Michigan’s legislative leaders are setting auto insurance reform as a top priority for the fall session. That’s a great call. Michigan has the highest insurance rates in the nation, and the premiums in Detroit are beyond outrageous.
Detroit Mayor Mike Duggan says he’s pushing “day and night” to move the Legislature on insurance reform, calling it his No. 1 issue at the moment.
Lawmakers are signaling support for the mayor’s agenda. Duggan says he is optimistic of passage. Motorists should hope his optimism is well placed.
Average auto insurance premiums in Michigan were $2,738 in 2016. That’s almost exactly twice the national average. In Detroit, premiums average more than $3,000 a year.
The reason: Michigan is the only state in the nation whose no-fault insurance law guarantees unlimited lifetime benefits for those injured in automobile accidents.
That provision has proven itself a gravy train for trial lawyers and medical providers. The system is rife with fraud; attorneys can order as many tests as they wish to make the case for benefits, and in some cases the law firms claim one-third of the medical benefits for their fees.
From acupuncture to aromatherapy, virtually no treatment is off-limits for accident victims who claim to need it. Transportation and caretakers are also often covered without any limits.
Auto insurance companies are required to cover all expenses, with basically no questions asked, and aren’t allowed to negotiate with health care providers for better rates.
Duggan is pushing for reforms that would cap the lifetime benefit, establish a fee structure for the medical services provided and crackdown on the collusion between attorneys and clinics.
He believes effective reform could drive down the cost of premiums in Detroit by up to $1,000, depending on the driver.
That would go a long way toward removing a major barrier to living in Detroit.
Astronomical insurance costs have discouraged many from buying homes in the city. Others who do buy homes in the city keep their cars registered to a relative’s address in the suburbs to sidestep high rates. But that also keeps them off the city’s voter registration rolls.
In 49 other states, medical benefits are capped, and once the limit is hit, health insurance policies take over.
Predictably, both the trial bar and medical providers are lobbying hard to keep the unlimited lifetime benefits.
Opponents of capping them warn that doing so will further drive up the cost of health insurance policies and stick hospitals, and ultimately taxpayers, with the bill for treatment.
That’s not been the reality in other states.
If capping the benefits drives down premium costs, as projected, it would make auto insurance more affordable and encourage more motorists to buy coverage.
That would be a welcome bonus, since at any given time one in five motorists on Michigan’s roads is driving without insurance.
Reforming auto insurance would benefit drivers throughout the state, and is particularly essential for Detroit’s revival.
Lawmakers should stick to this task.