Massive MCCA Deficit Shows Need for Transparency and Public Oversight

LANSING, Mich.—(Oct. 4, 2024)— CPAN, the consumer protection organization fighting for fair insurance laws, today said that recent public comments made by the acting director of the Michigan Catastrophic Claims Association (MCCA) offer additional proof that the quasi-public insurance program is being mismanaged and requires greater public input and oversight. 

Acting Director Joseph Erhardt confirmed on the MIRS Monday Podcast this week that the MCCA is facing a deficit of about $2.1 billion after giving away $400 dollars to every Michigan driver in 2022–while in the same interview announcing the MCCA’s opposition to a package of Senate bills that would bring greater transparency and accountability to the association.

“Every Michigan driver pays into the MCCA fund–but due to the association’s shadowy approach, we have no idea how our money is used,” said Tim Hoste, president of CPAN. “It turns out that they managed to turn a $5 billion surplus into a $2 billion deficit in just two years. No wonder they don’t want the public looking into their books. No more taking the word of insurance company executives–we need real transparency for the MCCA.” 

All Michigan drivers—including those who receive no protection through the MCCA—pay an assessment fee to the association, which was created by the state legislature in 1978 and has a board of directors composed of representatives from big insurance companies. The MCCA controls more than $21 billion in assets that are used to reimburse insurers for auto injury claims over $635,000. 

In the interview, Erhardt said that the massive deficit was caused in part by the Andary et al. v USAA Casualty Insurance Company et al. Supreme Court decision, which restored care for thousands of catastrophically injured crash survivors whose accidents took place before the 2019 auto insurance reform law cut their care by nearly half. However, Hoste noted that the MCCA was well aware of the potential ramifications of the lawsuit, which was filed back in 2019. Hoste also noted that, in its 2022 Annual Statement, MCCA reported a $2.9 billion reduction to its surplus due to “unrealized” net loss in its investment portfolio, which had nothing to do with Michigan drivers or the rights of catastrophically injured crash survivors.

The bills, introduced by State Sens. Mary Cavanagh and Rosemary Bayer, would open the MCCA up to the Freedom of Information and Open Meetings Acts, add public representatives to the board, and require public disclosure of its finances and methodology. The bills would also eliminate the association’s ability to assess fees to drivers who do not choose the unlimited PIP option. Currently, the law allows the MCCA to charge all drivers, even if they are ineligible to receive benefits. 

“Right now, thousands of Michigan drivers are being charged an MCCA fee even though they receive absolutely nothing in return,” Hoste said. “That’s a scam. We thank Senators Cavanagh and Bayer for their continued work protecting Michigan consumers from the discriminatory practices of big insurance companies.”