 4560 (which he co-sponsored) to defund the MCCA by $1 billion to pay for road repairs, explaining:
The proposal bill “continues the fight for more transparency from the MCCA” and “is a great first step toward much needed transparency in ensuring Michigan drivers are not paying more than is needed to sustain the MCCA.”
While I may have disagreed with Rep. Miller on his previous proposal to defund the MCCA by $1 billion, he is dead-on right to push for transparency into the MCCA’s assessment-calculation process. Kudos to Rep. Derek Miller, and CPAN, on this.