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Michigan Auto Insurance Assessment Rising 14%

Starting July 1, 2010, drivers in Michigan will pay $143.09 for every vehicle they insure to the Michigan Catastrophic Claims Association (MCCA), which pays for car accident bodily injury claims in excess of $460,000. The assessment represents an increase of $18.20 from the previous year [1].

Purpose of the MCCA

The MCCA is a nonprofit unincorporated association. Created in 1978 by the Michigan state legislature, its purpose is to reimburse auto insurance companies in the state for each personal injury protection (PIP) claim paid in excess of a preset amount. Currently that amount is set at $460,000. The auto insurer directly pays out for the entire claim, and is then reimbursed by the MCCA for any amount in excess of $460,000. All auto insurance companies in Michigan are assessed by the MCCA to cover the catastrophic medical claims that occur statewide. The cost of these assessments is then passed on to policy holders [2].

The 2009-2010 assessment was $129.89 per vehicle. In 2008, that figure was $104.58, so that means Michigan drivers have seen an increase in this assessment of 37 percent in just two years' time. Over these same two years, unemployment and wage cuts have hit Michigan hard. The increased expense is sure to lead to more than a few complaints among motorists across the state. But these figures are based on the MCCA's annual actuarial evaluation of the previous year's expense, so there is very little that can be done even for those who fume about the assessment.

Michigan's Unlimited PIP System

The MCCA is merely an instrument set up to administer payment based on the system in use in Michigan. Michigan is unique among no fault states in the fact that it requires motorists to opt for unlimited PIP benefits. This means there is no lifetime limit on the amount of money a claimant can receive on a personal injury claim following an accident. No fault auto insurance is purchased to protect the policy holder, so anyone carrying legal coverage in the state could conceivably end up with one of these huge settlements following an accident.

This and other factors have made Michigan auto insurance premiums among the highest in the nation. State drivers and politicians are currently at work on competing proposals to try to do something about the high cost of insurance in MI. But in the meantime these rates remain high with little relief in sight. The average cost of no fault auto insurance in Michigan was $928 in 2007, the last year national figures were available. By comparison, the national average that same year was only $795. Also in 2007, Michigan's uninsured motorist rate was estimated at 17 percent [3], with some saying it is even higher now.

The state requirement that all drivers have unlimited PIP appears to be driving auto insurance prices upward. From the years 2000 to 2006, PIP costs across the country remained steady, while in Michigan they rose from $141 to $277 per insured vehicle over that same time period [3]. The ever increasing cost of insurance causes endless strain on consumers, many of whom have been rocked by the recent recession. Michigan has arguably felt the effects of the recession more than virtually any other state, because the state economy was already slowing down long before most other states.

Cutting Michigan Car Insurance Prices

There are a number of complicated factors going into the determination of auto insurance premiums in Michigan. The concept of unlimited lifetime personal injury protection benefits is only one variable among many. But research does seem to suggest that this concept (one unique to Michigan) is putting a strain on the market and pushing prices upward. One solution suggested by researchers to the problem of high insurance rates in the state is to modify no fault law to allow for more PIP options, giving consumers lower priced alternatives to lifetime unlimited PIP coverage. Other suggestions abound, including a few being promoted by groups trying to get their ideas on the November 2010 ballot, and others sponsored by legislators and state Supreme Court justices.

At this stage, it is unclear what might become of Michigan's no fault auto insurance law. What is clear in light of the recent MCCA press release and other insurance related happenings is that Michigan is fast becoming a battleground state when it comes to auto insurance. From arguments over no fault law and its particulars to debate over the use of credit scoring and other factors in the setting of auto insurance rates, there is much yet to be resolved. Michigan continues to be a place of interest nationwide for those interested in auto insurance law and in these debates.

[1] http://www.freep.com/article/20100402/NEWS06/4020338/1008/Statewide-news-Auto-insurance-rider-to-rise-nearly-20 Retrieved 2010-04-05.
[2] http://www.michigancatastrophic.com Retrieved 2010-04-05.
[3] http://www.rand.org/pubs/research_briefs/2010/RAND_RB9513.pdf Retrieved 2010-04-05.

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