Michigan Announces $3B In Refunds For Drivers

LANSING, Michigan, Dec. 8 -- Gov. Gretchen Whitmer, D-Michigan, issued the following news release on Dec. 7, 2021:

In a move that will put money back into the pockets of Michigan drivers, Governor Gretchen Whitmer and the Michigan Department of Insurance and Financial Services (DIFS) today announced that the Michigan Catastrophic Claims Association (MCCA) has acted upon the governor's call to return surplus funds to Michigan policyholders and will immediately begin the process of refunding $400 per vehicle to Michigan drivers. Drivers are expected to receive checks in the second quarter of 2022.

"These refunds and the recently announced statewide average rate reductions are lowering costs for every Michigan driver," said Governor Whitmer. "Michiganders have paid into the catastrophic care fund for decades, and I am pleased that the MCCA developed this plan so quickly after unanimously approving my request to return surplus funds to the pockets of Michiganders. We are working together to put Michigan drivers first, and I am directing DIFS to ensure that the MCCA and Michigan's auto insurance companies accurately, fairly, and promptly issue these refunds."

"The Governor and I called for these refunds because we recognize that this surplus money belongs to Michigan drivers, and we need to put it back in their pockets," said Lt. Governor Gilchrist. "These refunds are a major win for all drivers-especially Detroiters-who have paid the highest insurance rates in the nation for decades. There is still work to be done, and Governor Whitmer and I will continue to take action in the best interest of Michigan drivers."

"DIFS stood with Governor Whitmer in calling upon the MCCA to return surplus funds to Michiganders with auto insurance, and we applaud the MCCA for taking the necessary next steps to deliver the largest refund possible to drivers while maintaining the viability of the fund," said DIFS Director Anita Fox. "In the coming months, DIFS will work to ensure that refund checks are issued to Michigan consumers as quickly as possible."

In November, Governor Whitmer called on the MCCA to issue refund checks to consumers from its projected $5 billion surplus, which the MCCA then voted unanimously to issue. The surplus and refunds are possible, in part, due to the historic bipartisan auto insurance reform signed into law by the Governor in 2019.

The MCCA's analysis determined that approximately $3 billion of the surplus could be returned to policyholders while ensuring continuity of care for auto accident survivors. The refund plan submitted to DIFS Monday by the MCCA will return money to every Michigander with an auto insurance policy in force as of 11:59 p.m. on October 31, 2021. Eligible consumers do not need to take action in order to receive a refund. The surplus funds will be turned over by the MCCA to the insurance companies operating in Michigan by March 9, 2022, and the insurers will be responsible for issuing checks to eligible policyholders. DIFS will direct insurers to issue refund checks to consumers as expeditiously as possible, but in no event later than 60 days after the transfer of funds. That deadline and additional guidance to insurers will be detailed in a bulletin to be issued by DIFS in the near future.

Additional information about the auto insurance reform law, including the uninsured driver amnesty period, which expires before January 1, 2022, can be found at Michigan.gov/AutoInsurance. Frequently asked questions, tips for shopping for insurance, and an insurance locator to help find licensed agents are also available.

The mission of the Michigan Department of Insurance and Financial Services is to ensure access to safe and secure insurance and financial services fundamental for the opportunity, security, and success of Michigan residents, while fostering economic growth and sustainability in both industries. In addition, the Department provides consumer protection, outreach, and financial literacy and education services to Michigan residents..

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To: Anita G. Fox, Director, Department of Insurance and Financial Services, PO Box 30220, Lansing, Michigan 48909-7720

Dear Director Fox:

At a Special Meeting of the Michigan Catastrophic Claims Association's (the "MCCA's") Board of Directors held on November 3, 2021, the Board unanimously determined that it could fund all of its anticipated liabilities while returning a significant portion of its estimated surplus to Its member insurance companies to refund to policyholders. As of June 30, 2021, the MCCA' s assets of $27 .290 billion exceeded its estimated liabilities of $22.254 billion, resulting in an estimated surplus of $5.036 billion. Thus, the MCCA's assets exceeded its estimated liabilities by approximately 22.63% as of June 30, 2021. The estimated surplus resulted from realized and expected savings from reforms to Michigan's no-fault insurance law and higher than projected investment returns.

The MCCA will return approximately $3.0 billion of its estimated surplus to its members for refund to policyholders on the policies discussed below that were in force as of 11:59 p.m. Eastern Standard Time on October 31, 2021. The MCCA will retain the balance of the estimated surplus to ensure its ongoing ability to provide reimbursements for personal protection insurance benefits.

Under section 3104(24) of the Michigan Insurance Code, a member of the MCCA must distribute any refund it receives to the persons that it insures under policies that provide the security required under section 3101(1) or 3103(1), or both, and that are subject to an MCCA premium on a uniform basis per car and historic vehicle.

Section 3101(1) states that "except as provided in sections 3107d and 3109a, the owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance and property protection insurance as required under this chapter .... " Section 3103(1) provides that "[a]n owner or registrant of a motorcycle shall provide security against loss resulting from liability imposed by law for property damage, bodily Injury, or death suffered by a person arising out of the ownership, maintenance, or use of that motorcycle." Accordingly, all owners or registrants of motor vehicles required by section 3101(1) to maintain personal and property protection insurance, and owners or registrants of motorcycles required by section 3103(1) to maintain insurance for property damage, bodily injury, or death, qualify for refunds.

The MCCA's Board of Directors has determined that the Refund Per Car will be $400 for every car that was insured on the in-force date of October 31, 2021 at 11:59 p.m. The Refund Per Historical Vehicle is 20% of the Refund Per Car. Therefore, the Refund Per Historical Vehicle will be $80 for every historical vehicle insured on the in-force date. In determining the Refund Per Car, the MCCA's Board of Directors sought to issue the largest possible refund to policyholders while maintaining sufficient funds to ensure continuity of care to those catastrophically injured in motor vehicle accidents.

The MCCA is currently evaluating the time needed to complete the return of surplus to its members. logistics of returning surplus include the following: selling investment securities to access the necessary cash, subject to contractual obligations with investment managers, and doing so over a period which includes the Thanksgiving, Christmas, and New Years' holidays when trading is typically much slower; collecting data from member companies regarding the number of vehicles insured on the in-force date of October 31, 2021 at 11:59 p.m.; ensuring the accuracy of the amounts returned to each member; and devising a secure means of transferring the surplus to members. The MCCA is working with its standing committees, investment advisors, and auditors to put processes in place and estimate timeframes for doing so. Similarly, members currently are in the process of identifying the steps necessary to issue refund checks to policyholders and the timeframes associated with taking those steps. We anticipate that the MCCA will distribute surplus to its members by March 9, 2022, which is the earliest date by which the MCCA can do so using proper controls and procedures.

Sincerely,

R. Kevin Clinton

MCCA Executive Director