Gov. Whitmer urges $5B insurance refund for Michigan drivers; early rebate possible

Craig Mauger
The Detroit News

Lansing — Gov. Gretchen Whitmer is calling on the Michigan Catastrophic Claims Association to return a $5 billion surplus through "refund checks" to every resident with auto insurance, something a key Republican lawmaker noted could occur down the road under current law.

The Democratic governor made the request in a Monday letter to Kevin Clinton, executive director of the claims association, which, under state law, levies an assessment each year to cover claims for those catastrophically injured in car accidents.

The association's surplus has grown from $2.4 billion at the end of 2020 to $5 billion as of June 30, according to Whitmer's letter. The change is "partly a reflection of the cost-saving measures" included in the state's auto insurance overhaul approved in 2019 by the Legislature and signed by Whitmer.

"The over $5 billion surplus accumulated by the MCCA belongs to Michiganders and should be put in people’s pockets immediately with a refund check," Whitmer said in a statement. "As we stay laser focused on growing our economy and ushering in a new era of prosperity, we need to use every resource we have to help people thrive.

"A refund check to working families will help us continue to put Michiganders first and drive down costs."

Clinton said in a Monday interview he doubted the MCCA's board would give away all of the organization's surplus. He also noted that the 2019 law included a mechanism through which a refund could occur. Still, he said the MCCA will likely at least consider an early distribution. 

"If they get something from the governor, they’ll give it serious consideration," said Clinton of the MCCA's board, which includes five voting members who represent the insurance industry.

The MCCA's board is next scheduled to meet on Wednesday, he said.

Sen. Lana Theis, R-Brighton, chairwoman of the Insurance and Banking Committee, accused Whitmer of playing politics on Monday and emphasized the new law already mandates how and when refunds should be issued.

"We need to let the statute play out," Theis said.

Before the changes in 2019, Michigan drivers were broadly required to have unlimited personal injury protection as part of their auto insurance with the MCCA assessment being paid by everyone with a policy.

After the changes, the MCCA had liability for policies issued before July 2, 2020, and for new policies in which drivers chose unlimited coverage — Clinton said about 80% of Michigan drivers chose to stick with unlimited coverage. The MCCA can only charge insurers for policies that continue to feature unlimited coverage.

Last November, the claims association announced its assessment charged per vehicle was decreasing to $86 for the period beginning July 1, 2021, through June 30, 2022, a 14% reduction. The association said the reduction was "primarily the result from savings created by cost controls for medical treatment and other changes" made in the 2019 auto insurance law.

The Legislature created the MCCA, but it's not considered a state agency.

Its website describes the entity as "a nonprofit unincorporated association of which every insurance company that sells automobile or motorcycle coverage in Michigan is required to be a member."

Erin McDonough, executive director of the Insurance Alliance of Michigan, noted in a Monday statement that the 2019 law included a provision that contemplated a refund by the MCCA.

Beginning July 1, 2022, and every three years afterward, the director of the state Department of Insurance and Financial Services must ensure an audit of the MCCA is conducted for the previous three years.

If the audit showed the assets of MCCA exceeded 120% of its liabilities, the director would have to order the claims association to refund the excess to its members "as long as doing so would not threaten MCCA’s ongoing ability to provide reimbursements for PIP (personal injury protection) benefits," according to a 2019 analysis by the House Fiscal Agency.

"Under law, this money goes back to Michigan insured drivers, which the Insurance Alliance of Michigan and its members strongly support," McDonough said. "Moving up the timeframe for a refund, as the governor now proposes, makes it even more important to stay the course with the full reforms."

There's been a heavy push by accident victims and medical providers in recent months to alter elements of the 2019 law, including a requirement that as of July 1, 2021, medical providers' reimbursement eligibility be capped at 55%. In June, Whitmer urged the Legislature to act to "ensure some of our most vulnerable residents maintain access to their care."

Theis, the GOP lawmaker, said calling for a refund from the MCCA and urging legislators to change the fee schedule were conflicting messages from the Democratic governor.

The association was not established to be a political account, Theis said.

In the state House, Rep. Beau LaFave, R-Iron Mountain, a member of the House Insurance Committee, said he supported the idea of an early refund for all Michigan drivers as long as the data was followed and the move didn't produce large increases in rates in the future.

A refund will probably occur, LaFave said.

"The question is how much and when," the GOP lawmaker said.

Others disagree. Devin Hutchings, president of the Coalition to Protect Auto No Fault, said taking money from the claims association would be "a slap in the face to the survivors and families who have been begging for relief from the Michigan catastrophic care crisis created by the 45% government-mandated cut in care under the new auto insurance law."

Twenty-three years ago, in 1998, the MCCA voted to return $1.2 billion of its surplus at that time to its member insurance companies. The action occurred because the association's surplus increased beyond "a level necessary to cover its expected losses and expenses," according to a state bulletin.

The bulletin said the return of 1998 surplus had to be passed through to policyholders directly in the amount of $180 per vehicle.

The current surplus is the largest Clinton said he is aware of the MCCA ever having. The association's executive director linked the stockpile to investments and the 2019 law change.

"If you give away all of your surplus, you don’t have any money in case something goes wrong," Clinton cautioned.

The association has not always had a surplus. The MCCA began the fiscal year ending on June 30, 2014, with a $1.87 billion deficit, according to a report from the state House Fiscal Agency.

At the time, some lawmakers were proposing taking $1 billion from money held by the MCCA and using it for road repairs. The proposal didn't advance.

The MCCA sets its annual assessment by analyzing the amount needed to cover the lifetime claims of all people catastrophically injured in car accidents for the coming year, according to a 2007 summary from the state Department of Insurance and Financial Services.

"This analysis includes review of the investment return that the fund receives, medical cost inflation, any existing deficit or surplus, and any changes to coverages," the summary said.

Staff Writer Beth LeBlanc contributed.