Insurance Reform Opponents Spin 'No' Votes; Drivers Just Want Rate Relief

Now what? Some special interests have reason to celebrate the high-cost status quo

State Rep. Andy Schor, D-Lansing, recently posted on Facebook an explanation of why he voted against a bipartisan auto insurance reform supported by Detroit Mayor Mike Duggan and Michigan House Speaker Tom Leonard. The bill was defeated last week in a 45-63 vote, but ongoing pressure to address the high cost of coverage here means the issue is not dead.

Schor said he agreed Michigan drivers “need relief from high auto insurance rates,” although his explanation for voting against the bill warrants a closer look.

Schor wrote: “HB 5013 abandons the unlimited insurance coverage that we have been guaranteed through the no fault law.”

That is inaccurate. House Bill 5013 would replace a mandate that consumers only purchase policies with unlimited coverage for injuries; it would let them choose between less coverage at a lower price or unlimited coverage. It also would let senior citizens opt out of paying for additional medical coverage in their auto insurance policy if they are already covered by a health insurer or Medicare.

Schor wrote: “This bill creates second-class citizens by ensuring that people who make less will have worse insurance coverage after auto accidents.”

The high cost of auto insurance here contributes to Michigan having the fourth-highest rate of uninsured drivers in the nation at 20.3 percent, according to the Insurance Research Council. One in five Michigan drivers does not carry auto insurance.

As a result, Michigan already has two classes of drivers – insured and uninsured – and the current no-fault insurance law is partially responsible. The bill supported by Duggan and Leonard would make it possible for people who can’t afford any auto insurance to be covered.

Schor wrote: “Instead, it creates levels of insurance coverage for personal injury protection (PIP), and will have different people purchasing insurance based on how much money that they have.”

Again, currently, one in five drivers in Michigan has no insurance coverage.

Schor wrote: “Michigan currently (and since the 1970’s) has no fault insurance protections, which means that we cannot sue others if they cause accidents and create catastrophic injuries in exchange for unlimited coverage when we are injured.”

Michigan drivers can still sue, and there is evidence that the number of lawsuits has been rising sharply, contributing to the rising price of insurance. Under the bill defeated last week, Michigan drivers could still sue a negligent driver who is responsible for a crash.

Schor wrote: “Many need to save money and will have to choose capped premiums for lower cost and, as a result, will have very limited protections if they are in a car accident.”

Schor’s definition of “very limited protection” refers to what — under the bill he opposed — would still be the most generous in the country. After Michigan, the state with the highest coverage mandate is New York, which requires vehicle owners to carry policies that cover at least $50,000 in personal injury protection expenses. Recent reports suggest that the unlimited injury coverage mandate lets hospitals and doctors extract much higher prices to treat crash victims than in other states.

HB 5013 offers drivers a choice of coverage: $250,000, $500,000, or, as is the case now, unlimited. Insurance companies would have to reduce the price of personal-injury protection coverage by at least 40 percent for drivers who chose the $250,000 option.

“Claiming that Michiganders will have inadequate coverage under HB 5013 is claiming that every American has inadequate coverage, too,” said Michael Van Beek, the Mackinac Center for Public Policy’s director of research, in a blog post. “It’s possible that’s true, but if it were, the ramifications of such a problem should have surfaced by now.”

Schor's office did not respond to an email seeking comment.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.