R Street praises Michigan Senate for tackling reforms to the auto insurance system

Under S.B. 248, sponsored by state Sen. Joe Hune, R-Hamburg, Michigan would create an insurance fraud authority, funded by the insurance industry, to serve as a central repository of suspicious claims data and to assist local law enforcement in prosecuting insurance fraud.The measure also would cap compensation for attendant care provided by family members and establish a fee schedule to bring reimbursement for medical procedures and products in line with rates paid by commercial health insurance carriers.Finally, the bill would restructure the Michigan Catastrophic Claims Association, a state-run reinsurance mechanism created to handle catastrophic claims made possible by a unique Michigan law requiring auto insurers to provide unlimited lifetime medical benefits. Under the bill the MCCA would be reinvented as a provider of excess coverage that will sell separate polices to drivers for claims that exceed $545,000.

“R Street has been advocating for a fraud bureau, cost containment and no fault reforms in Michigan since we first opened our doors,” R Street Midwest Director Alan Smith said. “We congratulate Sen. Hune and Senate leadership for their hard work on this measure. We think these are very welcome changes to mitigate the effects of abuse of the system which continues to be very popular with Michiganders overall, and we hope the state House agrees.”

Michigan consistently ranks among the top five states in the nation for high auto insurance, and in recent years the average price for car insurance in Michigan has remained more than $2,000 per year. The state scored a “D” in R Street’s 2014 report card on insurance regulation across the country.”Michigan regularly reports auto insurance loss ratios that not only are the highest in the country, but that are several standard deviations higher than the closest state,” said the report card’s author and R Street Senior Fellow R.J. Lehmann. “It also has performed poorly in our rankings in that, despite very high rates of suspicious claims, there is no dedicated staff to policing and investigating insurance fraud. These changes will, one suspects, improve the state’s assessment considerably in the years ahead.”