Remember all of those campaign promises we heard six months ago? Did we really think any of them might happen this time or that this group of supposed leaders would prove themselves less inept than the charlatans they’ve just replaced? It’s no wonder that less than half of our citizens don’t even bother to vote.
Frustration with politics accelerated again last week after our state legislators failed to come up with an acceptable bill that would fix the state’s auto insurance nightmare once and for all, as many of them had promised. The inability of elected officials to solve even the simplest but most critical of problems reminds me of former President Ronald Reagan who once, amusingly, said, “I’m from the government and I’m here to help.”
Well, one thing’s for sure: This group of legislators is no different than those that have come before, they sure are not helping.
Today, Michigan drivers pay more for auto insurance than residents of any other state in the nation, an estimated $1,200 more per year. Yet, Michigan legislators remain inept at coming up with a plan to reduce premiums and still maintain needed coverage for citizens. Experts say the high cost of premiums is primarily due to the state’s no-fault insurance system that includes providing accident victims unlimited coverage for medical bills, wages and living expenses, even in permanently catastrophic situations.
In 1978, the state legislature created the Michigan Catastrophic Claims Association, a nonprofit, unincorporated entity to ensure that permanently disabled auto accident victims and the families that depended on them would be financially supported for the remainder of the accident victim’s life. We, as citizens of the only state in the country to have such a program, should be proud of the commitment we’ve made to forever protect people who suffer permanent, debilitating injuries.
The problem is that the MCCA has become the prime culprit behind our auto insurance rates soaring out of control. Last week, Michigan state senators passed a plan that would effectively eliminate the MCCA. But before letting politicians do a hit-and-run on an effective and caring program, citizens should be asking if the problem isn’t more about state legislators’ lack of oversight of the MCCA rather than the amount drivers are being charged for auto insurance.
Last week’s bill passed by the Senate doesn’t reform the plan, it just reduces the coverage to the insured, by allowing drivers to opt out of unlimited medical benefits and choose from a selection of lesser plans. The Senate plan would allow drivers to choose a level of coverage or no coverage for those who have health insurance in place. The new plan would effectively eliminate the MCCA, resulting in an immediate savings on auto rates, but would continue to cover people who are currently in the system. The bill also creates an Automobile Insurance Fraud Task Force within the Michigan State Police to investigate fraud by medical providers, attorneys and others who take advantage of insurers.
It all sounds good, but legislators failed to deal with some of the real issues that are driving up the costs – such as motorists with terrible driving records, out-of-control medical costs and rates that are determined based on where drivers reside. Plus, the MCCA is run by insurance companies with little or no oversight from the general public or the legislature. These are the issues that are driving up rates, making it nearly impossible for a growing number of residents to even afford auto insurance.
I know personally a young man who was looking to buy a used car just to get back and forth to work, but the insurance costs were going to be more than he paid for the car. Based on a report by Insure.com, Michigan has the most-expensive auto insurance rates in the nation, which averages $2,611 per year depending on where you live, with Detroit coming in at an average of $5,464. That’s almost $2,000 higher than New Orleans, which has the second highest rate in the nation. The report also indicates that out-of-state residents save an average of $1,154 per year over the cost for insurance in Michigan.
So, what’s driving up the costs? To start, Michigan insurance law limits the ability of auto insurers to negotiate prices from health care providers, and it is the only state to offer unlimited coverage, while other no-fault states have caps on spending. In Michigan, crash victims are protected with unlimited lifetime coverage of all of their medical bills, plus drivers are provided up to $5,700 per month for lost wages. And, if the accident is a fatality, the victim’s family can receive that amount for three years, depending upon what they would have received from a victim’s earnings and fringe benefits. In addition, auto accident victims are entitled to up to $20 per day in replacement services to pay for routine household tasks they can no longer do, like housekeeping or yard work.
Currently, Michigan drivers pay $192 per vehicle to fund the statutory MCCA. On July 1, the fee is slated to increase to $220.
In 2017, the average cost of a personal injury protection claim in Michigan was more than six times the national average, with costs increasing nearly twice as fast as in others states, according to the Insurance Research Council.
“Bodily injury liability claims are becoming more frequent,” the IRC reported. And bodily injury liability claims also are becoming more frequent due to attorney involvement in auto injury claims. The increase in claims is partly due to a 2010 Michigan Supreme Court decision lowering the threshold for determining when an individual can seek compensation for “pain and suffering” caused by a crash.
The IRC report also indicates that Michigan has a large amount of fraud in the no-fault system, with people declaring medical issues are more serious than they truly are. Why not? The MCCA has more than $18 billion in assets for the taking.
So, because the state doesn’t set price controls or fee schedules on medical costs and is not dealing with rising attorney involvement and more auto-related lawsuits, Michigan’s auto insurance costs are out of control.
“The more you observe politics, the more you’ve got to admit that each party is worse than the other,” the late actor and humorist Will Rogers said.
During the recent race for governor, Michigan voters listed escalating auto insurance rates as one of the top issues on their list. They expected state leaders to dive in and deal with a failing system that has allowed premiums to increase at unreasonable rates. Yet, based on the most recent actions from state legislators, it’s apparent that they aren’t fixing the system – they’re just reducing the protection and benefits by putting more of the risk back on drivers.
That’s their idea of fixing a broken system.
I think it’s time our elected leaders go back to the drawing board and review how the plan works, who oversees the benefits and the payments made, and how the medical and insurance companies benefit from this convoluted system that protects big corporations from losses.
It’s also time for citizens to get educated, angry, organized and express their opinions, outrage and ideas. Our elected leaders are failing to fix a system that can be efficient, less costly, and still caring.
Could there be anything else as critical that our elected leaders are failing to fix? Oh yes, the roads.
Time’s a’wasting. Let’s get to work.
Fred Jacobs, CEO,
J-Ad Graphics Inc.