DETROIT – The story, for once, seemed like good news for everyone: After years of trying, Michigan, the state with the highest car insurance rates in the nation, finally found a way to meaningfully lower them for virtually every driver.
That’s what both the Democratic governor and the leaders of the Republican majority in the legislature said last week. “This plan will help drivers from Detroit to the U.P.,” Gov. Gretchen Whitmer said when both houses passed the bill May 24.
“Today we are delivering on our promise to Michigan families to provide cheaper car insurance rates,” echoed Senate Majority Leader Mike Shirkey, a Republican from Jackson County.
That all sounds wonderful … except it may not be true.
The devil is in the details — and on closer examination, the bill seems to deliver considerably less than its backers claimed.
Yes, insurers are required to reduce rates – but only for the next eight years. They are also only required to reduce them on the PIP, or Personal Injury Protection portion of car insurance policies.
And while supporters proudly noted that the new law forbids insurers from setting rates by zip code, it instead allows them to use “territories,” that apparently can be as small as a census tract.
Worst of all, critics say, it eliminates the one unique positive feature about car insurance in Michigan. Until now, anyone suffering catastrophic injuries in an auto accident has had all their medical expenses covered for life by the Michigan Catastrophic Claims Fund.
That fund pays all medical bills over $550,000 for anyone badly hurt in an accident. So far, nearly 40,000 people have received benefits from that fund, and 18,000 people still are.
Now, drivers will be allowed to pay less and opt out of full catastrophic claims coverage, putting some people at risk.
What will happen in the future to those who opt out to save money – and then are terribly injured in a horrible crash?
Though there was heavy pressure on legislators to vote yes, 19 of them, all Democrats, refused to go along. State Rep. Yousef Rabhi of Ann Arbor, the Democratic floor leader, was one.
“This is one of the worst possible outcomes you could imagine,” he told me. “We are giving up our unique, best-in-the-nation coverage for the promise of temporary reductions in rates,” he said.
“This bill still allows insurance companies to have their own way. It still allows redlining, and it only requires them to lower their PIP charges,” which account for about half the average fee.
He thinks “they could still make it up by raising other things – collision coverage, say, or just making something up. This bill offers all sorts of off-ramps for insurance companies.”
The floor leader was in the minority – the bill passed the House 94-15 — but he was far from alone. State Rep. Jim Ellison served for many years as mayor of Royal Oak before going to the legislature.
He posted on Facebook that he agonized over the decision, but finally voted no, “because it fails to deliver on the promises made to drivers who deserve a real fix to their skyrocketing insurance rates.”
Instead, he argued that it “offers a nominal decrease in rates for a few years, but then allows insurance companies to jack the rates back up, while gutting coverage to accident victims.”
Other opponents, including State Sen. Jeremy Moss (D-Southfield) raised the same objections, but added that they resented that the 120-page bill, the product of last-minute compromises, “received no public hearing, no testimony, no fiscal analysis,” and was rammed through before most lawmakers even had time to read it.
So … why did this happen?
Why was the governor so eager to pass an auto insurance bill that most analysts say leaves the poorest people vulnerable and may not actually reduce rates all that much or for very long?
Most likely, because she needed a win, and needed to show that she was able to deliver on her promise of bipartisan cooperation.
Detroit Mayor Mike Duggan, a fellow Democrat, has been pressing her to do something about Detroit’s astronomical car insurance rates, which currently average $5,414 a year, compared to, say, $1,277 for the same driver in Cleveland.
When the agreement was announced he was ecstatic, calling it “outstanding,” and an “excellent bipartisan deal” that “will cut rates for Michigan drivers significantly.”
Most analysts do thing rates are, in fact, likely to decline in the short run. But no one was claiming that Michigan would no longer be the most expensive state for car insurance in the nation.
Some wondered whether this might be just one part of a bigger deal. Could Gov. Whitmer have agreed to what is essentially a GOP-backed insurance bill in return for Republicans being willing to raise taxes significantly in order to fix the roads?
That seems very doubtful.
“If so, we certainly weren’t told anything about it,” said Rabhi, the Democratic floor leader. “But I can tell you that if it was me, and there was any agreement like that, I’d want to have both bills on my desk before I signed either of them. “
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