My move to Michigan last summer coincided with the renewal of my auto insurance policy. While I had anticipated having a state income tax dock my take-home pay (Texas does not have one), my jaw dropped when my auto insurer quoted me a 73% premium increase on my Michigan policy.
In one of my first legislative meetings in Lansing, no matter what policy topic we were discussing, every five minutes or so one of the other participants redirected the conversation back to auto insurance. After the eighth or ninth time, I was explicitly asked for the Mackinac Center’s help in fixing this disastrous system.
Michigan has the most expensive auto insurance policies in the country, with premiums 64% above the national average and more than double what our neighbors in Wisconsin, Ohio or Indiana pay. Detroit residents are the hardest hit; one state senator shared with me the story of a constituent who had to shell out $7,000 a year to insure a vehicle valued at $3,000.
Michigan’s no-fault system has notoriously resisted reform, as the hospitals and trial lawyers benefit tremendously from the current system and have formidable trade associations and political influence. But Michigan motorists have felt the pain so acutely that legislators feel compelled to act, and 2019 may finally be the year a bill reaches the governor’s desk.
On May 7, the Michigan Senate passed SB 1 by Sen. Aric Nesbitt. This bill provides consumer choice for personal injury protection (PIP) coverage, allows senior citizens to have Medicare rather than auto insurance pay their accident-related costs, and imposes a fee schedule on medical services in auto accident claims. It also would restrict “common ownership of, and referrals between and among, entities that provide legal, medical, and transportation services,” which is an attempt to root out some of the shadier profiteering that Michigan’s no-fault system enables. Finally, it begins the wind-down of the Michigan Catastrophic Claims Association, which pays for lifetime care for the most severely injured accident victims and just announced a 15% increase in its annual premium assessment.
Earlier this year, Matt Coffey, a member of the Mackinac Center’s Board of Scholars, testified before the Senate Insurance Committee. He told lawmakers that several reforms could help motorists, but the greatest opportunity for delivering significant savings would be to provide PIP choice and impose a fee schedule on medical providers.
Last year, a reform effort imploded on the House floor, but reducing the cost of Michigan auto insurance is a top priority of both chambers’ leaders, as well as for Detroit Mayor Mike Duggan. And Quicken Loans founder Dan Gilbert is laying the groundwork for a ballot initiative if legislators fail to act. If Michiganders continue to share their horror stories with lawmakers, that may be enough to finally get a fix to our state’s horrific auto insurance system.
