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

“Year One”

The “year one” savings of $150 may be reduced, canceled out or offset by the following new fees and assessments introduced by House Bill 4612 and consumers may even end up paying more for auto insurance:

New Catastrophic Claims Fee

Points of interest concerning the new “Catastrophic Claims Fee” include:

  • Consumers will be required to pay this new fee in order to providing funding for new catastrophic claims that are filed on or after January 1, 2014. (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.
  • The new “Annual Catastrophic Claims Fee” will be calculated using a formula similar, if not identical, to the one used to calculate assessments by the Michigan Catastrophic Claims Association (MCCA). (Pages 25 and 28 of HB 4612) This year’s MCCA assessment was $186 and last year’s was $175, according to press releases from the MCCA.

New annual $21 million assessment

Points of interest include:

  • Consumers will be 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 will charged to Michigan auto insurers, the assessment will be 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”

Significantly, after “year one,” HB 4612’s promised “premium” savings of $150 will cease, but the fees and assessments that consumer will be required to pay will continue on:

  • Consumers will continue 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 will continue to pay the Catastrophic Claims Fee indefinitely.
  • Consumers will continue to pay the $21 million annual assessment until 2019. (Page 54 of HB 4612).
  • Consumers will pay a $25 Medicaid “charge” until 2020. (Page 29 of HB 4612).
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