Michigan must overhaul its indefensible no-fault auto insurance

By Sen. Dan Lauwers
25th Senate District

As I travel throughout the 25th Senate District talking to residents, I enjoy discussing the tremendous strides Michigan has made since the Lost Decade. Unemployment and crime are down. Incomes are up. Our recovery has been remarkable.

At the same time, one of the questions I keep hearing is, “When are you folks in Lansing going to finally do something about the high cost of car insurance in the state?” Despite Michigan’s resurgence, the high and ever-increasing cost of auto insurance remains a problem that needs to be fixed.

In fact, this might be the most important issue to voters across the state.

This is for good reason: Michigan drivers pay the highest auto insurance rates in the country, with our average rates a staggering 83 percent higher than the national average.

Our ridiculously high auto insurance rates are having a negative effect on our population. The rates have prevented many people from either relocating or returning to Michigan. In addition, employers in the state struggle to recruit talent to Michigan when job candidates discover our rates are two to three times higher than neighboring states’ rates.

Thousands have been priced out of driving. Thousands more choose to drive without insurance.

The situation is dire.

Earlier this month, Detroit Mayor Mike Duggan testified before the Senate Insurance and Banking Committee on the history of auto insurance in Michigan, and how we came to charge residents more than any other state.

In 1972, the state Legislature passed the no-fault auto insurance legislation. With its passage, we were promised fewer lawsuits, faster payments to accident victims and lower rates. Most of what we were promised has not come to pass.

As Duggan pointed out, it is the personal injury protection (PIP) portion of our no-fault auto insurance system that is driving the high costs. In 1972, medical costs, represented by PIP, made up only 6 percent of total auto insurance costs.

Today, PIP coverage makes up a whopping six times that amount — 42 percent.

There are many contributing factors to this rise in costs, including (but not limited to) the following:
• Michigan’s no-fault PIP provision requires drivers to buy unlimited medical coverage as part of their car insurance.
• Nearly all employer health plans contain provisions stating their coverage is secondary.
• Auto insurers pay significantly more to hospitals and other providers than other insurers do for the same care, and there is substantial fraud in the no-fault system.

Everyone should watch Mayor Duggan’s explanation of how we have arrived at this situation. His compelling testimony can be found here.

Our current auto insurance system must be overhauled. The system is indefensible.

By giving drivers the ability to choose the personal injury protection coverage that best meets their needs and budget; reducing medical cost inflation related to auto insurance claims; cracking down on unnecessary medical treatments, products and services; and making other significant changes; we can make auto insurance more affordable for all Michigan drivers.

Senate Bill 1 seeks to do all the above. The bill currently is before the Senate Insurance and Banking Committee. My hope is that we consider the bill soon and send it to the full Senate for consideration. Michiganders deserve nothing less.

Senator Dan Lauwers, R-Brockway Township, serves as vice chairman of the Insurance and Banking Committee. He serves the residents of the 25th Senate District, representing Huron, St. Clair, and Sanilac counties as well as Armada Township, Memphis, New Baltimore, Richmond and Richmond Township in Macomb County.