Efforts to reform Michigan’s unique auto insurance law, which ensures costly coverage by requiring essentially uncapped medical benefits, are facing some resistance in the state’s House of Representatives.

A group of House Democrats are looking to rally floor opposition to H.B. 4936, which already has passed the Michigan House Insurance Committee. The bill, sponsored by the committee’s chairman, Rep. Pete Lund, R-Shelby Township, would allow Michiganders to choose among policies that provide at least $500,000 and up to $5 million in personal injury protection benefits.

In addition to paying for replacement services and up to three years of lost wages, current law requires Michigan auto insurers to cover the first $480,000 of PIP medical costs directly, with policyholder assessments used to finance the potentially unlimited cost of larger claims that are reimbursed through the Michigan Catastrophic Claims Association. The MCCA currently covers medical bills for nearly 13,000 claimants, and policy assessments through July 30 of this year were $143.09 per vehicle.

Rep. Phil Cavanagh, D-Redford, who led the Democratic opposition during committee negotiations, claimed in a recent press conference that the legislation was “about padding the bottom lines of insurance companies at the expense of consumer protection and increased transparency.”

The claim is bizarre, as the costs of PIP medical benefits aren’t ultimately borne by insurers. Like all claims costs, they are passed on to consumers. The current law does not provide any special hindrance to insurers’ ability to make a profit. What it hinders is their ability to offer an affordable product to protect Michigan drivers.

The minimum coverage limits contemplated by H.B. 4936 – and the companion Senate bill, S.B. 649, introduced by Senate Insurance Committee Chairman Joe Hune, R-Hamburg – would still be the highest in the nation by far. The $500,000 limit is double the $250,000 limit in New Jersey, which ranks second in the nation, and more than 10 times the $50,000 mandated in New York, which ranks third.

Indeed, while New York and New Jersey frequently top the NAIC’s ranking as the most expensive states for auto insurance, what state regulators actually measure is where consumers are purchasing the most expensive coverage. Insure.com, which annually surveys auto insurance quotes in the 50 states, this year ranked Michigan’s average annual premium quotes of $2,541 as the highest in the country.

How is it that Michigan consumers could face the highest auto insurance rates, but those in the greater New York City area pay the most? Well, according to Insure.com, the disparity is easy to explain: 17% of Michigan drivers are uninsured, the ninth-highest rate in the nation.

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