Insurance Industry at it Again

It was only a matter of time before the insurance industry launched another attack on auto no-fault in Michigan. You've probably seen recent articles that rank our state as the most expensive place to purchase auto insurance. Insurance companies are using these articles to attempt to tear down auto no-fault and the lifetime benefits that have been critical to the recovery for countless accident victims.

The following op-ed was submitted to the Detroit Free Press today by CPAN president John Cornack.  CPAN members are encouraged to submit their own letters to their local newspapers and to their state legislators to make sure our voices are heard. 

Don’t Buy Insurance Industry Spin

It’s unfortunate to see recent media articles taking insurance industry spin at face value.  I’m referring to ones like the Mar. 22 Detroit Free Press article “Auto Insurance in Michigan Highest in U.S.” where Michigan’s insurance rates are blamed on a state law that requires insurers to issue “unlimited” coverage for personal injuries in an auto accident. The truth is, Michigan auto injury benefits are far from unlimited and such terms are being used to dumb down the conversation about auto no-fault reform.

It’s true that Michigan auto accident survivors are not capped on their personal injury claims, but accident victims can only recover benefits for treatments deemed to be reasonable and necessary.

The fact that medical care does not stop once a $50,000, $100,000 or even $500,000 medical limit is reached means that Michigan’s severely injured accident victims have the chance of a full recovery without worrying about bankrupting their family to pay their medical bills or turning to state taxpayers for Medicaid. It’s this basic feature – covered medical expenses for as long as the injuries resulting from the accident persist – that makes our auto insurance system the best value in the country and the model for no-fault insurance. 

Insurance companies have long claimed that capping personal injury coverage would save ratepayers 15 percent.  Unfortunately, they fail to mention that lifetime personal injury coverage accounts for only 15 percent of the total premium.  Insurance companies also never say if their calculated savings are on the total premium or if we would just save 15 percent on the personal injury portion of the auto policy. In cities like Detroit, where the average driver currently pays upwards of $5,000 to insure a single vehicle, even a 15 percent reduction on the total premium is asking drivers to give up the most valuable part of their insurance policy without making significant inroads to affordability.

Instead of going after negligible savings, policyholders should start asking their insurance company to look at the most expensive part of an insurance policy.  Collision coverage accounts for 50 to 60 percent of the average insurance premium in Michigan.

Drivers should also ask the state to provide stronger oversight of the insurance industry.  Michigan requires all drivers to pay for insurance, yet there is almost no regulation over how much insurers are allowed to charge.  In other industries, such as utility companies, the state regulates every rate increase and often orders refunds for overcharges. Auto insurance – because it’s required by the state – should be no different. 

It is clear Michigan has much work to do to ensure all drivers can afford auto insurance. But the insurance industry’s attempts to do away with the cornerstone of Michigan’s auto insurance system – lifetime medical benefits for severely injured accident victims – for an ambiguous 15 percent savings is a disingenuous attempt to solve the problem.  I hope the media and all Michigan drivers will be more critical of the insurance industry’s spin in the future.

 -- John Cornack, CPAN president