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Mayor Duggan, where’s our 95% car insurance savings?

October 12, 2017 by Steven M. Gursten

Shouldn’t drivers pay 95% less if the Duggan-Leonard-Theis plan is going to allow the insurance companies to slash No Fault PIP coverage by 95%, instead of letting the insurance cos. pocket the difference at taxpayers’ expense?

No Fault PIP coverage

If Mayor Duggan and House Speaker Leonard have their way on auto No Fault reform, Michigan drivers who select the $25,000 No Fault cap amount are going to receive 95% less in No Fault PIP coverage than they currently receive today.

So shouldn’t they get to pay 95% less on their car insurance premiums?

Makes sense, right?

Let me explain.

What Mayor Duggan and Speaker Leonard misleadingly call a $250,000 lower cap amount is really a $25,000 cap.

That’s a steep drop in No Fault coverage from the current cap of $550,000 that car insurance companies currently have under Michigan’s No-Fault law.

Under our auto No Fault law today, Michigan’s auto insurance companies are liable for No Fault PIP (“personal protection insurance”) insurance benefits only up to $550,000.

Once the cost of a car crash victim’s medical expenses exceed $550,000, all liability for additional insurance benefits cease. Any amounts incurred over the $550,000 are then taken over by the Michigan Catastrophic Claims Association (MCCA). That is part of the $170 MCCA assessment fee that all Michigan drivers pay. The MCCA literally steps in and takes over all liability for any accident claim over $550,000.

Although the Duggan-Leonard-Theis proposal would allow drivers to opt out of this and select $25,000 in No Fault coverage, the bill’s sponsors say those drivers will only receive approximately 20-40% savings on the PIP portion only of their current car insurance premiums. Specifically, insurance companies’ liability will be slashed by 95%, reducing liability from $550,000 to $25,000.

Mayor Duggan’s fuzzy math is great for insurance companies’ bottom lines — at your expense

The big problem with HB 5013 — the No Fault reform plan being aggressively pushed by Detroit Mayor Mike Duggan, House Speaker Tom Leonard (R-DeWitt) and House Insurance Committee Chair Lana Theis (R-Brighton) — is that drivers who select the lowest No Fault PIP coverage cap of $25,000 are not receiving the bulk of these savings.

The insurance companies are.

This savings double-standard defies logic, not to mention basic notions of fairness:

If drivers will be paying to lose 95% of the coverage they currently receive under No Fault, they should at least be paying 95% less.

Like so much about the one-sided, insurance company-written “Driver’s Choice Insurance Reform” plan, the double-standard of a savings for only 5 years of somewhere between 20%-40% of the No Fault PIP coverage portion of your car insurance bill for drivers, with the insurance companies pocketing the difference, is outrageous. And don’t forget, the insurance companies only guarantee these savings for drivers for 5 years. After that, they can again start increasing your premiums.

That’s about as good as it can get if you’re an auto insurance company in Michigan — and it comes at our expense.

Why HB 5013 is terrible for people, great for insurance companies

Here are a few more “choice” facts from my blog post “Takeaways from House Insurance hearing on Duggan-Leonard No Fault plan,” about the dismal state of affairs for actual price savings for drivers under HB 5013:

  • Savings are only for the most underinsured drivers who choose are underinsured with the $25,000 No Fault cap.
  • Guaranteed savings really means only guaranteed for 5 years.
  • Savings for drivers are temporary, yet savings for insurers are permanent.
  • Savings are only on No Fault PIP coverage only, not on a driver’s total auto insurance bill.
  • Savings probably won’t survive the Senate.

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