Years ago, Wendy’s had a TV commercial. A wonderfully ironic grandmother by the name of Clara Peller exclaimed at the top of her voice, “Where’s the beef? Looking back on Senate Bill 1 of 2019, we find ourselves asking something similar.
To steal a line from Governor Whitmer, where’s the fucking beef? When she signed the No-Fault Reform Bill on a sunny May afternoon on Mackinac Island, a smiling crowd of Democrats and Republicans alike proudly welcomed each other. Faultless change had been elusive for more than two generations. In this “reform,” they proclaimed, we Michigan drivers would get massive savings. They made us believe that our highest car insurance premiums in the country were a thing of the past.
Here is the reality. Zebra.com, considered the authority on auto insurance these days, tells us in its 2022 State-by-State Auto Insurance Rankings: Michigan saw the following average annual rates rise from $3,096 in 2019 to $2535 in 2020, a decrease of 18%. But fares rose 4% in 2021, from $2,535 to $2,639.
So we’ve seen marginal savings at best.
Digging into the report, Michigan retains its dubious distinction of the highest rates in the world. On an individual basis, Zebra reports that Michiganders have the highest individual auto insurance rates in the nation and that Detroit is the city with the highest auto insurance rates in the nation. Again we ask “where’s the beef?”
So what happened?
We checked with Amanda Nothaft, Ph.D. She does a lot of the math for Poverty Solutions at the University of Michigan. The legislator relied on data from Poverty Solution to try to craft this reform without fail. Dr Nothaft told Local 4, ‘the law is a very good first step in this area’, but added ‘there is still work to be done’. We will discuss this part in a moment.
Why we haven’t seen rates come down the way promised is a three-pronged issue. Dr. Nothaft says three things need to change for our rates to fall into “there’s the beef” territory.
1. The bill did not eliminate lifetime and long-term medical benefits under what is called PIP or personal injury protection. Instead, the vast majority of Michiganders chose to keep it. This put a floor on how low rates could go down. Nothaft says of this development “a car accident of this magnitude is a very low probability event, but people want to protect themselves and they are used to having this coverage”. “I think there are people who are waiting to see how this all plays out, how the reforms play out before they go for lower coverage.” To get an idea of the coverage we buy, New Jersey is the next closest state for PIP and its cap is $250,000 of coverage.
2. Senate Bill 1 eliminated the use of non-driving factors such as zip codes and credit scores. Good idea. The reality, however, is that insurance companies have developed what are called “territories” and “insurance scores”. These keep many buyers’ rates high. Nothaft thinks “these territories could be, probably reflect the affected postcodes, as the law does not dictate how the territories are defined. An insurance score is just a credit score with a different weighting”.
3. Senate Bill 1 caps medical expenses. This was done because of abuse in medical billing. The system has become plagued with inflated medical costs. The bill uses Medicare as a guide on how to pay benefits. This had serious unintended consequences. With less money flowing into the system, many medical providers serving serious accident victims requiring long-term care have found themselves scrambling or even closing their doors. With that, these patients, perhaps the best known of whom is former Detroit Red Wings defenseman Vladmir Konstantinov, lose the daily care they’ve depended on for years. There is an ongoing lawsuit attacking this corner of the law. Nothaft thinks this is the biggest shortcoming of Senate Bill 1: “The law needs to be rethought on long-term care costs and provide, give providers some kind of relief or remedy when they believe that what they are reimbursed for is consistent with the care they provide.
Now, of course, the insurance companies aren’t always the bad guys here. No-fault insurance in itself is an extremely expensive system. People are still stealing wholesale cars and trucks all over Michigan, and certainly in Detroit. This drives up costs.
Many still drive without insurance, driving up costs. Medical providers aren’t always the bad guys here, either. Untying the Gordian knot created by a 1970s insurance law is difficult. It came with all good intentions but progressed into all bad results. The reform has left out many of our poorest people. These long-term care patients desperately need help.
Although House Speaker Jason Wentworth has said he doesn’t expect any major new legislation this year to address the issue, that’s not stopping representatives on both sides of the aisle from working on solutions. No one knows where this is heading in the days to come. But we would all like to see a better solution, given that gas prices and inflation have long since eaten away at all that measly 18% that the Legislative Assembly and the Governor so proudly promised three years ago.
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