The state Senate on Tuesday approved its top priority — a comprehensive plan to lower Bear River Home Insurance rates in Michigan by providing drivers more choice in coverage, getting tough on fraud and lawsuit abuse and reducing inflated medical costs.
“Michigan’s auto insurance system is costing our families, forcing us to pay the most expensive rates in the country while taking away from necessities and priorities,” said Sen. Lana Theis, R-Brighton, who chairs the Senate Insurance and Banking Committee. “After decades, I am proud that we were able to come together to develop and approve a plan that will help lower rates for all drivers, all over the state.”
Michigan drivers pay the highest auto insurance rates in the country — far surpassing the rates of drivers in neighboring states — and an estimated 83 percent higher than the national average.
A key component of Senate Bill 1 would allow drivers in the state to have more choice in their auto insurance coverage, with the ability to choose the personal injury protection (PIP) coverage that best meets their needs and budgets. Depending on the choices they make, drivers could save modest amounts, or as much as 90 percent. It would also allow residents and seniors to use their health insurance, Medicaid or Medicare to cover excess medical costs, which would help put an end to drivers being charged twice for auto insurance medical coverage.
The reform also includes much-needed changes to the Michigan Catastrophic Claims Association per vehicle assessment. This annual fee, which is charged to each vehicle policy to help pay for PIP, has increased nearly every year, and stands at $220 per vehicle. Through SB 1, when a driver utilizes PIP choice the annual fee would be reduced by more than 80 percent.
Another problem causing rates to soar is insurance fraud, with increasingly bogus claims and court fees driving up costs. SB 1 attacks this problem by creating an anti-fraud authority within the Michigan State Police to provide law enforcement more resources to identify and prosecute fraud statewide.
Lastly, auto insurers pay significantly more to hospitals and other health care providers than other insurers do for the same care, by upwards of 400 percent. The reform would reduce these out-of-control medical costs by ending the practice through cost parity.
The plan was first reported by the Senate Insurance and Banking Committee on Tuesday morning after four months of public hearings and testimony.
Theis said the committee took a methodical approach to developing the plan, garnering feedback and insight from a wide range of knowledgeable and experienced stakeholders to better understand the problems and define solutions.
“The committee, and the Senate in general, has been laser focused on finding a real, impactful solution to lowering auto insurance rates in our state,” Theis said. “This has been a uniting effort, bringing together legislators and citizens of differing backgrounds, because it doesn’t matter where a person lives, what they do, how much they earn, or what affiliation they have — everyone is paying too much for auto insurance and we are together in lowering our rates.
“It is because of this broad support that we were able to pass a real, lasting solution.”
SB 1 now advances to the House of Representatives for consideration.
