From medical-provider fee schedules, to fighting insurer fraud, to MCCA transparency, to ending ‘credit scoring,’ here are 13 ways legislators can deliver savings to drivers and keep No Fault protections
If new Michigan lawmakers are concerned about and want to find a way to lower No Fault car insurance costs for drivers in 2017 – as ace MLive Capitol reporter Emily Lawler recently wrote – then I’ve got some ideas they might be interested in.
Thirteen ideas, to be exact.
And, I’m glad to share them.
For years, I’ve been following, analyzing and blogging about proposed changes to Michigan’s No Fault Law that would – in the words of the politician doing the proposing – generate “savings” for consumers.
Consistently, the proposals are long on eliminating and cutting back on the No Fault benefits and protections that are vital to car accident victims and short on actual, meaningful, long-term savings.
As a Michigan driver, I consider the proposals, because I too, would love to pay less for my car insurance.
But, as a lawyer who has dedicated my legal career to helping people who have been injured in auto accidents, I critique the proposals because I know from first-hand experience how life-saving and indispensable the No Fault Law is.
As such, I’ve come up with several my counter-proposals. Printed below, I submit for the consideration of lawmakers – new and not-so-new – my 13 ways to lower car insurance prices for consumers and preserve No Fault benefits and protections for car accident victims:
- Create a No Fault medical-provider fee schedule. This should be at the top of every lawmaker’s priority list when it comes to strategies for lowering car insurance rates for drivers and preserving No Fault benefits and protections for car accident victims. Plus, fee schedules will have the added benefit of eliminating a lot of the PIP fraud, ambulance chasing and personal injury lawyer solicitation that – despite the laws criminalizing it – seem to be growing more and more dangerously prevalent. Significantly, Republicans and the auto insurance industry have for many years advocated for No Fault fee schedules, insisting they could generate between 55% to 64% in permanent savings on No Fault medical claim costs.
- Create a “Fraud Authority” that is as zealous about identifying and punished No Fault fraud committed by Michigan car insurance companies as it is about going after wrongdoing insureds. Make no mistake that fraud by insurers exists and tragically, is far more frequent than most people believe. Examples of insurance company fraud include: Using clearly biased insurance company or IME doctors; unreasonably denying and cutting off benefits; withholding of information by adjusters; lying to adjusters and deliberately providing misinformation by claims adjusters; and, intentional underpayment of No Fault benefits. Notably, in House Bills 5134 and 5135 (which were introduced in 2016, but passed before the end of the legislative session, it was proposed that a “Michigan Automobile Insurance Fraud Authority” be created that would “to investigate the claims practices of insurers and to evaluate if those claims practices create unnecessary disputes, treat claimants or medical providers unfairly, increase litigation, or cause unnecessary delays in the payment of claims.”
- Empower Michigan’s Insurance Commissioner to stop auto insurers from charging “excessive” prices.
- Require transparency into the Michigan Catastrophic Claims Association’s (MCCA) process for determining, setting and increasing its annual assessments which No Fault auto insurers pass along to consumers in the form of higher car insurance prices. As I noted in my September 23, 2014, blog post, a study by a former Missouri Insurance Commissioner revealed that the MCCA’s assessments (which are essentially No Fault fees to cover benefits for catastrophically injured car accident victims) are 15% to 26% “higher than necessary.”
- Vigorously enforce the “ambulance-chasing,” anti-solicitation laws, which impose jail time and substantial fines on lawyers – and the runners and steerers in their employ – who approach car accident victim within 30 days of the accident in attempt to “solicit” the victim’s legal business.
- Empower the Insurance Commissioner to regulate excessive profits by Michigan’s highly profitable No Fault automobile insurance companies. As I noted in my 2013 guest column in the Detroit Free Press: “Michigan auto insurance companies collected more than $2 billion more in auto premiums in 2011 than they paid out in claims. They brought in about $6.8 billion in private passenger and commercial auto premiums and paid out some $4.7 billion in losses on private and commercial auto claims, according to data provided to Michigan Auto Law by the National Association of Insurance Commissioners and the Michigan Office of Financial and Insurance Regulation. Michigan auto insurers pocketed the difference. That’s more than $2 billion in unused premiums in 2011 for the trouble of selling a product (auto no-fault insurance) that consumers in this state are required by law to purchase.”
- Prohibit Michigan No Fault car insurance companies from using “credit scoring” in the setting of rates, i.e., charging higher prices for car insurance to drivers with bad credit scores and lower prices to drivers with good credit scores. As I noted in my December 16, 2015, blog post, consumers with bad credit could pay as much as 115% more for car insurance than drivers with good credit.
- Prohibit car insurance companies from hiking up rates and premiums for automobile accidents involving their insureds, but for which the insureds were not at-fault. In 2014, House Bill 5517 was introduced which proposed to: Prohibit an “automobile insurer” from setting rates and/or premiums “based on an accident that an insured or applicant for insurance was involved in if the insured or applicant for insurance was not substantially at fault in the accident.” Unfortunately, the bill “died” due to inaction at the end of the 2013-14 legislative session.
- Prohibit automobile insurance companies from using the “price optimization” technique for determining an insured’s premium. Simply put, “price optimization” is where auto insurers “stick it” to their loyal insureds by charging them higher prices based on the assumption that the consumer will not shop around with other insurers for a better deal.
- Enact a No Fault 80/20 loss ratio rule, which would require Michigan car insurance companies to either pay out No Fault claims or pay refunds to their insureds. Modeled on the federal Affordable Care Act’s 80/20 Medical Loss Ratio, a No Fault 80/20 loss ratio rule 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. I first proposed this idea in November 22, 2012. Then, I raised it again in January 23, 2013. In 2014, the idea was proposed in House Bill 5528, but the bill, unfortunately, “died” due to inaction at the end of the 2013-2014 legislative session.
- Enact “Bad Faith” Legislation which would impose on Michigan No Fault auto insurance companies a “duty to deal fairly and in good faith” with their insureds and which would hold insurers “liable for compensatory, consequential, and exemplary damages… costs of litigation, including actual attorney fees” for failure to do so. Bills proposing such changes have been (sadly unsuccessfully) introduced in 2009, 2014 (House Bill 5520) and in 2015 (Senate Bill 347).
- Amend the Michigan Consumer Protection Act to make it applicable to Michigan auto insurance companies. Because the Michigan Supreme Court has ruled that auto insurers are, generally, exempt from the restrictions and sanctions available under the Michigan Consumer Protection Act, Michigan auto insurance consumers have no recourse against Michigan auto insurers who engage in “[u]nfair, unconscionable, or deceptive” business practices. A good start would be the points proposed by House Democrats in 2014: Require auto insurance companies to “deal fairly and in good faith when a policy holder makes a claim for benefits”; Allow consumers to sue auto insurance companies who engage in “unfair and deceptive practices”; Put the legal “burden of disproving bad faith action” on the auto insurance companies; Allow successful consumer-litigants to collect attorney fees and court costs from auto insurers who acted in “bad faith”; Require that “bad faith” auto insurance companies “ensure that a customer’s credit score does not go down as a result of late payments”; and, impose a $1 million administrative fine on auto insurance companies who act in “bad faith” on a “second or subsequent” occasion.
- Bring Michigan into the 21st century by allowing Michigan auto insurance consumers to collect “punitive damages” from wrongdoing auto insurance companies. Since approximately 1884, punitive damages have been forbidden under Michigan law. Michigan is one of only five states in the country that still does not allow punitive damages.