Whitmer pushes to fund anti-fraud auto insurance unit

Jonathan Oosting
The Detroit News
Gov. Gretchen Whitmer presents her fiscal year 2020 budget proposal, called ˜The Road To Opportunity," to lawmakers during a joint meeting of the House and Senate appropriations committees in the Senate Hearing Room in Lansing, Tuesday morning.

Lansing — Democratic Gov. Gretchen Whitmer is asking the Republican-led Legislature to fund and staff up an anti-fraud investigation unit as debate continues about how to reduce Michigan's high auto insurance rates and reform its unique no-fault system.

Whitmer’s 2020 budget plan includes $499,300 to cover six full-time employees in the anti-fraud insurance unit, which was created on paper last fall by former Gov. Rick Snyder without any dedicated resources. 

The Michigan Department of Insurance and Financial Services in February hired former State Police First Lt. Joe Thomas to lead the new unit. It’s also reassigned two analysts to the team.

Whitmer’s proposed funding would cover the salaries of Thomas and the two analysts but also allow the state to hire two new investigators and a new technician for the anti-fraud unit, said insurance department spokeswoman Andrea Miller.

The plan would help fill roles “needed to perform collection, analysis and investigation of complaints alleging fraudulent activities in Michigan’s insurance and financial services markets and coordinating (the department’s) investigative efforts with the Attorney General’s Office and law enforcement,” Miller said.

Lawmakers have long considered the creation of an anti-fraud unit amid a decades-long debate over reforming the state’s no-fault auto insurance law, which House and Senate leaders are both calling a top priority this year.

Debate in the Senate has largely focused around offering motorists the choice to purchase lower coverage policies that do not include lifetime medical benefits for catastrophic injuries that are currently guaranteed under Michigan law.

Supporters say it could drive down rates, but opponents argue it would end important coverage and ultimately force more injured motorists into bankruptcy and on to government health coverage.

Legislators are also considering a fee schedule that would cap auto insurance reimbursement rates for medical providers. Others, largely Democrats, want to prohibit insurers from using non-driving factors to set insurance rates.

The Legislature may also look to address insurance gimmicks that some might consider fraud but are currently allowed under state law, said Senate Insurance Committee Chair Lana Theis, R-Brighton.

Chairwoman Lana Theis, R-Brighton, asked colleagues to submit potential amendments by next week before she decides on the next course of action.

The anti-fraud unit is “just gearing up,” she said, “and waiting to see what happens is not a solution. We need real answers right now that actually lower insurance rates, so I think that’s something the Legislature needs to address directly.”

Theis said adequately staffing the new anti-fraud team is important, noting Michigan was one of “the only states” that didn’t have a formal unit, but she said she’s not yet sure what that funding level should be.

“We’re still trying to get our hands around what is fraud and what isn’t fraud, and then how many people we actually need,” she said. “We’re pushing to figure out what those numbers are before we commit more tax dollars to something that we’re not certain of.”

As created by Snyder through an executive order, the anti-fraud unit is authorized to investigate any criminal or fraudulent activity under the insurance department’s jurisdiction, including the auto insurance law, workers compensation, consumer protection, banking and more. 

More aggressive enforcement could create savings by curbing small-time fraud and larger fraud rings of people intentionally causing accidents, said Douglas Heller, a national auto insurance expert who has collaborated with the Coalition Protecting Auto No Fault in Michigan.

But lawmakers could also empower the state insurance department to better enforce rate setting protections, Heller said. Under current law, the department can only challenge “excessive” or “unfairly discriminatory” rates if it determines there is no competition in the marketplace.

“The theory under the statute is that in a competitive market, if any insurance company raised their rates too high, the competitors would steal their business,” Karin Gyger of the Michigan Department of Insurance and Financial Services told lawmakers Wednesday.

The Senate Insurance Committee has heard weeks of testimony on the no-fault auto insurance system, and Theis said she is hoping this month to bring officials from the Michigan Catastrophic Claims Association before the panel.

While the two issues are not directly related, there is speculation in Lansing that Whitmer and legislative leaders could try to agree to no-fault auto insurance reforms as part of a grand bargain on road funding, which remains the governor’s top priority.

“No-fault car insurance is a stand-alone issue — it’s one of the most important things we can do for the citizens of Michigan,” said Senate Majority Leader Mike Shirkey, R-Clarklake, who opposes Whitmer’s road funding proposal to raise fuel taxes by 45 cents per gallon but has acknowledged the need for new revenue..

“We need to prove to people that we can actually save them money before we should ask them to spend more money,” he said.