Study blames medical claims for high auto insurance rates in Michigan
But at least one consumer advocate faults the report for not scrutinizing insurance companies and their role in setting the prices that motorists actually pay for coverage.
The study, released this month by the national
The study primarily attributes the situation to the very large medical-related claims under
The average size of those claims, known as personal injury protection (PIP) claims, was
The median claim was
monetary caps on personal injury protection benefits. Injured motorists in states without no-fault typically rely on regular health insurance after accidents, which is nearly always less generous in benefits than
"Obviously having unlimited benefits creates some extremely large claims,"
Other reasons cited in the report for
-- No fee schedule: There are no state government-set price controls for medical services covered by no-fault insurance. Other no-fault states have such controls, known as fee schedules, to rein in costs and reduce incentives for fraud.
-- More attorney involvement: The percentage of no-fault claimants with attorneys rose to 18% in 2017 from 13% in 2013.
-- Lots of lawsuits: Auto accident-related lawsuits in
-- Loosened lawsuit threshold: The frequency of "pain and suffering" bodily injury claims increased about 7% a year in
The study did not mention insurance companies' use of controversial non-driving factors when setting premiums, such as drivers' ZIP codes and a version of their credit scores, which critics say unfairly penalize people in high-poverty cities like
Even if
"If you want to reduce overall costs in
But for consumer advocate
"One of the things I read in this report is a total lack of attention to any of the cost drivers in
Heller contends that rating factors such as credit scoring are connected to the underlying cost of insurance because they adversely impact lower-income residents, who then can't afford to buy auto insurance, resulting in fewer people who are paying into insurance pools.
"When you price people out of the market because of who they are -- not how they drive -- you've shrunk the pool. And that itself is a cost-driver," he said.
The report also failed to mention state regulators' light-touch policies for reviewing auto insurers' rates to determine whether they are fairly or excessively priced, Heller said.
"There is a difference between how much it costs these companies to sell insurance, and how much they are charging," Heller said. "The problem is we don't know what the gap between the actual cost and the premiums the companies charge really is because no one is holding the insurers to account."
The report did not examine the
In 2017, 28% of all the medical-related no-fault insurance payouts went to claims exceeding
Contact JC Reindlat 313-222-6631 or [email protected]. Follow him on Twitter@jcreindl. Read more on business and sign up for our business newsletter.
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