A bill now being considered in the state’s House of Representatives needs widespread support.
According to the Detroit Free Press, the average auto insurance premium for a Michigan driver in 2016 was $2,738, the highest in the United States. In Detroit — the center of the American auto industry — average premiums were even higher, totaling over $3,000.
Fortunately for Michigan’s drivers, the country’s highest auto insurance rates might soon fall. After extensive discussions, Michigan’s House of Representatives held its first hearing on a package of reforms aimed at lowering auto insurance premiums in the state on October 3, with the House Insurance Committee scheduled to vote on the measure the following week.
Lower Premiums and Medical Costs
The House’s proposed bill would reduce a driver’s premiums according to the extent of a driver’s existing coverage and driving history. Rates for drivers without collision or theft coverage would be halved, while average drivers with a comprehensive policy and $250,000 in personal injury coverage would see their rates lowered by 20%. Rates for retirees with full lifetime health care would fall by 35%. The current proposal also gives the state the authority to regulate rate hikes for five years.
If the bill is passed, drivers could set their own personal injury coverage limits at $250,000, $500,000, or the unlimited lifetime benefits currently allowed in Michigan. Under the proposal, however, drivers who opt for $500,0000 or unlimited coverage would not be guaranteed a rate cut.
In addition, the bill attempts to cap the costs of treating victims of car accidents at 100% or 125% of Medicare’s rates in similar cases. At the moment, Michigan places no restrictions on what health care providers can charge to car crash victims. Further, senior citizens may choose to cover their medical expenses following a car accident with Medicare instead of auto insurance. By doing so, they could save between $800 and $1,000 per year.
While the current proposal before the House Insurance Committee enjoys wide bipartisan support, as well as endorsements from Detroit Mayor Mike Duggan, the NAACP, the Michigan Chamber of Commerce, it’s not the only bill on auto insurance being discussed in Lansing. Another bipartisan group of legislators has advanced a series of bills that would, among other proposals, prohibit insurers from setting rates based on zip codes or gender, and establish a system to root out fraud — a provision supported by the state’s Director of Insurance and Financial Services, Patrick McPharlin.
Insurance Rates on the Rise
Michigan’s skyrocketing auto premiums reflect steep increases in rates throughout the country — and the difficulty in trying to control them. Jim Lynch, Chief Actuary for the Insurance Information Institute, recently predicted that premiums will rise 5% to 10% in 2018. Much of that increase can be attributed to a greater number of drivers, a rise in distracted driving incidents, and more expensive auto repairs and medical bills.
Whether Michigan succeeds in lowering its auto insurance rates hinges on reaching an agreement acceptable to both political parties, insurers, hospitals, and other advocacy groups. Although the bill under debate has bipartisan support, several Democrats on the House Insurance Committee noted that the state would be forced to pick up the remainder of an injured driver’s medical expenses if the driver were to choose lower-coverage policies, which could cost the state’s Medicaid system $150 million over the next ten years, according to the nonpartisan House Fiscal Agency.
John Cornack, President of the Coalition Protecting No-Fault, also expressed his concerns over possible inadequate medical care if residents select “bare-minimum policies.” Meanwhile, the Republican Senate Majority Leader Arlan Meekhof has reportedly said he cannot support the bill’s restrictions on what insurers can charge.
Supporters of the bill, including Wendy Block, Senior Director of Health Policy, Human Resources and Business Advocacy at the Michigan Chamber of Commerce, argue that the state can attract more insurers and boost employment by lowering auto insurance costs. “One of the main points employers bring up to us is that people simply can’t get to the jobs and transportation, and the high cost of insurance is often cited as a factor,” she told the House Insurance Committee hearing. “We do think this bill will break down the barriers for employment.”