In Michigan, efforts are being made by insurance advocates to change the State’s long-standing auto insurance policy. Dr. Robert Hartwig is one of these people.
Hartwig, a medical doctor by profession, is also the president of the Insurance Information Institute. In his speech presented to the members of the Michigan House Committee, he testified that the “no-fault” system is what causes Michigan’s car insurance costs to increase.
A no-fault system is any type of contract by which the insured is indemnified for losses by their own insurer irrespective of who is at fault, or who had generated the damage or loss.
He stressed that there are no other states or locality in the US other than Michigan which offers unlimited no-fault benefits. Furthermore, these unlimited benefits are being translated into unlimited costs.
While other states are also increasing their policy rates, the factors which affect Michigan are also the same with the exception that there is virtually an unlimited source of funding for no-fault claims.
He declared that while this is happening, step-up in costs could be attributed to system operations which he claims as not having an efficient system of checks and balances. Contrary to what other states do, medical expenses and other protocols in Michigan such as treatment and utilization plans are not scheduled.
Much of the reports were presented with computations and other facts and figures. It was revealed that back in 1998, the average no-fault auto policy claims amounted only to $9,103. It had risen to an astounding amount of $31,883 in 2007. The report had also shown that this equates to a 250% increase.
It must also be noted that Michigan has no insurance fraud department. There is no one who would take legal steps against fraud or abuse; neither is there an investigative body assigned to do this.
Hartwig even went into saying that because of these factors, the state’s car insurance system is like a large blank check.
He continued that very high medical care costs also occurred because of this system, imminently subjecting policy holders to rate increases. However, even as such, the higher premium paid by motorists does not equate to revenues for insurance companies as this is just being funneled into medical expenses.
His testimony also pointed out that even with healthy competition amongst industry players, rate increases are bound to happen. As of date, there are reported to be more than 100 insurance providers and players doing business in the state.
Hartwig suggested that the solution to this dilemma of auto insurance in the state is to concentrate on how much drivers incur during an accident or any contingent event. It is up to the public policy makers to implement these changes.