Michigan Lawmakers Prepare Another Dead-End Challenge to Sky-High Auto Insurance Rates

Ryan J. Farrick — February 13, 2018

Image via mabelyeap/Pixabay. (CCA-BY-0.0). Public domain.

Brace yourselves: Michigan lawmakers are preparing another lost-cause bill to reform the state’s sky-high auto insurance rates.

Crain’s Detroit Business reports on the latest attempt, noting that Michigan’s 45-year old insurance mandate has mixed reviews. While decidedly costly, an uncapped no-fault law ensures Mitten motorists are covered for whatever medical expenses come crawling out of an accident – no matter who may have caused it.

But unlike other industries, auto insurance in Michigan is far from transparent. Big companies are given leeway to charge among the highest premiums nationwide, justifying the extra expenses in the name of no-fault.

Now, says Crain’s, a small group of Republican legislators are trying to move Michigan to another model. Citing Ohio’s litigation-based payout system as an example, they’re hoping to lower premiums for cash-strapped Motor City constituents.

Residents shouldn’t get their hopes up – even the bill’s sponsors recognize it’s doomed for failure.

“I think on the House floor, it’s got a snowball’s chance in hell,” said Rep. Aaron Miller (R-Sturgis). “I’m not unrealistic about its chances – I don’t think it has any chance.”

Crain’s proposes the exercise may simply be instructive, eventually offering a framework legislators can use to propel concrete change. The publication goes on to suggest that insurance rates may act as deterrent to talent, especially in Detroit proper.

Due in part to crime as well as dilapidated infrastructure, Michiganders with cars registered in Detroit pay among the highest urban auto insurance premiums in the nation – roughly twice as much as their suburban neighbors.

One unsurprising consequence of astronomical rates is the number of motorists driving uninsured in the city.

“You’ve got people that just say, ‘I can’t afford it,’” said attorney Steve Gursten. “Half of Detroit is driving without auto insurance. It’s costing the state in so many other ways.”

Detroit has the highest automotive insurance rates of any city in the United States, with the average policy running close to $10,000 pear year. Consequently, about half of all motorists in the Motor City drive uninsured. Image via Paul Bica/Flickr. (CCA-BY-2.0).

In an interview with WXYZ Detroit, Gursten claims the biggest benefit of switching from a no-fault system to at-fault coverage would be a drastic lowering in rates.

Needless to say, it wouldn’t be a no-strings-attached transfer.

“God forbid you’re in a terrible, terrible car wreck and suffer a catastrophic injury,” said Gursten. “The quality of medical care you are going to receive and your access to care is going to be better in Michigan than anywhere else in the country. Because no-fault pays for life for all necessary medical care, it’s an incredible benefit.”

Some 38 states across the nation rely on litigation-based payouts – meaning motorists have to take a culprit in court to receive benefits.

Among the remaining states mandating no-fault coverage, Michigan is the only which doesn’t set a cap on insurance benefits.

While no-fault was initially designed to rid the courts of commonplace litigation, a Crain’s analysis found a drastic rise in the number of first-party lawsuits between drivers or their doctors. Spanning the years 2007 through 2016, the pace of litigation picked up by 163 percent.

“No fault was designed with the mindset that we’re going to get rid of the litigation,” said Paul Heaton, economist with Rand Corp. “As a practical matter, we’re not getting rid of the litigation.”

And neither are Michiganders liable to see any relief in the form of lower auto insurance premiums – not this year, or in any soon to come. For the nation’s tenth most populous state, the showdown between insurers and Congress is always just another failed bill away.