Don’t buy this pig in a poke
ESCANABA — I want cheaper gas and cheaper car registration, but they are not on the horizon. The price of gas went up this year because the Legislature raised the gas tax 38 percent, from $.19 to $.263 per gallon. That is why gas prices went up in January. Michigan has the fifth highest gas tax in the nation.
You may have noticed car registration went up by 20 percent. In the event you wanted to be green or just save on fuel costs the Legislature increased the cost of registering you hybrid or electric car even more, by $47 and $135 respectively.
Now the Legislature claims it wants to reduce your car insurance bill. The Legislature is asking consumers to buy a pig in a poke. It’s real purpose is to fulfill the wish list of auto insurance companies. What the Legislature will not tell you is that consumers will be holding the short end of the stick and insurance companies will profit.
Almost 35 years ago the insurance industry lobbied and convinced the Michigan Legislature to pass the Michigan No Fault law. The law took away a citizen’s right to sue a negligent driver, unless the person’s injuries constituted a serious impairment of body function. Lawyers groups opposed the law.
As a quid pro quo for eliminating consumer rights under the No Fault Act, it provided that your car insurance company would pay your necessary medical expenses for life, income loss within three years of the injury, and household services the injured person could not perform within three years as well. Regardless of fault. Typical household services are removing snow, house cleaning and mowing the lawn. There was a hard cap of $20/day for household services and a cap on income loss that increased with inflation. Drivers were required to pay for the repairs to their own cars no matter who was at fault. Car owners used collision coverage to cover this loss.
Neighboring states, like Wisconsin, did not adopt the No Fault concept. Negligent drivers in those states remain responsible for medical bills, income loss and property damage. Sometimes the person hurt in an accident is the person who was at fault. In that case no car insurance company pays any money.
Now Michigan insurance companies want to continue the prohibition on lawsuits and want to limit the money they pay under the No Fault Act. First, they want to cap payments of medical expenses at $500,000. If a person suffers a broken leg $500,000 will easily cover the injury. A quadriplegic needs much more than $500,000, as do brain injured victims. The insurance industry does not say who will pay to treat the catastrophically injured people. The legislators who are pushing the proposal do not say who will pay. The person’s family? But it will probably be taxpayers.
Second they do not want to pay reasonable medical bills. They want to pay a schedule set by a state department. The result will be smaller insurance payouts. While the proposal would guarantee reduced insurance payouts, it will not guarantee reduced cost to consumers.
Part of your Michigan insurance premium is placed in the Michigan Catastrophic Claims Fund (MCCF). The fund pays medical expenses when they reach $555,000. Each insured pays a MCCF fee each year. Last year it was $160, next will be $170. In 2015 it was $186. The fund is run by insurers and will not release MCCF’s financial records. No one outside the MCCF knows what basis, if any, is used to set premiums.
The Legislature is not going to require limits on insurance premiums in return for its changes to the law. It is not requiring insurance companies to open their books so that we can see how much of the auto insurance premium is based on mismanagement or exorbitant salaries for insurance officers.
Michigan consumers are at a disadvantage because the Michigan Legislature often promotes the desires of special interest over the public interest. Don’t buy this pig in a poke.
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Richard Clark practiced law for 41 years in Escanaba.