Letter: There is no ‘auto insurance windfall’

Re: The April 11 Editorial “Shut off the auto insurance windfall”: You missed the mark by failing to share with readers that the auto insurance tax credit reduces the cost that auto insurance consumers are forced to pay for providing unlimited, lifetime medical benefits to people injured in accidents caused by uninsured motorists.

The Legislature, in 1973, created the Assigned Claims Plan to provide the state-mandated no-fault auto insurance benefits to the uninsured and assess all auto insurance companies to fund the claims. The law dictates that the cost will be passed on to auto insurance companies and their customers who already pay some of the highest auto insurance rates in the country. This surcharge now amounts to over $40 per vehicle to the average auto insurance policy in Michigan.

The tax credit, received by some auto insurance companies when the Assigned Claims Plan was moved from the state to an insurance association, reduces the $40 cost on Michigan insured motorists.

Who collects from the Assigned Claims Plan? The Assigned Claims Plan, for example, would provide no-fault unlimited, lifetime medical benefits to a pedestrian or bicyclist who did not own vehicle and was hit by an uninsured vehicle or in a hit-and-run accident. In these cases, there is no auto insurance policy to provide the “innocent party” with the state-mandated auto insurance benefits even though these individuals did not pay anything into the auto insurance system.

The cost of this system has grown from $12.5 million in 1998 to an estimated cost of over $242 million in 2015. Today, in addition to bicycles or pedestrians, more and more of the Assigned Claims Plan recipients are passengers in uninsured vehicles since Michigan has the fifth highest (21 percent) estimated uninsured motor vehicles rate in the country. Uninsured motorists who are driving their own vehicle cannot recover no-fault insurance benefits, but their passengers can.

There is no “auto insurance windfall.” The tax credit offsets some of the costs paid by auto insurance consumers, and transfers it to general taxpayer dollars. This begs the question: Who should pay for these free, state-mandated social benefits? Should individual auto insurance companies and their customers pay for these costs, or all Michigan taxpayers, either through a tax transfer or directly?

This administration was made aware of the tax implications of the transfer of the Assigned Claims Plan before the governor signed the bill into law. The tax credit has been in place for three years and now due to budget issues, the administration and certain lawmakers want to eliminate it.

Peter Kuhnmuench, executive director

Insurance Institute of Michigan