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Consumers’ Guide

Proposals to make Michigan auto insurance affordable

Below are proposals that Michigan lawmakers should consider if they are truly serious about making Michigan auto insurance affordable:

  1. Create a No-Fault medical-provider fee schedule. This will serve the dual purposes of 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.
  2. 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.
  3. Empower Michigan’s Insurance Commissioner to stop auto insurers from charging “excessive” prices.
  4. 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. 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.”
  5. 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.
  6. 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.”
  7. 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.
  8. 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.
  9. 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. In other words, 45 states allow punitive damage recovery.
  10. Enact a No-Fault 80/20 loss ratio rule. 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.
  11. 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.
  12. 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.
  13. 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.