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Republicans ‘Baking’ No-Fault Bill

April 16, 2019

Senate and House leaders are coordinating their efforts to reach agreement on no-fault auto insurance reform, up front — at the beginning of the legislative process. The term they’re using for this approach is that the legislation will be “baked” right from the beginning.

Over the years, attempts to reform Michigan’s one-of-a-kind no-fault auto insurance system have repeatedly failed because lawmakers couldn’t agree on how it should be done. But now the system, and its comprehensive catastrophic care component, is hitting the state’s drivers with rates among the highest in the nation.

So, this time around, efforts are being made to — as much as possible — achieve bicameral consensus in concert with the measure being drafted.

“The Majority Leader hopes that we’ll see a bill substitute [for SB 0001] and action on that in the next few weeks,” Amber McCann, spokesperson for Senate Majority Leader Mike Shirkey (R-Clarklake) told reporters Wednesday. “We’ll do an unveiling once every ‘I’ has been dotted and ‘T’ has been crossed. Right now, there’s still a lot of discussion taking place. A lot of research is going into the substitute for the introduced version of no-fault. I think it will be there within the next three weeks.”

“The Majority Leader would like it to move rather quickly,” McCann continued. “But it will really depend upon the appetite in the caucus and he would like to work in coordination with his colleagues in the House. The goal would be to have a plan that is 100 percent baked, so to speak. Once we are introducing a substitute.”

MIRS asked what was meant by the term “baked?”

“We’d like to work out as many of the kinks or obstacles — related to a fully formed plan — in advance, if possible,” she explained.

Auto Insurance Expert Offers Few Surprises

When Victoria Kilgore, director of research from the Institutes/Insurance Research Council, gave the Senate Insurance and Banking Committee a presentation Wednesday on auto insurance costs, much of it may have seemed like an old TV rerun to committee members.

Among the highlights were:

– The average expenditures Michigan drivers pay for auto insurance is significantly higher than those of other states.

– In Michigan, average household expenditures on auto insurance have been growing by leaps and bounds in recent years, increasing at a rate of 5.3 percent, annualized, since 2011.

– In 2015, 20 percent of Michigan drivers involved in accidents were not insured.

Perhaps the one surprise was that, according to the data Kilgore presented, as of 2016, Michigan’s auto insurance system was not the “least affordable based on household incomes” in the nation. It was only the third “least affordable based on household incomes” behind Louisiana and Florida. Michigan’s auto insurance rates remain the country’s most expensive.

However, Sen. Tom Barrett (R-Potterville) wondered if Michigan’s standing would look even worse if the presentation included more recent data.

“It seems to hit more of a hockey stick curve since 2013,” Barrett observed, before asking Kilgore if she’d seen any information covering 2016 to 2018.

She said she hadn’t.

“That would have just recently become available,” Kilgore pointed out.

Sen. Mallory McMorrow (D-Royal Oak) asked Kilgore about Colorado’s experience with auto insurance reform.

“Colorado shifted their auto insurance to a tort system from a no-fault system,” McMorrow said. “It would be interesting to look into what happened there.”

“Colorado was actually facing a situation where their no-fault insurance was becoming increasingly expensive,” Kilgore observed. “So, they decided to revert to a tort liability system. Consequently, they did see that their costs fell significantly.

“Colorado’s affordability index, I believe, is 1.36 percent of their (household) income, which is considerably lower than the countrywide average we see now,” Kilgore added.

Sen. Ken Horn (R-Frankenmuth) asked how much the elimination of Michigan’s unlimited PIP (personal injury protection) aspect of its no-fault system would save.

“I think we’ve seen pretty clear evidence that the unlimited benefit creates some extremely large claims, which does increase your PIP severely and your average costs,” Kilgore said. “Michigan looks drastically different than other states — looking at those measures.”

Barrett took issue with Kilgore’s reluctance to make a definitive statement regarding the medical costs resulting from the unlimited PIP, even though examples had been given of hospitals charging much higher fees when the patient involved is covered by Michigan’s unlimited no-fault insurance.

Kilgore had stressed that her organization hadn’t fully looked into this aspect of the issue.

“It’s just inherently wrong to charge $3,200 for a case that costs $770 for a procedure under Workers Compensation,” Barrett asserted.

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