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Lawmakers add savings mandates before reporting no-fault reform

October 31, 2017

Article courtesy of MIRS News Service

Lawmakers mandated additional savings from the pending no-fault auto insurance reform Thursday before voting to send HB 5013 out of the House Insurance Committee to the floor, where the measure could be taken up as soon as Nov. 2.

The Rep. Joseph Bellino (R-Monroe) amendment mandates rate reductions for two of the three tiers of personal injury protection (PIP) called for in the bill — a 20 percent reduction for PIP coverage capped at $500,000 and a 10 percent cut for unlimited PIP coverage. 

Initially, the bill had required only a 40 percent rate rollback for drivers who choose the lowest level of PIP coverage, capped at $250,000. Currently, under no-fault auto insurance, all drivers are required to carry unlimited lifetime PIP coverage, a rule that bill sponsor Rep. Lana Theis (R-Brighton) says makes Michigan auto insurance rates the highest in the nation.

Bellino said the amendment is important because it will mean all residents will see auto insurance rate cuts, no matter which level of PIP they choose. Theis said insurance companies should be able to make those reductions work because other aspects of the bill reduce the overall costs of the system. And the amendment answered one of the criticisms of the bill offered by its detractors. 

The amendment was a hit with House Speaker Tom Leonard (R-DeWitt), who worked with Theis and Detroit Mayor Mike Duggan to devise HB 5013. 

“Their biggest criticism of this bill was that it did not ensure rate relief for all three tiers,” Leonard told reporters after session Thursday. “We have now ensured that under this bill that every person in the state of Michigan, regardless of what type of plan they choose, they will see some type of rate relief. There are certain individuals that like the status quo. They want to maintain the rigged system . . . And I think we took their biggest talking point away from them with this amendment. Now every citizen in the state is going to see rate relief.” 

Pete Kuhnmuench, of the Insurance Alliance of Michigan, was less sure that insurance companies will actually be able to roll rates back that far. 

“We are very supportive of certain elements within the package,” he explained. “We still have ongoing concerns with the mandatory rate rollback and that has been heightened by the addition of the amendments that were put on this morning . . . As an industry, we have not had an ability to analyze whether that can be delivered on the typical policy. We alerted our members about this going on last night and I’m sure they are running numbers as we speak. We will have more of a position as we get to the floor debate.” 

The Bellino amendment was approved by the Insurance Committee in a 16-0 vote. Rep. Phil Phelps (D-Flushing) was not present. 

As amended, the Insurance Committee then voted to report the bill to the House floor in a 9-5 vote, with two members passing. 

Voting yes were Theis, Bellino, Reps. Curt VanderWall (R-Ludington), Tom Barrett (R-Potterville), Gary Glenn (R-Midland), Hank Vaupel (R-Fowlerville), Michele Hoitenga (R-Manton), Beau LaFave (R-Iron Mountain), and Jason Wentworth (R-Farwell). 

Voting no were Reps. Michael Webber (R-Rochester Hills), Tim Greimel (D-Auburn Hills), Sherry Gay-Dagnogo (D-Detroit), Robert Wittenberg (D-Oak Park), and Donna Lasinski (D-Ann Arbor). 

Rep. Jim Runestad (R-White Lake) and Rep. Abdullah Hammoud (D-Dearborn) passed. 

“I’m excited,” Theis said in reaction to vote. “I have been working on this a very long time. It has been in my heart to fix this. And to be in a position where people can see rate relief, it’s monumental . . . To me it doesn’t makes sense that we are requiring people to pay for unlimited lifetime care and that is the only area where we are mandating that kind of care, in that one sliver of your life, in case you are injured in this one way.” 

Leonard said he hopes to call a vote on the House floor soon, but wouldn’t commit to a specific time. 

Before reporting the bill, the committee rejected an amendment offered by Gay-Dagnogo. She would have eliminated all non-driving related factors from rate setting for auto insurance premiums. Factors, which have been hot-button issues for Democrats, that would have been prohibited included gender, marital status, occupation, credit scores, income, home ownership and location of residence. 

Gay-Dagnogo explained the purpose of her amendment was to make certain Detroiters get fair rates and to eliminate territorial rating, often referred to as “redlining,” in the future. 

“I put forward an amendment to strike out redlining, to ensure that the people of Detroit would not be left behind in the conversation to advance Fair and Affordable Insurance, as reflected in HB 5111, and I’m disheartened that the amendment failed,” Gay-Dagnogo stated. “. . . Our auto no-fault system is broken because it pits districts against each other as those outside of Detroit refuse to remove territorial rating non-driving factors that are in statute.” 

The amendment failed on a mainly party-line vote 5-9. Two Republicans, Webber and Bellino, passed. 

Kuhnmuench contended that what some people see as non-driving-related factors turn out to be very good predictors of loss experience. Credit scores are an example. By contrast, he said, a driver’s driving record is not as good of predictor. 

He further argued that territorial rating is valid. Those who live in urban areas and drive on more crowded roads and expressways are more likely to have an accident than drivers who travel more lightly used roads in the country, Kuhnmuench said. 

Theis also defended use of those factors, particularly where a driver lives. 

“What we are looking to do is reduce the cost throughout the state for auto insurance, not adjust in one area and have it go up in another area. While these factors might be perceived by some as not having a direct effect, they are shown to have a direct effect,” she said. “My goal was to reduce it for everybody, not to make it less expensive in one area and more expensive in another.” 

Duggan issued a statement applauding the committee’s actions. 

“Today, drivers in Michigan are one step closer to finally having choice in their auto insurance, and the opportunity for significant reductions in their rates,” Duggan stated. “. . . We have presented a proposal that will result in significant savings for everyone by reining in out-of-control health care costs and stopping seniors from being gouged by paying an extra $1,000 a year in duplicate coverage they don’t need.” 

The Michigan Chamber of Commerce issued a statement not only supporting the Theis-Leonard-Duggan plan, but also bashing the alternative plan package offered by a coalition headed up by Rep. Ben Frederick (R-Owosso) and Lasinski.
“While the real auto insurance reform plan being pushed by the Speaker and Mayor would save drivers more than $1 billion annually, the fake plan fails to give drivers choice in their level of medical coverage; allows hospitals and other medical providers to continue their price gouging, charging drivers two, three, seven or more times more for their medical procedures than they would any other patient with medical coverage; and offers watered-down fraud protections,” said Chamber spokesperson Wendy Block. 

John Cornack, president of the Coalition Protecting Auto No-Fault (CPAN), issued a statement in opposition. CPAN is supportive of the Frederick coalition package. 

“The number of problems with this bill could be stacked as high as the Capitol dome. There are ways to reduce Michigan’s auto insurance rates and improve the system without destroying it. Unfortunately, this bill’s supporters would rather sweep the criticisms under the rug so that they can rush forward with a vote rather than working on a comprehensive, long-lasting solution,” Cornack stated. 

He said reform must include a ban on the use of “unfair rating practices that allow insurers to charge higher rates based on non-driving factors” including gender, occupation and credit score.

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