“True” No-Fault Auto Reform

Recently a bill was voted on by the Michigan House Insurance Committee, this bill is a reform of the state’s current no-fault auto insurance system. While some say it is a step in the right direction, we have our own opinion of what true reform would be.

1. Strictly enforce Michigan’s current “mandatory insurance statute” by implementing a stiff, $1,000 fine. In addition to this, the vehicle’s wheel should be “booted” or the vehicle towed to an impound lot, and a daily tab of a $100/day be placed on the vehicle. According to a 2011 study, listing the number of uninsured drivers, Michigan was ranked #7, and on any given day in the Metro Detroit area, the number of uninsured drivers is around 50%, by applying the MCCA tax to all drivers (as opposed to only those that are insured), Michigan would obtain more money, and would reduce the overall premiums in all lines (liability; PIP/PPI; Physical Damage). What Michigan should do is attract more insurers writing auto insurance within the state and provide choices through competition.

2. In order for true reform to be accomplished, short term policies must be eliminated. Organizations are in effect “legally” selling certificates so individuals can buy plates, and then ditch the auto insurance. This is an unfair advantage to all the legitimate insurance agents and the companies we represent and, if not stopped, will never help bring more insured drivers into the system.

3. Amend the law (or change the PIP Priority of Benefits) for motorcyclists so that the motorcyclist’s insurer (either the motorcycle policy or their personal auto polices) will pay PIP benefits and not the insurer of the vehicle (offending vehicle, or not) that the motorcycle comes into contact with; at-fault or not.  The recent change for motorcyclists to buy $20,000 in “medical coverage,” which we don’t have in MI (it’s PIP – but from a vehicle; not the motorcyclist!) in exchange to ride “helmetless” was about the silliest of reforms I have ever seen.  Put the burden of these large claims where they belong – on the insurer of the motorcyclist – charge them appropriately (and significantly) for PIP coverage.

4. Bicyclists and pedestrians should collect PIP benefits from their insurer FIRST; not the vehicle in which comes into contact with them (offender) or vice-versa (no-offender).

5. Passengers in Ambulances should have a “priority of benefits” exception [like school buses; taxis; municipal buses and social service vehicles] so that the passenger/patient injured in an accident collect their no-fault benefits first from their own insurer; and if none; then a household members PIP policy and then if none, from the insurer of the ambulance.  This would help bring in more insurers into the arena for this class of business and make them more competitive as well.

6. Establish a specific limit or charge provider fee for all services, medical and rehabilitation.  This would not be difficult and would be much more cost effective.  For example, do not cover the cost of a new house when all that is needed is a ramp.  In the case of automobiles, pay for the modifications necessary for paraplegics rather than purchasing a new car.  Replace attendant provider care companies, because the current companies are attempting to charge unreasonable rates.

The insurers claim they are at risk on an unlimited basis for no-fault protection, but they are simply misled.  The insurer’s exposure, through the MCCA, is now capped at $500,000, which is the attachment point for the MCCA – and let’s call it what it really is – an insured driver self-funded reinsurance pool paid for by all the insured vehicles and collected by the insurers as a “pass-through.”  As I said before, if only the State of Michigan would enforce the law, which is already on the books, and bring in more drivers to the insurance pool to fund MCCA.  This charge would drop significantly, much more than the $125 figure being tossed around Lansing today.

This so-called reform is essentially a “done deal” however it is too bad they never ask the agents or claims adjusters. We are a large part of the “insurance industry” and we see the day-to-day issues, we report the claims and we ultimately see the outcome, payments and the confusion on a daily basis. As agents in this industry, we can provide valuable perspectives from both the consumer and ourselves.

Contributed by:   Bruce Sanders Account Executive, CIC, LIC with over 30 years of experience in the industry.