Premiums rose for some drivers after 2019 auto no-fault reform, study finds

Lansing — A case study of one Michigan auto insurer found premiums for drivers on average increased over the past two years and discrepancies among premiums based on geographic regions and credit ratings continued, despite 2019 reforms meant to curb both cost and unfair rating practices.

On average, clients of Citizens Insurance — which insures about 6% of drivers in Michigan — paid $90 more for their premiums in June 2021 than they did in June 2019, according to a study commissioned by the Committee to Protect Auto No-Fault. The company increased its annual operating profits 24% during that time.

"If there’s going to be an effort to create a reform of the insurance industry in order to protect consumers, the pain can’t all be born by consumers, it can't be about consumers giving up things, consumers accepting changes only," said Douglas Heller, director of insurance of the Consumer Federation of America. "There has to be accountability built in."

Heller's research came after House Speaker Jason Wentworth said last week that there were no plans while he remains House leader to alter the historic changes to the 2019 auto no-fault insurance laws. 

Senate Majority Leader Mike Shirkey, R-Clarklake, stood by the 2019 reform, citing a separate December study by Poverty Solutions at the University of Michigan that found the law contributed to an 18% decrease between 2019 and 2020 in the average premium. But the UM study also found Michigan still had the highest rates in the country and the changes had failed to decrease cost disparities based on race and geography.

“The auto no-fault reforms we enacted in 2019 were long overdue and have brought significant improvements and savings to Michigan drivers through more and better policy options," Shirkey said. "And $400 MCCA rebate checks are going out to policyholders as we speak."

In recent months, the law has stoked controversy because of a provision that on July 1 trimmed medical provider fees to 55% of what was charged in 2019 or 200% of the 2019 Medicare rate for Medicare-reimbursable services. The large cut to fees has pushed some medical providers to close their doors or refuse to take auto crash victims. 

The Insurance Alliance of Michigan has urged Wentworth to "stay the course" because of $400 refunds promised to drivers due to savings and the fact that 83,000 more Michigan residents have gotten insurance since the law went into place. The association called Wednesday's study "deeply flawed."

"Rate filings approved by the Michigan Department of Insurance and Financial Services clearly show insurance companies are actually exceeding the rate reduction required by Michigan’s new auto no-fault law," said Erin McDonough, executive director of the alliance. "Some special interests that benefited from the old auto no-fault system want to turn back the clock."

Wentworth, R-Farwell, said last week all of the proposals seeking to ease the cut "either move us back toward the old status quo or put the savings and refund checks for Michigan drivers at risk."

But Heller noted in his research that the refunds have done little to blunt the overall increase in auto insurance rates. 

Heller's research, which focused on Citizens because it had some of the most recent numbers, found Citizens Insurance raised rates a total of 7.3% through increases implemented on Jan. 1, 2019; July 1, 2019; and Jan. 1, 2020 only to drop them 4.9% as required by law in July 2, 2020. There were no changes to rates July 1, 2021, but the company increased rates Jan. 1, 2022 for a net gain of about 1.5% since January 2019, according to the study.

Some profit increases for insurance companies can be attributed to fewer losses during the pandemic because fewer people were driving, Heller said. But those gains have not trickled down to consumers, whom the 2019 reform was supposed to help, he said.

"Consumers are transferring less risk to insurance companies when they buy a policy; we are just in fewer accidents or getting less care in the wake of those accidents," Heller said. "And yet companies have been pushing premiums up.

"Residents in Michigan have kind of taken it on the chin by having fewer claims made," he said.

The study also found that while Citizens Insurance was blocked under the new law from discriminating based on zip code, the company had instead switched to using census block data to determine rates. It also had guidance prioritizing homeowners and those with higher insurance scores for discounts.

The discounts create huge discrepancies for drivers depending on where they live, Heller said. For example, he said, an individual seeking unlimited personal injury protection with no deductible in Troy would pay a $656 premium while an individual in a certain census block in Detroit seeking low-end $50,000 of personal injury protection coverage with a $500 deductible would pay a $2,220 premium.

"I’m actually concerned that the disparities have grown because the insurance companies are doing these more refined, territorial adjustments now," Heller said.

The study was released the same day a few dozen individuals protesting the new law delivered letters urging changes to Wentworth and Senate Majority Leader Mike Shirkey, R-Clarklake. 

Laurie Oleksa of Battle Creek showed up at the Capitol to protest on behalf of her 30-year-old son who was injured in a catastrophic car crash at the age of 11. Laurie Oleksa said nursing care for her son had been drastically decreased as had the compensation family members received for helping care for Dan Oleksa.

"Allow democracy to happen, allow our legislators to vote on this bill to change one that they all acknowledged they didn't understand; it got rammed down their throat in the middle of the night," Oleksa said. They didn't know it was in there."

Maureen Howell was at the protest with her 35-year-old son Sam, who was injured in a car crash at the age of 18. The around-the-clock care provided through the family's auto no-fault coverage allowed Sam to not only survive but also to regain many functions that some believed he'd never have again, such as eating, speaking and walking.

"This is why the system works and why it needs to be maintained," said Sam Howell.

"We just want them to hear us," Maureen Howell said. "We want them to know this could happen to them. Future survivors are not going to have miracles and this could be their own family."

eleblanc@detroitnews.com