Auto insurance companies have no plans to substantially reduce rates, based on review of state filings, insurance expert finds
Auto insurance companies have no plans to substantially reduce rates, based on review of state filings, insurance expert finds
CPAN continues to partner with state agencies and other organizations working to implement the state’s new auto insurance law in fairest way possible
LANSING, Mich.—(April 24, 2020)—Michigan residents facing enormous economic pressures thanks to the COVID-19 pandemic shouldn’t expect a break in their auto insurance premiums in 2020, even after last year’s auto insurance reform.
Initial public filings by auto insurance companies indicate that Michigan consumers will not see substantial savings in their auto insurance premiums, according to new findings by Douglas Heller, a nationally recognized insurance expert. Heller reviewed several of the rate filings made public so far in 2020 with the state’s Department of Insurance and Financial Services (DIFS) to determine if auto insurance companies have filed rates with discounts for Michigan auto insurance policyholders. The promise that auto insurance rates would drop substantially was the driving premise that resulted in Michigan’s new auto insurance law being passed in 2019.
In fact, the primary reason the auto insurance companies reviewed are in compliance with mandated Personal Injury Protection (PIP) premium reductions outlined in the new law is the reduced Michigan Catastrophic Claims Association (MCCA) assessment announced last November. This means that insurers are charging either the same or more for each dollar of PIP insurance retained by the companies compared with what was charged prior to the enactment of the new law.
"The new law means insurance companies will pay out less for no-fault coverage when accidents happen. But rather than passing along savings from this reduced exposure, the rate filings show that many insurers will be pocketing millions more under the new law,” said Heller. “Other than the cut to MCCA fees, which doesn’t affect their bottom line, most companies are either raising rates or, at best, keeping rates as high as they’ve always been.”
The study was drawn from a review of filings submitted by Auto-Owners Insurance Group and Citizens Insurance (a member of The Hanover Insurance Group), which collectively represent about 16.5% of the Michigan auto insurance market and are the largest insurers to have submitted non-confidential filings. Heller also reviewed several smaller insurers’ filings, with generally similar results. The rates of other major insurers were filed confidentially and will not be made public until after the July implementation of the new law.
Heller’s report found that the average premium drivers will pay for Citizens Insurance’s $580,000 exposure on an Unlimited PIP Medical Policy is 5.4% higher than the company charged on May 1, 2019 for the same coverage. The only reason the PIP premium that Citizens will bill its policyholders drops to meet the 10% decrease requirement under law is because of the impact of the MCCA assessment reduction. Heller found that Citizens will now earn 3.1% more for $500,000 PIP Medical coverage than it earned for the $580,000 of coverage it provided prior to the law change taking effect.
John Cornack, president of CPAN, said the coalition will continue to shed light on unfair practices as a way to ensure consumers get what they have been promised.
“For over a decade, CPAN has served as a watchdog on the auto insurance industry,” Cornack said. “Douglas Heller’s initial findings are extremely concerning for anyone who hoped the new law would significantly drive down prices. Now, as the COVID-19 pandemic ravages our state and our economy, our residents need relief more than ever. CPAN will continue to work with all stakeholders to ensure that auto insurance companies are held accountable.”