by Bruce Walker
Gov. Gretchen Whitmer is calling for the Michigan Catastrophic Claims Association to refund $5 billion in surplus funds to Michigan automotive insurance customers.
“My office recently reviewed the Annual Report of the Michigan Catastrophic Claims Association (MCCA) to the Legislature issued in September 2021,” the governor wrote in a Nov. 1 letter addressed to R. Kevin Clinton, MCCA executive director. “The report stated that the MCCA had a surplus of $2.4 billion at the end of 2020. In your annual statement issued on June 30, 2021, the surplus is now $5 billion. I am calling on you today to refund money to Michiganders.”
The governor attributes the surplus to the bipartisan Senate Bill 1 insurance reform bill she signed in May 2019. Provisions of the bill include:
- Guaranteeing lower rates for drivers for eight years;
- Giving people the choice to pick their own Personal Injury Protection (PIP) options with coinciding PIP rate reductions, offering unlimited coverage (at least 10% PIP reduction), $500,000 coverage (at least 20% PIP reduction), $250K coverage (at least 35% PIP reduction), $50,000 coverage for Medicaid eligible recipients (at least 45% PIP reduction), or a complete opt out for seniors or anyone with sufficient private insurance (100% PIP reduction).
- Increasing consumer protections by banning companies from using the following non-driving factors to set rates: ZIP code, credit score, gender, marital status, occupation, educational attainment, and homeownership.
- Setting fee schedules for hospitals and providers to prevent overcharging for auto-related injuries.
“The surplus reflects premium overcharges and is partly a reflection of the cost-saving measures implemented in the historic, bipartisan no-fault reform legislation I signed into law in 2019,” Whitmer’s letter continues. “Since then, many Michiganders have experienced financial hardships during the ongoing COVID-19 pandemic. Now is not the time for the MCCA to withhold money owed to Michiganders. I urge you to move swiftly to return the surplus funds to policyholders in the form of lump-sum checks.”
The bill shifts costs of those without unlimited coverage to other commercial insurance providers, or Medicare or Medicaid, with Medicaid presumed to pick up the tab in many severe injury cases due to the absence of long-term care coverage for many Medicare recipients. “If individuals who chose $250,000 or $500,000 in coverage faced large costs from auto accidents, in particular long-term care and attendant care costs, many of them would end up spending down to Medicaid eligibility and that would lead to a cost shift as well,” a Senate Fiscal Agency analysis said in 2019.
“Billions in surplus funds should not be held by insurers to invest for their own profit or be conditioned on the renewal of a policy. The surplus belongs to Michigan policyholders and should promptly be returned directly to them in full, in the form of refund checks,” Whitmer said.
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Bruce Walker is a regional editor at The Center Square. He previously worked as editor at the Mackinac Center for Public Policy’s MichiganScience magazine and The Heartland Institute’s InfoTech & Telecom News.
Photo “Gov. Gretchen Whitmer” by the Gerald R. Ford School of Public Policy, University of Michigan CC BY-ND 2.0.
