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Big winner under No-Fault reform? Insurance company profits

September 18, 2017 by Steven M. Gursten

With $2 billion more in premiums than payouts, insurance company profits are the big winner; ordinary people and car accident victims lose

Insurance company profitsInsurance company profits

Last week, I asked if Detroit Mayor Mike Duggan, former CEO of the Detroit Medical Center, or any of the politicians lining up to support so-called auto No-Fault reform, would ever run a business or run the government without knowing if it were operating at a profit or a loss.

But that’s exactly what they are trying to do by pushing drastic changes to Michigan’s auto No-Fault law without providing a full accounting of all the facts.

Since we are talking about taking away No-Fault PIP benefits from people — including many car crash victims who live in Mayor Duggan’s Detroit and who desperately need it — the biggest unknown fact is, just how big are the profit margins of the insurance companies who sell auto insurance in this state?

In particular, last week I listed the four top-priority facts that the public and the people who want to change No-Fault in Michigan must know if we are going to put essential No-Fault benefits and protections on the chopping block as part of any No-Fault insurance reform plan in the next several weeks.

Today, I want to talk about the most important fact of all: No-Fault insurance company profit margins.

We need to talk about reducing the cost of car insurance in this state.

But how can we talk about taking necessary No-Fault medical care away from ordinary people without knowing how profitable Michigan’s car insurance companies are right now? And instead of rushing to enact the wish list of the insurance company lobbyists, who smell political opportunity with the Legislature in Republican hands, shouldn’t we know how much more profitable these insurance companies will be if these absurd changes are signed into law? Make no mistake, Mayor Duggan never would have run the DMC this way. But he seems hell bent on trading bedrock protections for a promise of rate reductions without even knowing if the insurance companies are laughing all the way to the bank.

Signs of excessive insurance company profits are clear

The unmistakable signs of ever-growing insurance company profits are all here.

[H]ighly profitable” is how former Missouri Insurance Commissioner Jay Angoff has described Michigan auto insurance companies, adding that auto insurers in the Great Lakes State have been “significantly more profitable than the national average …”

As I noted in my 2013 Detroit Free Press guest column:

“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.”

As for what the future may hold — whether it’s something akin to Detroit Mayor Mike Duggan’s horrific D-Insurance plan or the promising Fair and Affordable No-Fault insurance reform legislative effort — we can rest assured of one thing:

If the auto insurance industry is pushing for No-Fault reform legislation, it’s because — and only because — they expect it will bring even greater insurance company profits in the years to come.

Michigan No-Fault reform is a profit-maker for auto insurers

The sad truth is, we have no idea just how big the profit margins are for the insurance companies who sell auto insurance.

And that’s insane.

We are required to buy car insurance to drive a car in Michigan. We face very serious civil and criminal penalties if we drive without auto insurance. But the state of Michigan has no idea how big the profit margins are!

I do know one thing. If these insurance companies were losing money, we’d know about it.

If Michigan were that bad, you can bet not a single one of these publicly held, shareholder-accountable companies — like State Farm, Allstate, Progressive and Farmers — would still be here in Michigan doing business.

Plus, I find it very, very, very hard to believe Michigan auto insurers are bringing in less in premiums than they’re paying out in benefits — especially when they got more than $1 billion back (per year) in reimbursements from the Michigan Catastrophic Claims Association (MCCA) in both 2016 and 2015, according to the MCCA’s Annual Report to the DIFS Director for the FY 2015-2016.

Insurance companies crying to the bank after over $1 billion payback from Michigan Catastrophic Claims Association (MCCA) in 2016 and 2015

Let me repeat that. More than $1 billion paid back in reimbursements were made to insurance companies each year that went right to insurance company profits.

Politicians should put that in their “reform” plan.

I’ll bet our auto insurance pricing crisis in cities like Detroit and Flint would disappear pretty quickly.

Tomorrow, I will talk about the other side of what is likely driving up these insurance company profits (and what I see every day as an auto accident lawyer in Michigan): the sharp increase in insurance companies’ denials and cut-offs of No-Fault benefits to car crash injury victims.

This is the second entry in a six-part series on what we auto accident attorneys at Michigan Auto Law believe the public must ask our state legislators, and the No-Fault insurance companies that do business in Michigan, if we are being asked to give up essential No-Fault benefits and protections under any proposed No-Fault insurance reform plan. Our other entries are:

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