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Insurance expert: Auto insurance industry misleads consumers to hide failure of no-fault law

Auto accident
Emma Winowieki
Catastrophically injured auto accident survivors at the state Capitol, asking legislators to fix no fault law that's depriving them of care

A new report says the auto insurance industry in Michigan is using misleading data to assert that the state's 2019 auto no-fault law is reducing rates for consumers.

Insurance expert Doug Heller of the Consumer Federation of America looked into claims by the Insurance Alliance of Michigan, the insurance lobby in the state, that "more than 50" new auto insurance companies are doing no-fault business in the state after the 2019 law passed.

State data shows, said Heller, that only four new companies entered the market in Michigan and are now selling no-fault policies since the 2019 law.

Heller said Michigan is still among the most expensive states in the nation for car insurance, and average rates are higher than they were in 2019 when the law passed. That's despite claims by the industry that new competition has lowered rates for insurance in Michigan.

"That didn't happen, and they're still telling us that it did," said Heller. "We shouldn't be misled to think that there is so much new competition and that the law did its job. It just didn't do that. We have a law that appears to be a pretty significant failure, and you have the insurance companies trying to hide that fact."

Heller said a claim by the insurance lobby that the new law has saved consumers $5 billion is also misleading.

"That's because the $5 billion wasn't savings on insurance rates. It was money that the Michigan Catastrophic Care Association (MCCA) took out of its reserves to distribute to car owners," he said.

The MCCA later admitted it had taken too much out, necessitating a higher fee on insurance policies to make up the shortfall.

Meanwhile, at least 6,800 severely injured car crash survivors have lost some or all of their care, due to the new law cutting payments to long term care providers nearly in half. That's according to an independent study by the Michigan Public Health Institute.

Heller said the insurance industry — and the state Department of Insurance and Financial Services — have refused to acknowledge that people have lost necessary medical care as a result of the no fault changes made in 2019.

Erin McDonough, President of the Insurance Alliance of Michigan, an insurance lobby and trade group, responded to Heller's findings in a statement.

Our industry will continue to focus on what’s important: making sure we work to implement savings for Michigan’s drivers and making sure that any of our claimants that need care, get that care. According to the Department of Insurance and Financial Service’s own response to CPAN, now more than 60 new insurance companies and affiliates have entered the Michigan market since the 2019 bipartisan reforms passed. These changes, including a medical fee schedule, were clearly the catalyst. The department also testified in committee this week that new companies go through a highly regulated process to write insurance in Michigan. New business coming into the market is a benefit to consumers, creates competition and helps to lower costs. Michigan is no longer the most expensive state in the country to buy auto insurance. In fact, the department recently released its independent report showing auto no-fault reforms have provided more than $5 billion in savings to the state’s drivers. This includes insurance companies reducing rates for personal injury protection coverage. DIFS also reported reforms are cracking down on fraud and reining in overcharging by unscrupulous medical providers.”

Tracy Samilton covers energy and transportation, including the auto industry and the business response to climate change for Michigan Radio. She began her career at Michigan Radio as an intern, where she was promptly “bitten by the radio bug,” and never recovered.
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