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It’s time for real auto insurance ‘reform’ that helps consumers – not insurance companies

October 8, 2015 by Steven M. Gursten

Why doesn’t CURE’s Eric Poe call for eliminating credit-scoring and charging people more for factors like education and occupation?

auto insurance reform

Don’t faint, but  I actually agree with CURE Auto Insurance’s Eric S. Poe that “[i]t’s time to … reform no-fault.”

We disagree over what that reform should look like. Mr. Poe’s version of auto No Fault insurance reform in Michigan is basically, if it’s good for the insurance industry, then let’s call it “reform” and enact it.

It would have been nice if Poe, in his August 30, 2015 column in Crain’s Detroit’s “Other Voices” blog, had called for No Fault insurance reforms that included the issues that he and CURE know best.

Specifically, CURE Auto Insurance, which does business in New Jersey and Pennsylvania, prides itself on the following philosophy (as stated in a June 11, 2015, press release):

  • “[B]asing rates predominantly on each applicant’s driving record and not on income-proxy related factors such as education, occupation, home ownership or credit score.”
  • “[O]ur rates and discounts aren’t based on education, credit score, or other income proxies since we believe those factors do not directly correlate with how well an individual drives.”

Real No Fault insurance reform in Michigan

Now, that’s the kind of proposed No Fault auto insurance reform I could get behind. So would Michigan lawmakers and consumers.

Getting rid of credit-scoring and eliminating the use of education, occupation and home-ownership as ratings factors would be great beginnings in the quest to lower Michigan auto insurance prices – in Detroit and in many other hard-hit areas across the state like Flint and Battle Creek.

Unfortunately, those were not the types of insurance reform Mr. Poe chose to champion in his Crain’s piece.

Instead, he took a “rose-colored glasses” approach to touting the well-intentioned, but unhelpful, “D-Insurance,” low-cost auto insurance plan proposed by Detroit Mayor Mike Duggan and Sen. Virgil Smith (D-Detroit):

“Senate Bill 288, which includes D-Insurance, would give individuals in those high-noncompliance areas the option of buying less than the currently required unlimited coverage, in exchange for a more affordable policy.”

In glossing over how incredibly bad Duggan’s D-Insurance plan is, Poe neglects to mention the ways in which D-Insurance is dangerous for Detroiters and for anyone insured under a similar plan.

For regular readers of my blog post, you know my reasons for opposing the D-Insurance Plan and why I think it’s a “bad deal for Detroiters” and dangerous for Detroit and why it “will drive Detroiters out.” They include the following:

  • As result of the proposed $25,000 cap on non-critical No Fault medical benefits, medical care costs will be shifted away from auto insurance companies and will, thus, cause increases in auto accident victims’ out-of-pocket costs, health insurance costs, Medicaid/Medicare-related taxes, lawsuits and, ironically, auto insurance costs (for liability/UM/UIM coverage).
  • To the extent that D-Insurance results in any consumer savings, the savings will be too little, especially given the drastic reduction in No Fault protections and benefits. Consequently, D-Insurance will drive Detroiters out of the Motor City to other cities where they can get cheaper auto insurance without sacrificing essential coverage.
  • Auto accident victims could lose their right to choose a doctor of their choice and, thus, be forced into an auto insurer’s “limited provider network,” i.e., managed care, where “the insurer may require an injured individual … to obtain” treatment and care “from a provider … that is part of the [insurer’s] limited provider network” (page 25).
  • Auto accident victims can be denied medical care unless they have first obtained “preauthorization” from their auto insurance company based on what the auto insurer deems to be a “medical necessity.” Can you say “insurance companies playing doctor”? I can’t think of anything scarier. Except maybe this: Auto accident victims who fail to obtain the required “preauthorization” will be denied coverage and will be personally and financially responsible for their medical bills.

To learn more about my opposition to D-Insurance, please check out my blog posts:

Notably, I was “on record” in opposing D-Insurance well before the June 22, 2015, “Other Voices” column that Mr. Poe references in his August 30, 2015, column.  Sadly, it also looks like Mayor Duggan is doubling down, and reverting to his bullying and bombastic reputation when he doesn’t get his way, blaming trial lawyers, doctors, hospitals, and just about everyone else for why D-Insurance is stalled.

Real No Fault reform – Medical fee schedules

If Mr. Poe is serious about proposing meaningful auto insurance reforms that will have a real impact on the prices that Michigan drivers pay for No Fault insurance, then I’d also like to hear his thoughts on medical fee schedules.

Here’s what I said about medical fee schedules in my “How I would change Mayor Duggan’s D-Insurance Plan to actually protect Detroiters” (June 15, 2015):

  • “A truly fair No Fault fee schedule helps doctors, accident victims, and lowers costs.”
  • “A truly fair fee schedule, combined with my 14 ideas to lower the price of auto insurance in Michigan, would give us the best of both worlds. It would meaningfully lower the price of auto insurance for Detroiters and it would keep the critical legal protections and insurance benefits of our No Fault system intact.”
  • “[A] fair No Fault medical-provider fee schedule may be just the compromise we need to accomplish the following important goals: Lower auto insurance prices; preserve and protect the No Fault benefits that auto accident victims need; remove a lot of the ugliness and PIP fraud that we all see from a small but growing number of lawyers and law firms; streamline billing for medical providers, doctors and hospitals; facilitate prompt payment and eliminate the need for costly litigation; and, eliminate most of the lawyer provider lawsuit industry entirely, as doctors and medical providers would be paid reasonably charges promptly.”

Additionally, here’s a link to my blog post, “How to lower Michigan’s auto insurance prices.”

In light of all this, I pose this question to Mr. Poe:

Is it time to “make auto insurance affordable to everyone in Michigan” by backing the meaningful “reforms” championed by CURE and by backing a compromise on medical fee schedules?

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