Commentary: For Detroiters, auto insurance costs still far too high

The Detroit News

By Rep. Shanelle Jackson

Auto insurance costs for Detroit residents have long been excessive. Detroiters pay the highest autoinsurance premiums in Michigan. In this time of economic hardship, rate increases threaten the financial security of many middle-class working families in Detroit. Something must be done.

This growing problem is in need of a creative and cost-effective solution. While there is honest disagreement on various proposals, I am convinced that one size does not fit all, that giving citizens more options has the potential to decrease auto insurance costs and make Michigan’s auto insurance system more sustainable.

I believe that implementing a Personal Injury Protection (PIP) Choice law in Michigan offers the best avenue to achieving these goals.

Michigan is the lone state in our nation with unlimited coverage for auto-related personal injuries to all insured motorists.

It’s a one-size-fits-all system. Residents of other states can select the maximum coverage amounts for medical expenses and lost wages due to an auto injury that fit their family’s needs, but this is not the case in Michigan.

But what would reforms to the PIP component of Michigan’s no-fault auto insurance system look like?

Fellow lawmakers and I have expressed strong interest in reforming PIP so that Michigan would switch from a system that covers unlimited lifetime medical benefits to a system that offers drivers a choice in the amount they would pay in PIP coverage.

One proposal would allow drivers to select among PIP coverage maximums of $500,000, $1 million or$5 million. The default amount would be $500,000. This “PIP Choice” proposal has its supporters and detractors, but the severity of the problem is evident.

Maintaining the present system means that rising health care costs and the unlimited nature of PIP will jeopardize the financial stability of the Michigan’s automobile insurance system. Knowing how auto-related personal injuries are covered by insurance makes understanding this situation easier.

Consider this. On July 1, PIP premiums rose by 21 percent to $175 per vehicle for all Michigan motorists. This $30 increase has been met with strong criticism. The Michigan Catastrophic Claims Association (MCCA) adjusts rates annually, but $175 is the highest rate ever.

Set up by the Michigan Legislature as a nonprofit in 1978, the MCCA ensures that, regardless of their size, insurers are able to comply with Michigan’s no-fault automobile insurance laws. Current state law requires an insurer to cover all reasonably necessary medical care needs resulting from a car accident — meaning unlimited, lifetime personal injury benefits — and places no dollar limit on those medical costs.

This requirement would burden small insurers, but is eased by the fact that the MCCA essentially spreads the costs of the most serious injuries to all Michigan insurers by creating a pool of money from which insurers are reimbursed for expenses beyond a set amount. Today, that amount is set at $500,000, and the MCCA paid out $927 million in personal injury benefits in 2011.

Supporters of PIP Choice laws recognize that the time to act is now. If the state fails to address this issue, it risks putting the MCCA funding pool and thousands for Michigan households in dire financial straits as premiums and payouts spiral out of control.

America is great because we acknowledge the freedom citizens have to makes choices and chose among competing options. Why has that freedom not been extended to our auto insurance?

State Rep. Shanelle Jackson, D-Detroit, represents Michigan’s 9th District in Lansing.