(Source: MIRS.news, Published 11/16/2023) Projected reimbursement costs for care following a catastrophic car accident could still be contributing to auto insurers charging higher premiums, says one national insurance industry researcher.
"Really, the way that the premiums end up panning out is the more that these insurers expect they have to pay out in the cases with . . . catastrophic injuries, with expensive collisions and anything like that – the more that the insurers feel they have to pay out there – the more impact that's gonna have on how much they have to charge for their premiums," said JR Ridley, the digital public relations director of MarketWatch Guides, an insurance industry newsroom.
A controversial piece of Michigan's 2019 auto insurance reform, which aimed to deliver historic price drops and flexibility to insured drivers, was reducing insurer-covered reimbursements for catastrophic crash survivor's care by 45%. In October, the Senate made headlines by approving legislation, 23-14, to scrap the 45% reduction, replacing it with new reimbursement rates – backed by numerous long-term care providers – influenced by the changing costs of medical care commodities.
The 45% drop in reimbursements was implemented in July 2021. According to one MarketWatch Guides study, rates decreased in Michigan by nearly 18% since 2021, with drivers saving $787 annually, on average, for full coverage insurance.
But despite the aforementioned savings, the same research provider listed Michigan as being the most expensive state for full-coverage car insurance, with the average rate calculated to be $3,785 per year. The national average for full-coverage insurance was reported to be $2,008 annually.
While the nationwide average for minimum-liability coverage was $627 annually, according to MarketWatch Guides, average minimum-liability car insurance rates were $1,604 per year in Michigan.
"I would venture, just based on the quality of life that people are able to maintain in other states around the country, and the fact that that doesn't necessarily need to come at such a high premium . . . there has to be some kind of silver bullet here, and something that the state would be able to do," Ridley said when asked if there's a way to have both: substantially lower insurance premiums, as well as improved care access for catastrophic auto accident survivors.
At least as far as premiums go, Ridley said the issue is definitely something that would be addressed, "just based on that sustained high amount. It does feel like there may come a point when that becomes a pretty burdensome cost for everyone in the state to have to deal with."
SB 530, SB 531 and SB 575 were not approved in the House before the Legislature adjourned for the rest of 2023. The House Insurance Chair Brenda Carter (D-Pontiac) has expressed commitment to learning more about the issue, despite advocates for changing Michigan's 2019 auto law voicing their disappointment.
The lead sponsor of the aforementioned package, Sen. Mary Cavanagh (D-Redford Twp.), described the Senate's passage of SB 530, SB 531and SB 575 as "just the first step in something that needs to be very well conversed, talked about with stakeholders, insurance companies . . . making sure we're getting it completely right the first time."
"Not that we got it wrong, but making sure that anybody who suffered some of the consequences – that we're taking care of that part without having to increase any premiums," Cavanagh said to MIRS. "In no means does it need to be rushed, so we don't have to come back to fix anything else that might have unintended consequences on the rollout."
High premium costs can also trickle down into rideshare operations, with MarketWatch Guides additionally reporting that Michigan is the second least profitable state for rideshare drivers, following Florida.
Specifically, the study found that drivers for businesses like Lyft and Uber report earning 13.8% less than the national average.
"What we've seen for the better part of the last three or more years at this point, is Michigan consistently has some of the highest auto insurance rates in the country, and this has panned out for any number of different driver profiles and analyses that we've done," Ridley said. "The biggest reason that Michigan ended up scoring so low on our rideshare profitability score here was those insurance premiums, and the fact that Michigan was the highest in the country meant that no matter how much you're taking in as a rideshare driver, you end up losing so much to the expenses for your vehicle."