ASK AN EXPERT: Why has my car insurance increased?

BIG RAPIDS — The Michigan Catastrophic Claims Association announced it will raise its annual per-vehicle assessments on all Michigan auto insurance policies and one Big Rapids insurance agency owner explained what these increases will mean for drivers.

With fee hikes being implemented July 1, drivers choosing unlimited, lifetime medical coverage — known as personal injury protection will be charged $122, up from $86. Drivers choosing any other PIP option, including zero-dollar PIP, will be charged a $48 assessment for "deficit recoupment. Currently, drivers who choose an option besides unlimited pay no MCCA assessment or fees.

Tyler Schuberg, principal certified insurance counselor at the Schuberg Agency in Big Rapids, said the price increases are due to a few factors.

"We're going to be experiencing significant price hikes across the board," Schuberg said. "We're going to be looking at 10% per each company, I think there's some companies as high as 13.5% increases. Specifically for auto insurance with the claim side of things, inflation has caused issues. The cost of vehicles has gone up, and the insurance that has to cover that vehicle has gone up because we need more premium dollars, need more money in the claim pile to cover those losses."

The MCCA has said the fee increases are necessary to address a deficit in the organization's statewide fund.

The fund, which is for the medical expenses of the most severely injured victims of auto accidents, swung from a $5 billion surplus in 2020-21 to a $3.7 billion deficit last fiscal year.

Schuberg said he believes the decisions being made about the catastrophic fund for health insurance are absolutely unguided.

"There's actuarial information that tells us how much we need to pay for insurance and what kind of risk we are," Schuberg said. "I think that a lot more of that needed to be taken into consideration before these changes were made. These companies don't need all this money.

"Right now, insurance is in a very, very volatile state," Schuberg said. "It has been inflation, reform, rebates and catastrophic weather events that have led to major increases."

The MCCA is a nonprofit corporation controlled by the insurance industry that manages the catastrophic care fund and it acts as a form of reinsurance that reimburses auto insurers once the size of an accident victim's medical bills exceeds a set threshold, currently $600,000.

According to the Detroit Free Press, there were 16,800 individuals in Michigan who had crossed the threshold and had open claims as of June 30 2022.

The last financial report for the MCCA showed $21.8 billion in total assets, down from $27.2 billion a year earlier.

Schuberg said there are several companies who have put a hold on new business or are considering doing so due to losses.

"Companies will say we got to shut down, we're losing money, our losses are too great," Schuberg said. "Right now, where we're looking with this inflation the amount of money that companies have been paying premium has been held back for as long as it can possibly be held back, and now it needs to go up because it needs to meet those inflationary period points."

Schuberg said supply chain issues and labor shortages have both contributed to making the claim process even longer, which adds to the cost, and since Oct. 11, 2022, there have been 11 weather disasters that have exceeded $1 billion each in cost, rippling through a company's territories leading to higher premiums.

Schuberg said for drivers holding insurance, right now would be a good time for an insurance checkup.

"Here's your opportunity for a checkup because your home may be underinsured, your autos may not be getting the best rate," Schuberg said. "We can go over some ways that you can maintain the coverages that are beneficial to you and your family. Maybe there's another policy, we can get a different policy discount (or) group discounts. There's lots of discounts out there that we can tap into to get you to your bottom dollar."

He encouraged insurance holders to get covered for basic insurance on vehicles, as making sure that liability coverage and medical are probably the two biggest things that are needed.

Additionally, practicing defensive driving, avoiding speeding tickets, accidents and things that could potentially lead to higher rates is helpful.

Schuberg admitted he believes higher rates are here to stay.

"The future is always cloudy crystal ball and it's hard to predict," Schuberg said. "With costs of living going up, I'd really like to see that not a factor and for businesses to pay their workers a little more, but I do not see that rates will start to level off when inflation levels off. It's unfortunate, but I think they're going to be staying around."