Gov. Whitmer calls for billions in auto insurance refunds for Michigan motorists [Detroit Free Press]

LANSING — Gov. Gretchen Whitmer on Monday called on the auto insurance industry to send refunds that could total billions of dollars to all insured motorists in the state.

The board of the Michigan Catastrophic Claims Association will consider the governor's request, but Whitmer is asking for a refund that is both much sooner and much larger than what the law requires, said Kevin Clinton, the association's executive director.

But a Republican lawmaker said Whitmer is "playing politics" in a way that could put catastrophically injured auto accident victims at further risk.

Whitmer said the refunds should result from the bipartisan auto insurance package that she signed into law in 2019.

The MCCA, a nonprofit corporation with a board controlled by the insurance industry that manages a fund that pays for catastrophic care, should issue the refunds, Whitmer said.

The fund, which has assets of more than $27 billion, gets its money from surcharges paid by insured motorists. Those surcharges have been reduced since the new auto insurance law took effect, moving to $86 per vehicle this year from $220 per vehicle in 2019. The surcharge, which used to be applied to all auto insurance premiums, is now only charged to motorists who maintain lifetime catastrophic claims coverage.

Whitmer said in a Monday letter to Clinton that financial reports show the fund's surplus has still grown from $2.4 billion at the end of 2020 to $5 billion as of June 30, 2021.

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"The surplus reflects premium overcharges and is partly a reflection of the cost-saving measures implemented in the historic, bipartisan no-fault reform legislation," Whitmer said in the letter.

The money "belongs to Michiganders and should be put in people's pockets immediately with a refund check," she said in a news release.

"A refund check to working families will help us continue to put Michiganders first and drive down costs."

Asked whether Whitmer was calling for the entire $5 billion to be refunded, spokesman Bobby Leddy said the MCCA will need to make a determination, but the governor wants it to "return the maximum amount possible while maintaining the viability of the fund."

Michigan has 7.4 million insured vehicles. A $5 billion refund, if it was ever approved, would result in average checks of about $676 per vehicle.

Clinton said Monday it's true that the fund's current assets exceed its expected liabilities by $5 billion, but he said giving up the entire surplus "may be a difficult thing to do."

The state's insurance law requires the MCCA, beginning in September 2022 and every three years thereafter, to issue refunds when assets exceed 120% of liabilities, Clinton said. If that calculation was made today, which is nearly a year ahead of schedule, it would provide for a $743 million refund, or about $100 per insured vehicle, he said.

"I don't think there's any law that says we can't do it early," Clinton said.

Both Whitmer, a Democrat, and the Republican-controlled Legislature have been under fire from advocates for catastrophically injured auto accident victims and related health care providers over sharp reductions in funded care since parts of the reform package took effect.

Fewer motorists are opting for unlimited catastrophic coverage and victims of catastrophic accidents — even those injured before the law took effect — are eligible for lower levels of insured care. Many groups and lawmakers are now calling for improved levels of care for those victims, though many had predicted such problems before the law, which included a sharply reduced fee schedule, was passed.

Devin Hutchings, president of CPAN, formerly known as the Coalition Protecting Auto No-Fault, said Whitmer's announcement "seems designed to distract our attention away from the real issue — the fact that survivors of catastrophic auto accidents are suffering under the new law, and that auto insurance companies are continuing to gouge consumers."

Whitmer is correct that motorists need a break on their premiums, but "taking money from the catastrophic claims fund — which was designed specifically to care for those with serious injuries — is a slap in the face to the survivors and families who have been begging for relief from the Michigan catastrophic care crisis created by the 45% government-mandated cut in care under the new auto insurance law," Hutchings said.

The 2019 legislation was expected to provide Michigan drivers with significant reductions in Michigan's highest-in-the-nation premiums, guaranteed for eight years, by giving drivers five choices for their insurance, ranging from keeping the current system of unlimited lifetime benefits to opting out entirely from the personal injury protection portion of insurance coverage.

Sen. Lana Theis, R-Brighton, chairwoman of the Senate Insurance and Banking Committee, said Whitmer "wants to take the savings from the no-fault reform and use them for her own political benefit." That is dangerous, she said in a statement issued by the Senate majority leader's office.

"The last time a governor played politics with the MCCA it threatened the funds that provided care for the catastrophically injured," Theis said.

She was referring to 1998, when the MCCA, at the urging of both then Gov. John Engler, a Republican, and House Democrats, returned about half its surplus to motorists in the form of $180-per-vehicle checks. Later fee increases were blamed on a resulting deficit.

Clinton said insurance companies are required to hold surplus funds to handle unexpected contingencies, and the same principle could be applied to the MCCA. If there are unfavorable court rulings, or if the law is changed to provide for greater payouts to catastrophic accident victims, the size of the surplus will be significantly reduced, he said.

Erin McDonough, executive director of the Insurance Alliance of Michigan, pressed a similar message in a Monday news release.

"Moving up the timeframe for a refund, as the governor now proposes, makes it even more important to stay the course with the full reforms," McDonough said.

"Long-term care is the number one cost driver within the MCCA and is currently subject to the reasonable medical fee schedule. Changes to any part of reform will have a domino effect that will change the MCCA's long-term liabilities, increase premiums and drive up costs at a time when Michiganders can least afford it."

Contact Paul Egan: 517-372-8660 or [email protected]. Follow him on Twitter @paulegan4. Read more on Michigan politics and sign up for our elections newsletter.

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