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Consumers’ Guide

No-Fault reform is based on the faulty premise that No-Fault medical benefit costs are driving auto insurance rates

Comparing Michigan to other No-Fault states proves that the cost of No-Fault medical benefits is not to blame for the auto insurance prices that Michigan insurers choose to charge.

[Editor’s Note: It’s important to note that the analysis that follows is based on information from 2013 (which is the most updated data available to the public) when lawmakers introduced House Bill 4612, a No-Fault reform plan that ultimately proved unsuccessful.]

With its guarantee of necessary and reasonably priced lifetime No-Fault medical benefits, Michigan auto insurance at $1,073 (according to 2013 rate information) was cheaper by at least $100 per year than auto insurance in other No-Fault states where the No-Fault medical benefits are drastically lower due to benefit caps.

According to data from the Insurance Institute of Michigan (IIM) (which was used in one of Gov. Snyder’s exhibits at a 2013 press conference announcing the plan that would be presented via HB 4612), Michigan’s average annual auto insurance premium was $1,073.

In New York, where No-Fault medical benefits are capped at $50,000, auto insurance cost $1,207. Similarly, in the District of Columbia and in New Jersey, where No-Fault medical benefits are capped at $25,000 and $15,000, respectively, the prices of auto insurance were $1,277 and $1,276, respectively.

Sources: Insurance Institute of Michigan’s chart, “Auto Rates — Premium Comparison by State,” 1/13 update, which is based on data from the National Association of Insurance Commissioners; No-Fault Chart from Gov. Rick Snyder’s April 18, 2013, No Fault reform press release

Further proof that Michigan No-Fault medical benefits are not driving Michigan auto insurance is found in the auto insurance industry’s claims about increasing No-Fault medical claim costs.

If, as the IIM claims, the average cost of a No-Fault “medical claim” has increased 224% over the past 12 years and if No-Fault medical benefit costs were actually driving auto insurance rates, then rates should have increased proportionately over the same period.

But that’s not what has happened.

To the contrary, as discussed elsewhere in the “Auto Insurance Consumer’s Guide to No-Fault reform,” Michigan auto insurance rates are lower than in previous years.