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Consumers’ Guide

Consumers May Pay More For Auto Insurance Because of No-Fault Reform’s New Fees And Assessments

“Year One” under HB 4612’s No-Fault reform proposal

The “year one” savings of $150 – under the No-Fault reform plan unsuccessfully proposed in House Bill 4612 in 2013 – would likely have been reduced, canceled out or offset by the following new fees and assessments introduced by House Bill 4612.

In fact, consumers may even have ended up paying more for auto insurance:

New Catastrophic Claims Fee

Points of interest concerning the HB 4612’s new “Catastrophic Claims Fee” include:

  • Consumers would have been required to pay this new fee in order to provide funding for new catastrophic claims that are filed on or after HB 4612’s effective date. (Pages 25, 28 and 52 of HB 4612)
  • According to the MCCA’s Annual Reports to the Michigan Insurance Commissioner, between 2010-12, there was 1,684, 1,617 and 1,619 new catastrophic claims filed with the MCCA each year.
  • HB 4612’s new “Annual Catastrophic Claims Fee” would have been calculated using a formula similar, if not identical, to the existing one currently used to calculate assessments by the Michigan Catastrophic Claims Association (MCCA). (Pages 25 and 28 of HB 4612)

New annual $21 million assessment

Points of interest include:

  • Consumers would have been required to pay the new assessment, which will be used to raise $21 million annually to pay for a newly created “Michigan Automobile Insurance Fraud Authority” and for the existing “Automobile Theft Prevention Authority.” (Pages 53-55, 59 and 65 of HB 4612)
  • Although the assessment would have been charged to Michigan auto insurers, the burden of paying for the assessment would have been passed along to consumers in the form of higher auto insurance rates. (According to MCL 500.3385: “Any assessments paid by participating [MAIPF] members … may be recouped through a surcharge in the insurers’ rates for automobile insurance policies issued by the member … A rate shall not be considered excessive because the rate includes a factor for recoupment …”)

Beyond “Year One” under HB 4612’s No-Fault reform proposal

Significantly, after “year one,” HB 4612’s promised “premium” savings of $150 would have ceased, but the fees and assessments that consumer would have been required to pay would have continued:

  • Consumers would have continued to pay the MCCA assessment indefinitely to fund the hundreds of millions of dollars in catastrophic claim costs that the MCCA must continue to pay for open and existing claims. (Pages 17 and 18 of HB 4612). In 2012 and 2011, the MCCA paid out $947 million and $927 million, respectively, according to MCCA press releases.
  • Consumers would have continued to pay the Catastrophic Claims Fee indefinitely.
  • Consumers would have continued to pay the $21 million annual assessment. (Page 54 of HB 4612).
  • Consumers would have paid a $25 Medicaid “charge.” (Page 29 of HB 4612).